Thursday, April 28, 2016

Donald Trump Really Doesn't Get It

Donald Trump sees America as the selfless benefactor of the world.  In his worldview, America gives, everybody else takes.

The Big Orange Behemoth figures that, if he wins the White House, he'll change all that, balance the books with other countries, especially America's allies. Trump's policy has a name - "America First."

It sounds like a plan - until you turn your mind to some things Trump doesn't factor in. There's America's constantly growing foreign debt. Then there's America's perpetual balance of trade deficit. Then there's America's mortal reliance on the US dollar as the world's reserve currency. Put them all together and you've got a double edged sword that America can only wave around at its own peril.

Every month America buys more than it sells. It imports more than it exports. To do this it borrows money - from foreign lenders.  America can keep this going, year in and year out, because it buys and sells and borrows in greenbacks, the US dollar, which happens to be the world's reserve currency. So long as the rest of the world remains content that the US dollar should be the world's reserve currency, the country that prints those dollars and decides how many of them there should be can live beyond its means by recalibrating those means as and when it likes.

America's role in the world, the one that Trump thinks everyone else should pay for? That's a big part of why the world puts up with the USD as its reserve currency. If America starts bullying the rest of the world, pretending that it's a victim of this arrangement of convenience, it could encourage the discontents to demand a new reserve currency, perhaps one anchored in a basket of leading currencies - the dollar plus the yen plus the yuan plus the euro, all of them averaged out. The Saudis have already floated this idea. So too have the Chinese and the Russians mutter about it from time to time.

A reserve currency not slaved to the US dollar would be calamitous for the US and for world commerce generally but not uniformly. America would be hardest hit but countries with large holdings of American debt would also suffer from a plunge in the value of the greenback against other currencies.

Putting America back on a pay-as-you-go footing would be painful. A world no longer governed by America's monetary policy could be less predictable. But we're already embarked on an unpredictable mid and long-range future. Even the end of the fossil fuel era triggers great unpredictability. There has always been upheaval whenever the world has transitioned from one energy source to another whether it be sail, coal or oil. Climate change will be another, probably even greater than the energy transition. Resource shortages, especially freshwater, and other drivers such as overpopulation - all of these forces factor in to deny us much certainty for the future.

Maybe this is the worst possible time for America to be flirting with a bombast like Donald Trump.


Anonymous said...

Anyong...The thing Trump also doesn't realize is the wealthy of America are not going to allow him to put in place his mindlessness. Plus the President of the U.S. doesn't have the power Trump thinks they do.

The Mound of Sound said...

I was discussing this point with a friend the other night, Anyong. Just what would America do if Trump prevails in the November elections.

I think he might not live long enough to stroll down Pennsylvania Avenue in January. America's massive and powerful security agencies have been pretty forthright in describing Trump as a danger to America's national security. They see him as a genuine threat to their country, a loose cannon. Is it hard to imagine a small group of them deciding that Trump must never be allowed to occupy the Oval Office?

Dana said...

I would imagine that, in embassies around the world behind closed doors and sotto voce, various US allies and friends and even a few adversaries are communicating their unease at this prospect.

What might a President Trump do when not invited to meet the Queen or address the British Parliament? Or not be invited to visit various European nations? Or when there is no clamour to visit DC or the White House?

What if the only international leader to welcome him is Putin?

Toby said...

It is bad enough that Trump has a bad dose of cranky old white guy syndrome but even worse that he has followers. Many years ago Lincoln Rockwell would stump for the American Nazi Party. People would boo him off his podium and even throw stuff at him. The basic public reaction was negative. Now we have Trump and other mostly GOP leaders repeating the same awful ideas to the extent that they may actually elect one of these idiots.

Anonymous said...

Trump might not get lead poisoning but, if he insists on USA ceasing to be world's policeman, he will get an offer he cannot refuse.
The very reason for USA living well beyond its means is bullying everybody else into accepting USD as the only global currency.
Demise of Saddam and especially Gaddafi, is linked to their refusal to trade oil in USD.

Anonymous said...

He is not nearly a frightening as Cruz.
Cruz says he would turn the Arabic middle east to glass! Nuke the bastards!!
Cruz has shown he cannot work with others, he is bombastic at best.
Trump , yes an asshole, would maybe be swayed by his advisors; not so Cruz.
End timers such as Cruz are much, much more scary.

Anonymous said...

Yup, Cruz.
The fella who tried to ban dildos scares me shitless...

The Mound of Sound said...

As an aside, former Republican House speaker John Boehner today referred to Cruz as "Lucifer in the flesh."

Interesting times.

Anonymous said...

It's sad really.
Trump really does have some good ideas!!
Ridding us of the establishment be it Government or the bureaucracy is not such a bad idea; fact is it is a good one!
There really does seem to be a cadre of elites, one percenters that govern this world.
It would be , depending upon the replacement , a good idea to reduce their influence upon society.
Unfortunately Trump intends to replace the establishment with his own establishment hence no change.
The excited States of America have few Republican options; a Corporate America on steroids( it is already corporate) or a theocracy led Cruz .