Friday, July 13, 2018

Trump's trade war is a necessary precursor for a return to the gold standard

In the most recent update from Dr. Jim Willie in his Hat Trick Newsletter, the well respected analyst cites three necessary steps the Trump administration must do before the United States can ever return to a system of sound money, and back to a gold standard.

The United States has three requirements in returning to the Gold Standard. They will be extremely difficult to achieve. They each serve as essential requirements in a criterion. All three are urgently needed. The challenge is formidable for the nation to remain as a leading player in the global economy. The United States stands alone in volume of national debt. Many place the blame on the social net like welfare, Social Security, and other measures. However, the biggest element is clearly the military budget, hardly for defense in the last two decades. As CEO Jack Ma of Alibaba stated so succinctly, the USGovt has spent $25 trillion on the military with nothing to show for it except decayed infra-structure and global animosity for its aggression. A major item in recent years for the deficits has been Medicare, which is full of fraud and waste. Another major item is the raft of pensions like for government service, judicial service, and military service.
  • Eliminate the $21 trillion USGovt deficit
  • Source 10,000 tonnes Gold to support the currency
This analysis by Dr. Willie brings us to an interesting look at the President's current gambit in the realm of global trade.

Over the past two decades the U.S. has almost completely destroyed its industry by offshoring most of its manufacturing, and by signing egregious trade agreements like NAFTA and GATT.  This also means that the U.S. is primarily reliant upon imported foreign goods with the rest of the world having to be willing to accept our currency as payment.  As a result, the trade deficit between the U.S. and its trade partners has soared to over $568 billion last year, with this year already on track to being even wors than in 2017.

So it should not be surprising that Trump is holding nothing back in his demands for nations to renegotiate their trade agreements if they want to continue to transact tariff free with the United States.

Subsequently, the U.S. has little to lose in regards to its already limited exports should a trade war escalate to the levels currently being threatened by the President.  But on the flip side, they have a great deal to lose when it comes to continued control over the global reserve currency.  And in the end this may have to be the one thing America can offer on the table if they want to lessen or eliminate their one-sided trade deficit in order to be able to return to a monetary system that doesn't rob them of their wealth the moment it gets instituted.


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