It looks like the topic we have been laboring to cover here on this blog for some time now is entering a more mainstream media publication for discussion. This article in Forbes calls on President Trump to alter the existing monetary system by replacing the US dollar as the global reserve currency with gold in some form.
This is not a new argument, but this Forbes article frames the discussion more like we have framed it here. It lays out three alternatives for Trump to consider as he tries to implement his economic program. Below I have excerpted those three alternatives which are exactly like what we have talked about here for some time. After that are a few added comments.
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"Inside President Trump’s otherwise “standard Trump stump speech” at CPAC was nestled what might be a most intriguing observation:
There's a keen insight in there that could, just maybe, transform our lives, America, and the world. No "global currency?"Global cooperation, dealing with other countries, getting along with other countries is good, it’s very important. But there is no such thing as a global anthem, a global currency or a global flag. This is the United States of America that I’m representing." -- Donald Trump
As it happens, there is a global currency.
It’s called the "U.S. dollar.”
. . . . .
In other words, if President Trump wishes to address America’s merchandise trade deficit (balanced to perfection, of course, by a capital accounts surplus) he will find that allowing the dollar to be used as the global currency is the real snake in the economic woodpile. The dollar’s burden as the international reserve currency, not currency manipulation by our trading partners or bad treaties, is the true villain in the ongoing melodrama of crummy job creation.
Mueller’s Wall Street Journal column enumerates the three options open to President Trump:
First, muddle along under the current “dollar standard,” a position supported by resigned foreigners and some nostalgic Americans—among them Bryan Riley and William Wilson at the Heritage Foundation, and James Pethokoukis at the American Enterprise Institute.
Second, turn the International Monetary Fund into a world central bank issuing paper (e.g., special drawing rights) reserves—as proposed in 1943 by Keynes, since the 1960s by Robert A. Mundell, and in 2009 by Zhou Xiaochuan, governor of the People’s Bank of China. . . . .
Third, adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman …and then-Rep. Jack Kemp.
. . . . .
"To turn the IMF into a world central bank would, of course, be anathema to Trump’s economic nationalism. To subordinate the dollar to the IMF’s SDR would be equivalent to lowering Old Glory and replacing the American flag with the flag of the United Nations on every flagpole in America. Unthinkable under a Trump administration."
. . . . .
"Former Fed Chairman Alan Greenspan just provided a barely noticed Big Reveal. In an interview with the World Gold Council’s Gold Investor Chairman Greenspan, stating “I view gold as the primary global currency,” went on to explicitly reveal, for the first time to my knowledge, that “When I was Chair of the Federal Reserve I used to testify before US Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that US monetary policy tried to follow signals that a gold standard would have created. [Emphasis supplied.]"
. . . . .
"How might President Trump go about turning this around? He has a unique opening to forcefully pivot America toward epic prosperity.
As Paul-Martin Foss of the Menger Center astutely points out the Federal Reserve Board currently has three vacancies. If Trump were to fill those vacancies with three sophisticated gold standard advocates from the short list of Lewis E. Lehrman (whose eponymous Institute I formerly served), Dr. Judy Shelton (who served as an advisor on his presidential economic transition team), former presidential candidate Steve Forbes, and John Allison, former CEO of BB&T (preferably as vice chairman for regulation) the president would create a super “beachhead team” at the Fed to seriously restore equitable prosperity."
. . . .
"Mr. President: “No such thing as a global currency?” The dollar is the global currency. Want prosperity? Heed Chairman Greenspan and do not just view but restore "gold as the primary global currency.” President Trump: replace the dollar with gold as the global currency to make America great again. We have the gold."
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My added comments: Forbes magazine has run many articles in support of a gold based monetary system and Steve Forbes has also spoken in favor of that quite often. This author (Ralph Benko) is a strong gold advocate. So this article is nothing new in that regard. However, I am featuring it because it does make some key points in it that we have made here and you don't often see in mainstream media articles.
