“Yet the idea that foreign demand for dollar reserves is driving U.S. trade deficits is out there, as is the idea that we need to fix this alleged problem. For now, I don’t expect anything to happen. But if the trade war, which is happening, fails to deliver the promised revival of U.S. manufacturing, which it will, Trump might decide to back some kind of grand currency scheme. What might that entail, and what would it do?”
I think we al know where this is heading; can anyone say Trump’s “StableCoin?” One thing about Trump; he never lets a crisis to go to waste, even if he manufactured the crisis on his own.
Right now, Trump is sitting on a lot of gold; it’s his prized possession; given he’s the “gilded” mad King! So inflation, and the destruction of the dollar isn’t a flaw in his agenda, it’s the point!
Helping Russia at all costs is the goal, America was never his priority. He owes Russia his entire existence, and wealth. They were the only game in town for him, after his 90’s Empire meltdown. Let that sink in….:)
What is so weird about the idea of spheres of influence is Russia is a pathetic country economically — its economy is smaller than just California’s or Italy’s . It is not remotely in the same league as the US, the EU or China. Someone needs to explain that to Trump.
Russia isn’t remotely in the same league as China, the US or the EU yet that is the country our supposedly “great on the economy” Banana Republicans and their fearless leader have put on a pedestal.
Now it’s starting to look like some in the mainstream media are using the idea of a Mar-a-Lago Accord the way they used the idea of Trump pivoting to being presidential in his last term. They grasp at anything to samewash Trump and downplay the danger and recklessness of his destructive policies.
45-47 doesn’t have any policies. He has whims. He is the dumbest president ever. He lurches from one whim to the next, or whatever someone tells him will make him look tough. He has no idea how financial policy works.
I am really tempted to get magnetic bumper stickers that say things like “I voted for this disaster” then surreptitiously put them on cars I see in parking lots that have MAGA stickers. I could probably get away with it because I’m an old white woman so nobody notices me.
Agreed, it’s a joke. They treat Trump with kid gloves, as though anything he does is normal, and his policies mainstream. Even venerated economists like Krugman, have been parsing their words; up and until now.
And it’s not just CA with a higher GDP than Russia; Texas, Florida and NY, respectively, all have higher GDP’s than Russia. Russia is nothing more than the world’s largest gas station, with nukes!
They should be a footnote in economics, and just serve as a warning to other strongmen throughout the world. IMHO…:)
Good points, but I would suggest that it was the stuffy, triangulating editors at the NYT who were parsing Paul Krugman's words. That's why so many of us find joy and hope in his newfound independence and prolific writing on Substack. 🥳
I agree, I should have clarified on Krugman. I did notice a lot of investigative journalists, and experts, give Trump the benefit of the doubt at first; even after the ludicrous pardons, when it should have been obvious to anyone, that his administration was going to be anything, but normal….:)
PK on Substack almost daily makes it easy to forget his years at NYT. It is a beautiful thing! I took some basic econ course in college, mostly learned that economics has way too much to do with politics. I try to read all Paul's stuff and understand it, but it isn't always easy. Maybe Paul should also write "Basic Econ for dummies" for those of us who don't want to be dumb.
Ditto! I wish I understood it better. It sounds like our trade deficits aren't as simple as the % of tariffs from country to country on "goods" but that the investments in the dollar have more bearing. Maybe?? 🤷🏻♂️
Trump has far more power than Putin ever will. He is the leader of the world’s strongest economy (until he wrecks it) and military. Putin would give anything to have that kind of true power. What he has is nukes and a macho act.
His connection with Russian oligarchs and Putin enabled Trump to maintain and secure his corporate survival and wealth, and has increased his ability to expand his corrupt and illegal access to the wealth of the USA. He's now literally running the USA, and Republican legislators at every level are protecting his ability to spread his tentacles and remove all the checks and balances that have been put in place to protect the country and Americans from people like him.
Very true. Six bankruptcies in rapid succession do tend to make reputable financial institutions skeptical about lending you more money. If it weren’t for the Russian oligarchs (and Deutsche Bank’s money laundering), Trump would be just another homeless old man with a tin cup standing on street corner.
Russia's power is the pee tapes they have on Trump. When you are the only piece protecting the naked King, you are a big guy even though the reality is you are only a pawn.
"I think we al[l] know where this is heading; can anyone say Trump’s “StableCoin?”
