A number of people have asked me to comment on the explanation for what Trump is doing provided by the Dutch economist Joeri Schasfoort, who runs a YouTube channel on political economy. This is what he has said:
To summarise the video, the argument is:
1. Other states in the world have no choice but to sell to the USA. This is a market they must serve. That is why most run trade surpluses with it.
2. Trump is not actually presuming that other states will tolerate US tariffs for long. He believes that they will queue up to negotiate.
3. The goal for Trump is that the conditions for tariff release must include:
- acceptance of dollar hegemony as a reserve currency, including by pegging their currencies to it, i.e, effective dollarisation of the world.
- acceptance of US political power so that its agenda might be imposed on vassal states.
- that countries agreeing to this pay a fee or tribute - the form is not clear - for use of the dollar.
The problems I see with this argument - which could be the plan, because who knows? - are:
a. This presumes that countries must sell to the States. Maybe that is not necessary.
b. The world could, as I suggest, agree to create a new reserve currency and a new international economic architecture.
c. There is a little thing like democratic accountability in the supposed vassal states to consider - and giving it away may not be acceptable or electorally viable in many places.
d. The suggested end of sovereign currencies by pegging to the dollar, implicit in this plan, may be way beyond what is politically viable or desirable in many states. Effectively abandoning economic control of their economies to the US is something very few states are going to do.
e. This whole scheme would require that the world trust Trump's USA.
From point (e) backwards, none of this is viable.
This might be Trump's plan, amongst the many interpretations, including my own, that are available. But if it is the plan, it is bizarrely wrong-headed. The conditions for its acceptability might exist with Starmer and his Labour cabinet (and in the broader cabinet, I would not be sure), but not in the UK as a whole. In other countries, it has not a hope.
The reality is that all versions of Trump's plan suggest just one thing, and that is that chaos is going to result. This is why the rest of the world has to align to work around the States, turning their back on it, the dollar, and all it stands for in the process, in my opinion. They are being given no choice, even if the short-term cost is high.
In summary, this video might summarise the Trump plan. That does not mean it will work.
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I thought the vid offered a one possible & reasonable view. As for your point:
“d. The suggested end of sovereign currencies by pegging to the dollar”
I would offer this:
https://www.youtube.com/watch?v=yJexNcw5_Sc
It has the benefit of being very short & references US & Saudi Arabia – 1974. Also interesting comment on US – Israel.
The Trump plan will probably not work – & is already producing a reaction.
Mike, I was surprised at some of the claims (US being virtually bankrupt in early 70’s and Gaddafi) – so I looked up who this John Perkins is. His claims are of great interest – but many of his ex-colleagues seem to question his more ‘interesting’ claims – though the general arc of the career he has described are vindicated (but not NSA placement, etc). So, though interesting, he doesn’t seem to be the most reliable of sources.
However, his claims do have a resonance – including re-enforcing the dollar as the reserve currency and the default for oil, leverage over a country’s resources if they are indebted in dollars, a economically beneficial reason for bolstering Israel. And, in a sense whether he is being truthful or not, doesn’t change what is a sensible response to current events: Seek alternatives to US trade, alternative reserve currency, importance of fiat currency, importance of strong bonds with other countries that respect the rule of law, suspicion / care in interactions with countries that have high levels of corruption / are not reliable …… if only we had potential partner countries on our doorstep………
It seems clear that the US is unlikely to be able to sustain its current position for a prolonged time. Agreeing something with them before they have a change of heart would be playing into Trump’s hands. Being isolated (current UK position) will mean that EU / China will seek a reasonable settlement and the UK will be left to accept what it is offered by all other parties……… possibly the worst of all options!
As you have already pointed out setting up new manufacturing capacity in the US would take over 5 years by which time there will be a new president.
The same must apply to Trumps proposed reset of the global economy
Not only that but he’s 78 and there seems to be growing protest against his actions in the US
I have no idea what the plan is… but the video suggests a plausible one.
I think we need to think harder about the status of the dollar and you have started that with a bit about Bancor a couple of days ago.
What do we mean when we say the dollar has “Reserve Currency status”? Who decides? What led us to where we are politically, economically and militarily and how are those things looking now?
What set up would we like (in an ideal world)? What might be feasible in the less than ideal world we live in? What should that mean for UK economic, foreign and defence policy?
Quite a lot to ponder….
I know
I will be giving it time this week
Out for a coffee now – but I was writing by 5.30 this morning
https://digitallibrary.un.org/record/653789?ln=en&v=pdf#files
Might be of interest. Chaired by Joseph Stiglitz.
Thanks
I will also take a look.
Seems Prof Richard Wolff agrees with you, he argues the US is a desperate, dying empire in DENIAL. China got the boot in fast because it can.
https://www.youtube.com/watch?v=N99mK9nsKZE&ab_channel=LifeWorthLiving
The sun is rising in the east, and setting in the west.
I agree with him – although not always
His view on Russia is strange
Perhaps Mr Schasfoort could produce another video setting out how the US would survive and thrive if the world cut off all exports to that country for a time. He says the world has no choice but to supply to the US; he doesn’t mention what the US needs.
For example, China has now imposed export restrictions on rare earth minerals – China produces 90% whilst the US has 1 rare earth mine. How long will it be until the US’s defence and electronics industries are affected by the loss of those elements bearing in mind that the US’s military industrial complex is massive, accounting for about 40% of global military spending. Just how big a stockpile of those elements does the US have, when is it forecast to run out and what happen when it does?
Solidarity will work wonders, Mr Starmer.
It was interesting to note that Mr Schasfoort puts the UK into the Green box of US’s Vassal States. That’s nothing new, though, everyone just called it a “Special Relationship”. It was/is nothing of the sort. It’s about time it was called out for what it is – the UK has been an unofficial US state for many years.
I can’t see the British swapping the pound for the dollar (not should they). Similarly I can’t see the EU or China changing to use the dollar (nor should they).
In short, you are right, there is no alternative to the rest of the world (the other 95% of the world population) working around the USA; it is possible.
Stand-up Maths educator Matt Parker hilariously disassembles the mathsy approach by the Trump genius squad.
https://youtu.be/j04IAbWCszg?si=uL069aK6xgXinQed
They aren’t tariffs, they are an extortion racket. The UK removing tax from US tech companies is one example of what they are designed to do. That Trump still imposed 10% tariffs on us shows that he still wants more, on top of the £800 billion they extract from our economy yearly. Food standards and pharmaceutical regulations will be axed next.
Instead of capitulating to gangsterism, just imagine we put a stop to that digital looting of our economy. US-based multinational firms rely on digital technology to loot the economies of US “trading partners.” We can retaliate against US tariffs by abolishing the legal measures they have instituted to protect the products of US companies from reverse-engineering and modification. Printers, Teslas, iPhones, games consoles, insulin pumps, ventilators, and even tractors, all ripe for the picking. If that doesn’t make Trump back down from his “tariffs”, then stop doing business altogether.
An alternative conspiracy view
https://integ.substack.com/p/is-trump-using-his-shock-tariffs.
Far-fetched, but it will be interesting how far the stock market is factoring in yo-yo tariffs, allowing massive gambling wins, but long term destruction