After a week where the dying globalist financier order deployed what they could control against Donald Trump’s Second American Economic Revolution, this piece by Brian Lantz serves as an antidote to the poisonous chaos and fear they are desperately trying to inflict.
After a week where the dying globalist financier order deployed what they could control against Donald Trump’s Second American Economic Revolution, this piece by Brian Lantz serves as an antidote to the poisonous chaos and fear they are desperately trying to inflict.
The role of the US dollar as the international reserve currency will be secured to the extent that the USA returns to the American System of Political Economy. Here that idea is briefly explored, but in a fresh way. The essential point of reference should be God-given human creativity -- the shared basis of the Abrahamic religions -- as that gift is then reflected throughout Alexander Hamilton's Report on the Subject of Manufacturers.
An idea, a discovery, weighs virtually nothing, but it moves mountains.
To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted. Even things in themselves not positively advantageous, sometimes become so, by their tendency to provoke exertion. Every new scene, which is opened to the busy nature of man to rouse and exert itself, is the addition of a new energy to the general stock of effort.
The spirit of enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of cultivators and merchants, than in a nation of cultivators, artificers and merchants.
- Alexander Hamilton, Report on the Subject of Manufacturers (1791)
There is no need to reference here, or even footnote, all the pundits and current-day influencers splashing around in mud puddles, saying silly things about Trump's tariff negotiations, the specter of 'recession,' and forebodings as regards the dollar's role as international reserve currency. There is even less need to reference other pundits commenting on those pundits - and so-on endlessly!
There are already too many dollars abroad, trillions and trillions of dollars! It is certainly a good thing to see, as a result of President Trump's tariff negotiations, some trillions of those dollars now returning to the US. Foreign companies are committing to build new industrial and manufacturing capacity -- and train and employ more American workers at good wages -- right here.
Ending the "Flea Market"
Going forward, the USA has no actual reason to 'bank roll' the global derivatives market, fueling that parasitic 'market' of speculators and algorithms with trillions of dollars in liquidity. That has been a most significant and deliberately obfuscated result of the US serving as the world's consumer. (There are other financial "exotics," but here derivatives serve as a useful focus.)
For example, the largest market for borrowing dollars is the foreign exchange (FX) derivatives market. According to the Bank of International Settlements - the purported central banks of all central banks – outstanding FX derivatives – comprising mainly FX swaps, currency swaps and outright forwards –surpassed $100 trillion at the end of 2023. The BIS reports that this roughly matched global GDP in 2023 ($105 trillion) and was four times the entire world's global trade ($24 trillion). "The churn of new deals surpassed $5 trillion per day in 2022. The dollar is the vehicle currency of choice – it was on one side of 90% of all FX derivatives trades."
Likewise with crypto currency, as the dollar now plays, "an outsized role in areas of financial innovation such as by being the dominant anchor for stablecoins." This was already reported in a Federal Reserve Fed Notes in 2023.
This is the financial bubble of bubbles that threatens the next global financial collapse. So, preemptively, away with the "Casino Mondial," away with "Casino Capitalism"!
The American System at Work
As the US returns to its former, well-regarded status as an industrial and manufacturing superpower, there can be plenty of dollars entering into international circulation and trade; more than enough to further secure the role of the dollar in international trade. American ingenuity will be back at work!
The United States will become, once again, a trade-surplus nation. By all accounts, the US historically ran trade surpluses, with periods of persistent surpluses from 1870 to 1970, averaging about 1.1% of GDP. Certainly there will be ebbs and flows in the trade balance, but it will be on a sound footing.
Take as an exemplar for sound dollar circulation, the role of the US Import-Export Bank. If a robust US real economy of industry and manufacturing is once again throwing off a surplus of capital goods for export -- both in quantity and quality -- the US government and American manufacturers will both be more than interested in providing dollar financing for such capital goods exports.
Export-Import Bank loans of dollars will sell US exports, but those dollars will also generate growing liquidity and resulting real leverage in the domestic economies of our trading partners. It will be known, for example, that these domestic companies are putting those imported, Made-in-the-USA, capital goods to work to grow the real economies of their nation. Such is the infectious nature of human creativity and Yankee ingenuity!
Likewise and very importantly, diverse and robust US construction and industrial companies will again be in the market to build infrastructure and other projects around the world. How could it be that America's corporate leaders -- listening to the siren songs of Wall Street & the Fed to seek instead quick bucks -- ever retreated from these opportunities? President Trump and his team are moving to 'level the playing field' and appear committed to ensuring that US industrial and manufacturing companies again have access to credit and bank loans to physically grow their footprints.
US infrastructure and industrial investment in other national markets will be important. Keep in mind that European and Asian nations are investing trillions of their hard-earned dollars in US production facilities!
Consider then what will happen as US companies again partner in, engineer, and build -- not just extracting raw materials -- industrial and manufacturing facilities. Dollars flow into these countries to build, and many of those nations will be developing nations. This is the heart of a Good Neighbor Policy. Those dollars promote further hard commodity and goods trade in the domestic economies of our partners, but also then profitably come back to the USA.
And, of course, US companies will otherwise continue to do mutually beneficial trade -- now fair trade -- with foreign companies around the world, but complementing our domestic powerhouse.
Again, there is no need for the US to be obligated to serve as the world's consumer — and run annual trillion dollar annual trade deficits in goods. There is no need to be producing trillions and trillions of dollars of 'Euro-dollar,' petrol-dollar, and other globalized forms of dollar liquidity, if the US and its allies are phasing out -- or more dramatically curtailing -- support for the high-wire act of global market speculation in currencies, interest rates, commodities, and Treasuries. This predominantly ‘offshore’ market is home to Dope, Inc and money laundering.It was never a necessity; it was a pox on all our houses.
The "too-big-to-fail" days of "high finance" have no place in the great and potent American System. President Trump and Treasury Secretary Bessent, along with other White House cabinet members, are making this clear again. Nowhere is there to be found, in the writings and actions of the creators of our American System, any role or need for globalized 'central banking' and the globalized system of financial derivatives speculation which has been predatory, global "international finance." Away with it!
Fixed Exchange Rates
The advantages of a return to a system of fixed exchange rates, among the currencies of sovereign nations, can thus be appreciated in fuller context. Nations can now, once again, arrange a suitable system that fixes the relative value of their currencies – US Dollar, Franc, Yen, Peso(s) and so-on. Nations can also agree to adjust those relative values as they deem needed, as such a system existed up until about 1971. In such a system, there would also be fewer reasons for nations to hold large amounts of dollars, as they do today to 'backstop" and protect their own currencies from predatory speculative attack.
It will be in negotiations that sovereign nations will reach such agreements, and President Trump has already opened the door.
'The City' of London and it's 'market' in FX and other derivatives will virtually disappear, limited then to only insignificant arbitrage. With fixed exchange rates, purchases and trading in the currencies of respective nations is quite reasonable. While the Dollar continues as the agreed upon reserve currency, the dollar is not required to mediate every trade and purchase in the world. None of what has existed in currency markets in recent decades has been based on so-called free trade.
John Quincy Adam's "Community of Principle" can instead fully apply. Negotiations among leading sovereign nation states -- led by the United States with Russia, China, and India -- can make straight the highway.
The world will rest easier. All of us will still have unlimited work to do. However our world will be a much safer and better place.
Expert in the almost forgotten science of physical economy. Basing his interventions on fundamental concepts, he’s engaged in a far-ranging dialogue to shape the future of our economy & culture.
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