If he could pump a lot of money into his stablecoin, he would profit both from the increase in value and from the transaction fees. So why not privatize Social Security and promise to distribute payments in stablecoin? Then he really would be a stable genius.
It IS Russia takes Europe, trump North America and Xi Asia...that is the plan of "friends with no limits" - oh and now we have to include the dumb Donald. trump tells you what he will do and acts as if......he can't help himself.
Agreed. There is no doubt that the three blind mice have plans to divide the world into three spheres of influence. However, there is one flaw in the arrangement. The EU plus Great Britain, Canada, Japan, Mexico, S. Korea and several other nations, have combined economies almost equal to the size of the US, Russia and China combined. And don’t forget, it’s not just North America that Trump covets, he wants all of South America as well. Europe goes to Russia, and China can control the S. China Seas.
And militarily, Germany, Britain and France, Ukraine and Poland can deal with Russia on their own; if need be…:)
"There is no doubt that the three blind mice have plans to divide the world into three spheres of influence. " Oceania, Eurasia, & Eastasia? Hmm, seems like a bad idea.
I know this is a very popular take but I see no evidence that it's true. Trump loves autocrats and aspires to be one. His desire to advance Putin's agenda is based not in any sense of obligation but in admiration. The reason I think the assumption of Trump's fealty to Putin is dangerous is because, following this logic, if Putin falls Trump would somehow be rudderless. On the contrary, such an event would cause him to double down on totalitarianism and choose a new autocratic role model. Orban, for instance.
No evidence. Threatening Mexico and Canada; two of our biggest trade partners? Tariffs on every ally, which weakens them economically and militarily. Taking Russia’s side on this war, yet has done nothing to rein in Israel militarily, when both were attacked?
Even Project 2025, is a carbon copy of Orban’s Hungarian Playbook for cementing a coup in a democracy.
Com’on, there’s a reason he’s trying to destroy the economy, and it all points to Russia. Authoritarianism is part of it; his loyalty to Putin is another.
Great primer again. What I am missing is that the only way to rebalance the Balance of Payments is that the USA is going to pay for it's budget deficit themselves, by considerably raising taxes. Then they don't have to rely on selling treasury bonds to the world.
What we in Europe don't understand is the American revulsion towards paying taxes. If you have an efficient government almost all your taxdollars will go to very important uses as education, health care, safety and security, infrastructure, etc. My marginal income tax is 51%, already kicking in at around $70k. On top of that 21% sales tax for everything you buy, plus local taxes and in the end inheritance tax. And we are totally happy with that, because we live in a well organized and safe country, number 5 in the world happiness report 2025.
I have been asking the same question and arguing the same point for the last nine years. I will be 69 yo in a month. After Trump's first inauguration, I sat down at my desk and started jotting down everything I remember about the economy and world/domestic events since ~1960 trying to figure out how America got to the point of electing him President. As I was writing stuff down, I was researching it online to supplement my memory, and That document grew to around 50 pages I think. This little exercise motivated me to start writing again after a fifty-year break.
I gave a lot of thought to America's divisions, but one thing I realized early on is that there are no simple causes or solutions; there are a lot of reasons for a lot of people to be unhappy, and each of those unhappy people have their own reasons for their discontent, but I do think a few things stand out.
As Ezra Klein has said, "In America, everything comes back to race." I'm reading Good Reasonable People - The Psychology Behind America's Dangerous Divide now, by Keith Payne, a psychology professor at the University of North Carolina. In the book, he shows how American voters are influenced by race, income and education. He concludes that how people's opinions about whether or not Black people have been and are treated fairly is one primary determinant of which party they vote for.
Another factor that I think plays into our divide is the concept of "American Exceptionalism." A lot of people, mostly people born with inherited advantage, believe that success is due solely to ability and hard work, and that no effort should be made to mitigate past wrongs that have put minorities at a disadvantage. I think this also reflects the nostalgia of the American frontier and self-reliance that is centuries out of date.
Like other Western democracies, globalization and the post-industrial economy have left many Americans behind, but I think some our policies and lack of a social safety net have compounded the problem, and again, race plays into that. Economists Angus Deaton and Anne Case, as well as Heather McGee, have pointed out that some poor White people vote against policies that would help them because they would also help people unlike them. I will note here that Professor Payne offers a contrary opinion to this in his book - again nothing is simple and all of this stuff is intertwined.