- the article lays out the three main options Trump has to choose from during his term of office. Please note the second option is the one we have covered here extensively and ties directly to the prediction that Jim Rickards has been making for years. That being that the IMF would issue the SDR as global reserve currency to replace the US dollar.
- while this article is encouraging Trump to choose option #3 (gold), we don't know what Trump is really going to do and that is why we continue to monitor all this here. Any major change to the existing US dollar centered system (Option #1 listed above) is likely to have a major impact on all of us even though it has received virtually no mainstream media coverage or discussion. Here we have the potential for major changes laid out clearly in a more mainstream publication.
- the article points out a huge key factor for us to watch for under Trump. Trump is going to get to pick several new governors on the Federal Reserve Board. He may even be able to eventually pack it with a majority he selected. We should pay close attention to who he puts on the Fed Board. If he really did pack it with pro gold advocates as this Forbes article implores, we can assume some kind of a return of gold to the system might actually be on the table for discussion.
Please note that the article talks about a "modernized" gold standard. There are several ideas out there on how to bring gold back to the system without using the old direct convertibility model under the old gold standard. There are even proposals to sort of combine options 2 and 3 using a new kind of SDR with a gold anchor or other hard anchor. (Dr. Warren Coats Real SDR proposal suggests using a new version of the SDR tied to a basket of goods as a hard anchor somewhat in the spirit of the old gold standard, but in a new way with a broader anchor than just gold)
Please note that the article talks about a "modernized" gold standard. There are several ideas out there on how to bring gold back to the system without using the old direct convertibility model under the old gold standard. There are even proposals to sort of combine options 2 and 3 using a new kind of SDR with a gold anchor or other hard anchor. (Dr. Warren Coats Real SDR proposal suggests using a new version of the SDR tied to a basket of goods as a hard anchor somewhat in the spirit of the old gold standard, but in a new way with a broader anchor than just gold)
There you have it. One article that sums up much of what we have tried to cover here for years. It tells you clearly what to watch for under Trump. It lays out three possible scenarios for him to choose from. If he were to choose option #2 (IMF/SDR) or option #3 (modernized gold), we will definitely see the kind of major monetary system change we watch for here. Do you really think someone like Trump who prefers dynamic change will choose to "muddle along" with Option #1? Grab your popcorn and stay tuned. It looks like it may be an interesting four years coming up.
Added news notes 3-8-17:
With one week to go we continue to monitor articles about the end of the debt ceiling holiday set to expire on 3-15-17. Here are two article links:
http://money.cnn.com/2017/03/02/news/economy/debt-limit
This CNN article says the government might make it to Oct-Nov once the debt ceiling kicks in if it is not raised.
Earlier this year the new Sec. of the Treasury said he wants the ceiling raised sooner rather than later:
http://money.cnn.com/2017/01/19/news/economy/steven-mnuchin-treasury-hearing-debt-ceiling/index.html?iid=EL
Here, Mike Maloney offers his thoughts on the recent David Stockman interview regarding the debt ceiling. Meanwhile, still no mention of it at all from President Trump or Congress. In fact, everyone is acting as if this will be a complete non event and business as usual so far.
With one week to go we continue to monitor articles about the end of the debt ceiling holiday set to expire on 3-15-17. Here are two article links:
http://money.cnn.com/2017/03/02/news/economy/debt-limit
This CNN article says the government might make it to Oct-Nov once the debt ceiling kicks in if it is not raised.
Earlier this year the new Sec. of the Treasury said he wants the ceiling raised sooner rather than later:
http://money.cnn.com/2017/01/19/news/economy/steven-mnuchin-treasury-hearing-debt-ceiling/index.html?iid=EL
Here, Mike Maloney offers his thoughts on the recent David Stockman interview regarding the debt ceiling. Meanwhile, still no mention of it at all from President Trump or Congress. In fact, everyone is acting as if this will be a complete non event and business as usual so far.
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