We can probably count on one thing – the people from Goldman Sachs advising Trump will most likely do what they always do – assume the manipulation and “influence” is all that is needed to change the trend in the dollar. Donald Trump’s top trade adviser Peter Navarro has hit out at Germany and accused the country of gaining an unfair trade advantage from the “grossly undervalued” euro. He gave a lift to the euro but has signaled that when it comes to international trade, they have NEVER learned their lesson even once.
These people Trump has surrounded him with are absolute idiots if they think they can “talk” the dollar down to help trade. Sorry, that is what Jim Baker did in creating the G5 and urging Europe to create the euro at the Plaza Accord in 1985. If they attempt to create the Trump Tower Accord to somehow fix currencies, they are going to find that the world monetary system is on the verge of collapse, which is why they are so desperate to create electronic money. The powers that be see eliminating cash as not just a tax bonanza, but it will eliminate bank runs because you cannot withdraw cash.
On May 28th, 1997 just weeks before the Asian Currency Crisis erupted on July 1st, I wrote to Robert Rubin who was pulling the very same tactic – complain that the yen should be higher. Rubin, ex-Goldman Sachs, attempted to manipulate the dollar for trade. Instead of the real reform, they ALWAYS look for the easy way – lower the currency to sell more.
Future Secretary of the Treasury responded, Tim Geithner in a matter of days by June 4th. Nothing has ever changed. The words coming out of the Trump Administration show that we are going to have to cope with this same nonsense of attempting to talk the currency down all for trade. We do not live in a FIXED exchange rate system. These people think they can talk currency up or down and it will magically stay there. What we see ahead is chaos and volatility – not a more stable economy.
First and FOREMOST – these people cannot even comprehend how trade works because all they see is dollar flow. Nobody sits at the docks counting the number of goods coming in. They look at the amount of money and ASSUME that reflects more or less goods imported.
Talking the currencies up or down WILL NOT alter the course long-term. We are headed into a major currency crisis for as the euro goes off the boards, the dollar will soar and Trump will freak out about trade exactly as we did back in 1931. At that time, Roosevelt’s Brains Trust were all wrong. They were advising, as Merkel, to maintain the dollar for confidence yet that was imposing deflation. Roosevelt turned to a rogue economist everyone said was nuts – George Warren. It was Warren who showed Roosevelt that the devaluation of the dollar was the only way out. Against the advise of the “establishment” bankers, Roosevelt devalued the dollar and that reversed the stock market and the economy, although that lasted only until 1937.
The core of the first Roosevelt brains trust consisted of a group of Columbia law professors Adolf Berle (1895-1971), Raymond Moley (1886-1975), and Rexford Tugwell (1891-1979). Note that they were lawyers, not market investors, technicians, or economists. They knew how to get around the Constitution, not straighten out the economy. Still, these were the men who played a strategic role in shaping the legal policies of the First New Deal in 1933 – not the economics. They also never actually met together as a group. They each were solicited for their LEGAL opinions by Roosevelt Roosevelt expanded his Brains Trust adding James Paul Warburg (1896–1969) who was the son of the famous banker Paul Moritz Warburg (1868–1932). Nonethless, James lacked the banking experience of his father. Louis Dembitz Brandeis (1856–1941) was another lawyer who became a Supreme Court Justice. Another lawyer educated in Chicago also joined the Brains Trust, Harold Lill Ickes (1874–1952). There was the social-activist among the time whose philosphy was that created jobs was better than handouts and created the WPA – Harry Lloyd Hopkins (1890–1946). The first woman appointed was Frances Perkins (1882–1965) whose background was chemistry and physics and at least had a vision compared to the lawyers and brought in the labor movement becoming the U.S. Secretary of Labor from 1933 to 1945. Another lawyer was Basil O’Connor (1892-1972) who went on to become head of the American Red Cross.
