Donald Trump and Elizabeth Warren agree to devalue the dollar, but not to worry, poverty is good for America
Presented below is our translation of an article by Ivan Danilov on the looming devaluation of the dollar. Commentary and notes [in brackets] are by Vince Dhimos.
Russian, Chinese and, even US, analysts have been talking about this possibility for years, but their conviction was that the dollar would drop spontaneously under the weight of the sovereign debt. But now politicians and Establishment-connected economists are finally getting around to softening up the public to accept a government-induced devaluation and are telling them everything will be just fine. Prominent influencers, writing, for example, in NYT, are batting around a figure of 27% for the devaluation. This will definitely make living even more expensive for the struggling little guy. It could push gas prices up by about that percentage, although domestically operating oil companies could possibly lower that a tiny bit (but not by much because shale producers need higher prices to offset their overhead). Part of the narrative is that a cheaper dollar will drive US exports, but the ulterior motive is certainly to achieve a soft default on the debt. You won’t hear Elizabeth Warren or Donald Trump mention that though! The coming devaluation is designed for the rich.
In case you missed the news of this bipartisan push for dollar devaluation in the US press, here is a pertinent article in CNN.
Further, a Fox Business article linked here explains how the US government and Fed can benefit by devaluing the dollar in order to resolve the sovereign debt issue. BTW, this article is certainly part of the msm’s sales campaign to soften you up to accept this idea. I don’t recommend swallowing this article’s view whole. The author, whose target audience is rich investors, is focused on cutting entitlements (which may be necessary, of course) but never mentions military spending, which is catastrophically high and unjustified because only the Pentagon and NATO think the Russkies are coming to invade your home and raid your fridge, and Congress doesn’t dare cut spending on arms procurement because they are wedded to arms peddlers, who are among their biggest donors (a marriage that undermines national security and ought to be punishable under criminal law!). That unwholesome lawmaker-arms dealer relationship is a structural defect in our body politic that won’t go away on its own, so in the final analysis, the US is wedded to profligate spending, even if the currency is devalued. In fact, barring a miracle, this marriage between Congress and arms sellers (and with Israel and Saudi as well, of course) will drive further currency devaluations ad infinitum until the middle class moves down to join the legally poor. This is why the US, barring a miracle, is ultimately doomed to fall off the cliff. Of course, if the US is forced to close most of its foreign bases and stop playing world cop, it could join the rest of the world and become a responsible productive economy. Then Washington and Wall Street could stop playing these reckless games with your currency.
The Fox News article linked above explains the mechanism of the soft default:
“A hard default, where the government simply refuses to pay its debts, would cause a global economic meltdown. Dollar-denominated Treasuries and federal reserve notes are the lifeblood of the global financial system. But a soft default – a one-time devaluation of the dollar which enables the government to pay back its debts in full, albeit at a lower intrinsic value – needn't be catastrophic.”
But Fox Business is part of the media campaign Ivanov tells us about, and is selling fiction here because the enterprising US Congress will always find a way to overcome the “one-time” restriction. Once the dollar is devalued, nothing will prevent a second, third, and on up to umpteenth devaluation any more than the Fed could have pulled off a one-time qualitative easing. Free money is too big a temptation.
At any rate, Danilov, based on his reading of the US economic press, warns that this is no longer a dress rehearsal. The devaluation, according to the US financial and economics press, is on the way, sometime during Trump’s tenure, but not to worry. The economic experts, for example, at NYT and Bloomberg, will make you feel good about paying considerably more for necessities and becoming even poorer than you are now.
“Save the US – devalue the dollar!”: New ideas on American restructuring
June 22, 2019
A ghost haunts American media, the ghost of restructuring. This is the only way to explain the general interest in the idea of the need for radical reforms of the fundamental principles of the American economy and politics. And this fad is affecting all parties to the intra-American political conflict, that is, both Trump supporters, and supporters of the Democratic Party.
Moreover, judging by the latest news releases in the most authoritative American media, both sides even offer similar radical solutions, and the only difference between them often comes down to the difference in colour and the tone of the ideological package in which they are inserted by prominent media propagandists. This similarity is noticed not only abroad, but even in the USA itself. And now The New York Times - the main political publication of the country - writes that the proposals for rescuing the American economy, which are being put forward by President Donald Trump and one of his main opponents from the Democratic Party, US presidential candidate Senator Elizabeth Warren, miraculously coincide. [sorry to interrupt this excellent analysis by Danilov, but I was wondering if you have noticed the subtle trick of the pols and their pals in the msm, namely, selling an idea or plan as “bipartisan,” suggesting that both left and right are for it. This is invariably a con because it is Congress’ way of pulling the wool over your eyes to do something that the people don’t need or want. “Bipartisan” means that the political class and msm are ganging up on you the people.] Since The New York Times is a publication with an unequivocally leftward ideological tinge, the ideological packaging for this coincidence is chosen so that readers can see the struggle for social justice in the radical measures that President Trump and his opponents are both promoting in their own way. This is a logical approach, because it is the only way to “sell” to (or to call a spade a spade, “foist” on) voters the idea of the need for a radical devaluation of the American currency.
