To recover the US manufacture UU., Make the world throw the dollar
To recover the US manufacture UU., Make the world throw the dollar
Donald Trump promised to "make America great again", but could make America Britain. To reindustrialize the US economy, President Trump must avoid the mistake of deindustrializing Britain: specifically, it must put an end to the role of the dollar as the world's main reserve currency.
A century ago, when Britain began to lose its place as the world's leading power, it suffered from economic diseases that Americans today will find familiar: declining exports, large government deficits and a huge amount of external debt. The role of the British pound as the main reserve currency in the world was one of the main drivers of this economic decline.
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John Maynard Keynes promoted the use of the pound sterling as the world's reserve currency, and wrote in 1913 that replacing gold with foreign exchange reserves was a step towards "the ideal currency of the future". But it did not take long for the markets to prove that currency reserves are not an infallible way of saving. The monetary system that Keynes recommended was established throughout Europe after a 1922 conference in Genoa, but collapsed in 1931 at the beginning of the Depression.
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The French economist Jacques Rueff described the fatal weakness of foreign exchange reserves at a conference in 1932. He explained that when a monetary authority accepts claims in dollars or sterling for its official reserves instead of gold, the purchasing power "has simply been duplicated ", so, for example," the US market is able to buy in Europe and in Mexico, the United States, at the same time. "In other words, when a foreign nation accepts the refund in US dollars, it increases its money supply without decreasing the US money supply, which allows the central banks of both countries to grant loans in dollars.
This "duplication" of credit is not only inflationary in the country of the reserve currency and in any country whose currency is linked to the reserve currency; it also necessarily causes the average price of goods to increase more rapidly in the country with reserve currency than among its trading partners. This is the reason why the manufacturing industries of Great Britain and the United States lost their competitiveness as exporters, which resulted in deindustrialization.
This so-called Triffin Dilemma, although first described by Rueff, was named in 1960 by the Belgian-American economist Robert Triffin, who described the outcome of the Second World War of the Bretton Woods gold exchange system. Under the gold standard, the worldwide increase in monetary gold equaled the net exports of the world. The problem with Triffin's dilemma is that each additional dollar of currency "reserves" must be matched by an equal deficit in the country's net exports with reserve currency, that is, by net imports.
The excess of reserve currencies made the 20th century a period of intense inflation. The average price of British products increased by 72 from 1900 to 2000, while US prices increased 18 times in the same period. These increases far outpaced inflation in other major export countries that did not provide international reserve currencies. The prices of German, Japanese and Chinese products have fallen compared to US exports.
Tariffs and other forms of protectionism can not restore the competitiveness of US exports. They invite reprisals, inhibit trade and raise prices even more. The non-competitive price level in the United States is effectively a tariff on US products. To think that another tariff will help American workers makes no more sense than to believe that one can heal the injuries of a pedestrian hit by a car as he recoils on the victim.
Triffin's dilemma can not be solved without a monetary reform that ends the use of the dollar as the main reserve currency of the world. Here is an agreement that could place Trump in the Alexander Hamilton League: persuade US sovereign creditors that the United States will convert every penny of foreign dollar reserves into long-term government-to-government debt, so that pay in gold, for example 30, 40 or 50 years. Hamilton's plan paid off the debt of the American Revolution in the mid-1830s. The gradual reimbursement of all outstanding official reserves of foreign dollars would reverse the industrial decline of the United States by restoring the competitiveness of US manufacturing prices.
The most essential step would be to establish a timetable for paying the outstanding dollar reserves, which would require long-term planning and a consensus between the White House and Congress. But if a payment schedule were finally established, the deflationary threat of the liquidation of the foreign dollar reserve that stands out from the US market would be eliminated. Then, the beginning of the actual payments would set in motion the changes in relative prices needed to reverse the curse of the reserve currency.
Like Mr. Trump, Hamilton's contemporaries originally thought that their dazzling character flaws far outweighed their virtues. But after the penniless immigrant managed to make a fortune for his adopted country, even those who had been his worst political enemies found that they were interested in carrying out his plan for decades. Today, the young people whistle the songs not of "Jefferson" but of "Hamilton". There will be no whistles of "Trump" melodies if he makes America Great Britain.
Mr. Mueller directs the economics and ethics program at the Center for Ethics and Public Policy.
SOURCE LINK ERESVIRAL.COM https://www.beviral.online
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