Dear President Trump:
Congratulations on your election victory. And now the real work begins. As I am an economist, I will confine my letter to economic issues. The two most important are jobs and the dollar.
It’s tempting to view economics like an election. For you to win, Hillary Clinton had to lose. However, what applies to politics does not work in economics. Trade and jobs are not zero-sum. Just as manufacturing in California does not cause unemployment in Arizona, manufacturing in China or Mexico does not cause unemployment in America.
You have threatened to impose taxes to encourage importers to manufacture inside the US. However, this won’t increase American jobs. Instead, it will increase prices, but most American buyers are struggling as it is. Higher prices will put further pressure on wages, jobs, profits—and debt service.
Tariffs will also encourage other countries to reciprocate, in a race to the bottom. Look at what happened in 1930. The Smoot-Hawley Tariff ignited a collapse of trade. Not incidentally, the world began marching off to war soon after.
Instead of a knee-jerk reaction to the chronically weak labor market, you should look for the root cause. It is: our irredeemable paper dollar. Once as good as gold, it was dishonored by President Nixon’s decision to default on the government’s gold obligations. He removed the extinguisher of debt from the monetary system. Ever since, the debt has been doubling about every eight years.
It will double on your watch too. Do you want to be known as “Twenty Trillion Trump” for the amount you added?
Many people love the debt game, and they will want you to keep playing. Wall Street, welfare queens, senior citizens, and the owners of leveraged assets will all fight to preserve the status quo.
However, the working people who produce things (and who voted for you) are left out. So are the small businesses, entrepreneurs, and students. They don’t benefit from ever-growing debt, ever-rising asset prices, or ever-falling interest rates. They need to earn interest.
Unfortunately, due to massive government and corporate debt, a higher interest rate in the dollar is now impossible. The US dollar is on the same curve as the Swiss franc and the Japanese yen. Interest will keep falling, and go below zero. The Fed talks about higher rates, but the downward trend will continue because it must.
If you really want to drain the swamp, why not use your executive power to move towards the gold standard? The people need the full legal right to use gold as money.
You have the power to direct the IRS not to levy tax when people exchange gold for paper dollars. This tax generates little revenue for the government, but is an important barrier to the use of gold.
With the use of gold as money, the gold interest rate will reemerge. Interest is the key.
Without interest, working people can no longer save for retirement. Without interest, retirees are forced to live on their principal and pray they don’t outlive their money.
Are you bold enough to go for gold?
Keith Weiner, PhD
Keith Weiner is the CEO of Monetary Metals and the founder of Gold Standard Institute USA.
Views expressed in this article are the opinions of the author(s) and do not necessarily reflect the views of Epoch Times.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.