"(Senator. - Ed.) Warren and Donald Trump agree, at least on one thing: American currency problems are detrimental to American workers," the influential economist (associated with the Democratic Party) said in The New York Times "think tank" Economic Policy Institute Policy Centre, Robert Scott (Robert E. Scott).
The so-called currency problems are such an elegant euphemism coined to describe harsh reality. The problem resides in the fact that both political forces in Washington believe the US dollar is too expensive, and for the sake of common (American) prosperity it urgently needs to be devalued. Mr. Scott immediately tries to reassure the reader, stating: “The new idea that the United States can achieve greater domestic prosperity by revaluing the dollar sounds unclear and a bit risky. Who would want to interfere with the workings of our currency? But the reality is that China and about 20 other countries are already doing this."
And then on the pages of the premier print publication of the United States there appears, just for reference, a recap of the theory on the world conspiracy against American workers, in which China and other 20 countries - "currency manipulators" – participate. Here we must make an important clarification: the list of potential manipulator countries (to which the author of The New York Times refers), compiled by the US Treasury, in addition to China also includes Russia, and several times in the American media, such as Bloomberg, there were inserts about high-ranking officials who threatened to give Russia the official status of a" currency manipulator,” which opens up the possibility to subsequently slap sanctions on our country.
The essence of the very "conspiracy" in which the non-Establishment Republican Trump and ardent Establishment democrat Warren (and also the author of The New York Times who sided with her) believe (surprisingly) is that foreign exchange manipulation by foreign governments has made American exports more expensive all over the world. And this made products made in China and other countries cheaper (than American ones. - Ed.). This is the main reason that America’s trade deficit has increased dramatically over the past 20 years, destroying almost five million production jobs, about 90 thousand factories and the livelihood of thousands of farmers in the country, Wall Street did not object to the appreciation of the dollar. This led to a flow of cheap imports and huge profits for companies that sell them, especially Walmart, Amazon, Nike and Apple. It also led to lower wages for 80 million American workers competing with countries, whose workforce was cheapened by these undervalued currencies. "
The leading economist of the Economic Policy Institute thinks (or pretends) that the decision is obvious: “devalue the dollar,” and he even mentions the specific dollar devaluation figure relative to all other currencies of the “manipulator countries”: 27 percent. But such a devaluation it will only work if the governments of other countries do not take retaliatory measures and start a so-called currency war – which will require repeatedly renewed US dollar devaluation measures.
As additional or alternative measures, sanctions are also proposed in the form of tariffs and attempts to force the main US trading partners to sign the new version of the Plaza Accord agreement, through which the Reagan administration solved a similar problem in the late 1980s. The problem is that Trump is not Reagan (although he wants to be like him), but China, the European Union (including Germany) and Japan clearly do not want a repetition of the situation 40 years ago, when the Reagan administration saved the American economy through crises in the rest of the world.
It is easy to see that discussions about the need to drastically devalue the dollar, at least by 27 percent to begin with, look rather strange in terms of real incentives for American re-industrialization – for only naiveté verging on stupidity could make anyone believe that after “balancing” the exchange rate of the dollar, production plants exported from the United States, would suddenly return to America on their own, especially if we consider that the purchasing power of American consumers will receive a rather sensitive “currency” impact.
By and large, devaluation (as well as accompanying or subsequent inflation) is beneficial not to the American workers, who are allegedly baked by Trump, Warren and The New York Times, but rather to American business and the government. Let's look at the situation from the outside, that is, through the eyes of competent, but unbiased observers from the Japanese business agency Nikkei: "Growing US business debt, already at a historical level, represents a potentially huge risk for the global financial system and the global economy, causing concern among market participants and politicians. Experts are becoming increasingly concerned about both the quality and quantity of debt in the US corporate sector, because loans to borrowers with lower credit ratings and already high debt levels are increasing."
In modern realities, such debts (corporate plus government) can only be resolved in three ways: through explosive economic growth (located somewhere in the sphere of unscientific fantasy), through mass defaults (possible, but very painfully, especially for the economic elite) and by devaluing the currency in which the debts are collected (to make it a little less disturbing, you can present it to the voter as a concern for social justice).
Conclusion: incontrovertible economic logic and political calculation indicate that the stars favour devaluation, although there are still chances for other scenarios.
Judging by the fact that the proposition “devalue the dollar, and Americans will be just fine” is being promoted openly through the mainstream left-wing media, and Donald Trump is publicly pressuring the management of the Federal Reserve to lower interest rates (which also reduces the dollar exchange rate), the idea is out there. True, this approach will have a major side effect, namely, it is unlikely the dollar will be able to retain the much-needed US status of a world currency.
But it may well be that Donald Trump has his own opinion on this matter, and the White House will try to make (yes, even by force) the whole world continue to use green paper even after a sharp drop in its value. It will be much better for the whole world if this fails.