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“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.”
“They can go find another “sucker!” There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America.”
Video of Trump’s 100 Percent Tariff to the Economic Club of Chicago.
[Trump to BRICS nations] We love your product and we hope you sell a lot of it but you are going to pay 100 percent tariff.
They will then follow it up by saying, sir it would be an honor to stay with the reserve currency.
That’s not even chess it’s checkers.
The idea of passing a 100 percent tariff is such an obvious a bluff, that the correct response is to laugh.Nonetheless, that’s what he said and clueless supporters are cheering.
Who Really Wants Reserve Currency Status?Despite moaning about the dollar, China does not want to have the world’s reserve currency because it would imply running trade deficits in which other nations accumulate yuan reserves.Japan and the EU (led by Germany), don’t want to have the reserve currency “advantage” either, for the same reason.Since Nixon trashed the gold standard, an export-based, current account surplus economy is incompatible with reserve currency status.Please read the above lines over and over until it sinks in.
Reserve Currency CurseThe reserve currency irony is that despite protestations of US advantage, no country wants the alleged advantages the US purportedly receives.Since no one really wants it, having the reserve currency is best viewed as a “curse” not an “exorbitant privilege“.Reserve currency status allows the US to run deficits with policy set by foreign nations.Q: How so?
A: If China subsides exports (call it dumping if you would), the US gets to chose between higher unemployment, slower growth, or trade and budget deficits.The US choice has always been higher trade and budget deficits.
What Happens When you Raise Tariffs?In isolation, tariffs act to strengthen the dollar, reduce growth, and increase inflation.Strengthening the dollar is counterproductive to the idea of increasing exports.Carried to extreme, and 60 percent or 100 percent tariffs on China would be extreme, retaliations would be swift, and likely drastic.If Trump really did what he said, we would likely have an instant global recession.Trump is playing neither chess nor checkers. It’s a nonsensical rant from someone who fails to understand the massive problem that started after Nixon ended gold convertibility.
Global Consumers of Last ResortThe US is stuck with the reserve currency because we have the largest, most open capital markets in the world, the world’s largest bond market, and a far better business climate than the EU, China, or Japan.To ensure the US remains the curse holder, China does not float the Yuan but props up corrupt SOEs, and Germany punishes the rest of the EU.Everyone wants to export to the US, and they do.The result is a currency war with everyone hoping to devalue their currencies against the dollar.As a direct result, and aided further by better US demographics, US consumers have become the global consumers of last resort.
Total Credit Market Debt Owed 
Base money supply is the sum of currency in circulation and reserve balances, or deposits held by banks and other depository institutions in their accounts at the Federal Reserve.
US Current Account Balance 
The current account balance is the financial inflow and outflow record. It is part of the balance of payments, the statement of all transactions made between one country and another.
No Restrictions on Debt and No Enforcement MechanismAs a direct result of having the global reserve currency with no restrictions on money supply (no gold standard or other enforcement mechanism) we now have nearly $100 trillion in total US dollar denominated debt with base money supply at $5.7 trillion.And the US trade deficit has soared.Trump threatens to keep this scheme in place with dollar-strengthening, growth-slowing, and export-weakening tariffs.Tariffs cannot and will not fix this because the problem is the lack of an enforcement mechanism that gold once provided and now nothing does.A currency crisis awaits as the current path is not sustainable.
AddendumA reader accurately commented “There isn’t really any other country that can have the reserve currency.”That is correct. But that was true immediately after WWII. The US Current Account was essentially zero from 1947 to 1971.What Happened?Also note the irony. BRICS is no threat to the US dollar except possibly as a sanction avoidance mechanism. So it’s just Trump huffing and puffing nonsense like a big blowfish.More By This Author:Continued Unemployment Claims Increase Another 9,000, It’s Recession Looking
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