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June 26, 2018 | Trump’s Worldview! Pluses and Minuses!

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian: http://kingdomecon.wordpress.com.

Mike Pompeo’s opinion article in the Wall Street Journal today reveals the worldview of our President, Mr. Trump. I can summarize the worldview of our President as the following:  ‘to rewrite the rules of our international world order to reflect current fairness for America’. It appears that Mr. Trump views the current rules of trade and also many of the rules which emerged after WW II to be unfair for America today. He wants to rewrite these rules to favor America. That is his America First worldview!

 

Trump’s ‘America First’ worldview desires to create new rules for economics, politics, and military relationships so that these rules reflect current realities. He senses that America is the piggy bank for the world and also that our debt and deficit situation can not continue going forward. New policies and new rules are needed. Mr. Pompeo says “Mr. Trump is right that the international rules and institutions developed during the Cold War era must be retooled to withstand new political, economic, and military pressures”.

 

Mr. Trump, says Mike, recognizes that his goals may prove elusive as inertia is a powerful force in international relations. Existing institutions and prior agreements are often hard to reform but reform is needed. I commend Mr. Trump for his willingness to shake-up our global stasis and pursue meaningful change. But his worldview is missing a key factor that Mike Pompeo has not considered IMO. What is the key international item which must be addressed if any of his lower level goals are to be achieved?

 

My sense is that trade issues, our massive debt, and our current deficit issues can not be addressed without recognizing the nature of our exchange rate situation. Why does America have all this debt, trade deficits, and trade distortions with our various counterparts? Why does China run a huge surplus in trade with the USA annually? Is our favorite status in currency relationships part of the problem? What is our favorite status as compared to China or any other nation on this planet?

 

America has the ‘reserve’ currency status for the world. Our dollar is the reserve currency for the planet. What does this mean? America can purchase consumer and military goods and services from all nations simply by going further into debt. Where is America’s disciple when it comes to our debt and deficit situation? We spend with no consideration of tomorrow. We create our dollar out-of-thin air to purchase whatever we desire. All this is possible as America has the status of ‘reserve’ currency for the planet.

 

All this emerged after a prior President dropped our dollar from an objective standard (a tie to material reality). When President Nixon closed the gold window he removed any restraint from our politicians to budget their spending. Borrow and spend has been our motto since 1971…and it continues today. Our trade deficit is now over $800 billion annually and our National debt is now over $21 trillion (soon over $1 trillion in deficits annually). Where is the discipline? Where is the ‘fairness’ in this situation for our counterparties?

 

Mr. Trump has a worldview with many pluses but his minuses are huge. Both China and Russia along with a host of lesser nations recognize this unfairness in our international situation. Mr. Pompeo says that Mr. Trump desires a Reset. But a Reset must also involve an understanding of our reserve currency status as this is at the core of our trade issues. Our main counterparties recognize this factor but does Mr. Trump recognize this reality? As I write, China is lowering their currency exchange rate (the value) relative to our dollar.

 

The dollar exchange rate today is 6.5793 as I write.  It was 6.2649 last January. China needs to maintain a growing export market and this means continuing surpluses in their trade balance with the USA. If Mr. Trump does not think about these exchange rates and the manipulation of these rates by all trading nations, then he is missing the core item of international distortions IMO. The main problem with trade today are the subjective exchange rates (globally) which lack any tie to objective reality.

 

Pass this missive on to Mr. Pompeo or someone else who can inform Mr. Trump of our distorted and manipulated exchange rate situation. International trade can not progress without a new Reset of these international exchange rates. Russia, China, Iran, Turkey, Argentina, Brazil, Venezuela, and a host of nations who peg their currency to our dollar are involved in this daily exchange rate fiasco. It must be addressed pronto IMO if anything meaningful is to occur. I am: https://kingdomecon.wordpress.com.

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June 26th, 2018

Posted In: Kingdom Economics

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