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Lost Jobs And Monstrous Debt: The Comorbidity Of A Strong Dollar Policy

Donald Trump's real genius may turn out to be economics. His remarks on the futility of US trade at the press conference to launch his bid for the Republican presidential nomination were exciting. He identified the problem and he has solutions. He is saying to follow the money.

There are only two ways to maintain a strong dollar. The right way is for a nation to export more than it imports. This is called mercantilism and it works every time.

The wrong way is for a nation to borrow money from other countries to pay for its imports. This has been US policy since Robert Rubin sold the idea to President Clinton in the early 1990s. Remember the central bank interventions around the world to buy dollars. Since then, the US has lost $10 trillion of wealth and millions of jobs to other countries in negative trade flows. Zero interest rates are essential to achieve even paltry GDP growth. The US is stuck in a chronic recession and will remain stuck until our negative trade balance is eliminated and jobs lost overseas are returned to this country.

Mr. Trump's comments should embarrass the press as much as they impugn our politicians. At no time in the past twenty plus years has the press noted that the US is the only country in the world selling out its own workers. Free trade is not a goal. The goal is to export more than we import. Free trade cost the US $508 billion last year.

We have also been disappointed that economists, by their silence, have supported a trade policy based on the principal that the lowest price is the only factor the US should consider in deciding whether to make or buy products. They all seem to have gone to the same school. Their argument is that the disappearance of jobs and wealth lost from writing off an entire industry in this country is more than made up by the lower costs imported products bring US consumers. They say a few are hurt; but many benefit. (They may also be comforted by the fact that pollution, though greatly increased, becomes someone else's problem). They are ignoring the fact that no nation in the history of the world has survived running negative trade balances.

We suspect that static econometric models provide the basis for expecting the "strong dollar" trade policy to yield benign results. In the real world, borrowing to buy imports is harebrained. Our dynamic trading record is a disaster for all to see. Real earnings for American wage and salary earners were $300 per week in 1995 and they are still $300 per week today. This is a barren record from a body politic that is supposed to represent the workingman.

The score of Republican hopefuls seeking the presidential nomination are going to adopt this page from Trump's playbook. They realize that blue-collar workers are learning that their enemy is not capitalism but the guy in some other country working for $50 a month. What's new in the 2016 election is that workingmen are going to vote for the party that will do something to help them. This is a mighty opportunity.