The dollar in the world’s safe shelter currency | Photo credit: Ponywang
Donald Trump’s commercial policy has drawn two types of comments. One deserves to be rejected and the other requires a closer scrutiny.
The comments that are rejected are politically inspired, which is trying to manipulate financial markets so that some can make money. This is simply dumb. His close friend Elon Musk has lost more than $ 30 billion.
The other set of comments is about the economy, which Trump is trying to devalue the dollar for US exports to become competitive. The simple answer to this is that a global reserve currency is, by definition, one that requires commercial deficits.
So, the idea that Trump does not want the dollar to be the reserve currency to the engineering of a commercial surplus for the United States is completely ridiculous. It could and has depressed. But that is temporary.
Public memory can be short, but I had thought about economists that would have somewhat longer memories. But apparently not, because they have forgotten what happened in the four decades from 1950 to 1990.
The simple truth is this: what is happening now is a repetition of those years, namely, huge deficits of US budget and trade accompanied by mass accumulation of dollars out of American control.
Recapitulation of a letter
The only difference is that it was Europe and Japan who were the villains at that time and the villain is now. Europe exported more to the United States between 1950 and 1970 than it mattered, still does, and found a huge cache, called Eurodolrs. Japan between 1970 and 1990 did the same and also accumulated huge reserves.
To solve the European problem, Richard Nixon, a republican president, left the gold standard in 1971. In the mid -1970s, Europe had lost its advantage that has not yet recovered.
In 1985, Ronald Reagan, another Republican president, forced two things to Japan. The ‘persuaded’ to the Japanese to accept voluntary export restaurant to limit the number of Japanese food that entertains the United States. The other thing was known as the Plaza Agreement that ‘persuaded’ Japan to revalted his currency fish The dollar.
In 1992, like Europeans had bit the dust in 1980, the Japanese economy also entered a stagnant phase. Neinder Europe or Japan have recovered even now.
China came in its place as the main exporter of the United States. Like Europe, between 1950-70 and Japan between 1955-85, it was also facilitated by the United States.
Then he bit his hand that fed her. So now it is his turn of being beaten. But will the story be repeated for the third time? We will have to wait and see.
Right in the 1970s, after the United States had refused to honor Troy’s gold for $ 35, the same chillidos of indignation and apocalypse forecasts had the same leg. All that happened was the volatility in the financial and Petrodollars markets replaced the Eurodollars. It was then that the Middle East became rich.
The international economy flourished. Many documents and books were written. Some economists briefly won the ‘Nobel’ award. But when all the commercial and academic dust had been established, there was the dollar, like the world’s coin of the world.
A legitimate question today is if the United States has the same leverage with China that Europe and Japan did, it provided military security to both. And the obvious answer is no. China is a military adversary.
When the United States hit them, European responded expanding their economic union both in trade and monetary. The EU and the euro were the possible result. The Japanese did not attempt. They just turned around.
And the dollar remained invincible. That is the point to the grass.
What can China do? It has tried RCEP, an Asian commercial block. He has tried an Asian infrastructure investment bank. He has tried to promote Yuan as the global reserve currency, already directly through BRICS. He is pretending that he is on par with the USA. In technology, through memes. It will blackmail the United States through its control or foreign lands, but that control has now been reduced.
But yes, this could hurt. Despite Trump, China also does not enjoy the confidence that the United States enjoy, what Trump could be destroyed.
United States or China?
In the end, the point is this: if I had to choose between the United States and China, who would you choose? And that is the question of billions of dollars: does the Communist Party of China or America?
Everything that China is considered does not have the depth of ‘integral power’ that is needed to face the United States. I think the treatment Trump will sacrifice is that the Pacific is you but that is all you get. Okay, and I will reduce 10 percent rates.
Meanwhile, in India we should ask ourselves, like Kalia in SholayWhat will our destiny be? “Ab Tera Kya Hoga, Kaliye“
Posted on April 13, 2025