Shortly after I started writing again, I wrote a piece about the American conscience and what defines it. IMO, if we want to crawl out of the abyss, we will have to recommit ourselves to the principles that all people are created equal and that democracy is worth defending.
For some reason, Americans don't like seeing other people get stuff "for free" (i.e., paid for with tax dollars.) We can be really generous when other countries have disasters (or we used to be), but poor Americans getting help with food and medical costs - no way. They need to work harder or go without. It may have to do with a racist idea that the people getting the "free stuff" are Black, or now, illegal immigrants. That's not true - there are more White people on welfare than Black people, but I think most people either aren't aware of this or don't believe it.
Another thing to consider is that most of the people who don't want to see other Americans get "free stuff" are Republicans. They think getting pibluc assistance makes people lazy, though there's no evidence to support this. I, and most liberals I read, are with you: helping each other helps us all and makes our country stronger. But 50% of the country hates this idea.
The reason I don't like paying taxes is because my tax dollars have gone for pointless invasions of other countries (Iraq and to some extent Afghanistan). Our military isn't efficient. There's a lot of private profit taking through military contracts.
I also am irritated that the wealthy don't pay taxes. Trump proudly announced that he was a "good businessman" and that's why he doesn't pay income tax. The wealthy buy special tax laws so they can avoid paying.
We don't have a decent healthcare system and our social safety net is far from generous.
Rietveld can probably point to service after service that government provides and here in the US we can't. Childcare, health, higher education, social safety net...we're pretty much on our own.
To be fair, we have a culture of complaining about paying taxes. It's a matter of pride to see how little you can pay in taxes. Not a healthy thing really.
Not only don't the super rich pay taxes like regular folks, now with the cuts to the IRS they won't ever find the wealthy cheaters. And when Biden added $$ to the IRS to hire and modernize the R's said they'd be coming after the middle class - a blatant lie
Well, nr 5 on the world happiness index is..... drum roll . The Netherlands.
18 million inhabitants on 40,000 km2. Not without problems, but generally speaking quite satisfactory. We have universal world class healthcare, based on madatory insurance. Tuition is (almost) free all the way through university. Higher education has a nominal annual fee of €2,600. Our judiciary is free from political influence, judges are appointed based on their proven professional track record and not based on political affiliation, we have full employment, a GDP per capita close to the US and a Gini Index of around 26 (US around 40). Could be worse.
And yes we are happy with skilled immigrants, because immigration is a major source for wealth growth.
Here’s one problem with your premise. “If you have an efficient government” - most Americans don’t believe our government is efficient. That’s basically how Trump was re-elected. I am very liberal and I don’t know that we have an efficient government, although what Musk is doing makes me furious. That, what someone else commented about the American independent streak, and racism - the fear that people of color are getting stuff that I deserve (goodness knows based on what) - explains a lot of the mistrust Americans have. And Trump is just playing that for all it’s worth.
Back in the '60s, we stayed in a small apartment complex. We became friends with the couple who were "managing" the complex, compensated mainly in their rent. They were white, and had recently moved to SoCal from Arkansas. It soon became evident that they were deeply racist. Their attitude had become one of privilege, and I posited that the were very happy to be on the bottom rung of the ladder, one step above "the blacks". In most other ways, they were "very nice people".
The concept of contributing to the greater good has a deep and wide countercurrent in American society. Individualism, bootstraps, self-made man, however you categorize it has a profound grip on American imaginations. If I can make it there, I'll make it anywhere, it's up to you New York, New York. As a result, any towing along of the unproductive is viewed as an unfair burden.
"What we in Europe don't understand is the American revulsion towards paying taxes." - its just greed. For example: slavery, native American dispossession and genocide, natural resource extraction, pollution, minimum wage, healthcare and many more.
Tariffs will work like the sales tax you're paying, except, if Trump gets way, the revenues will be used to extend and expand tax cutting rather than for supporting government services.
This explainer on the balance of payments and the dollar as a reserve currency is useful and very readable. The problem is we are not currently living under an administration that gives a damn about facts or reason.
The reality is the situation is more like the Twilight Zone episode “It’s a good life”, where everyone is desperately trying to stay on the good side of a child with vast powers.
Stepping outside economics for a moment, it is important to recognize the $$$$ as an international reserve currency, goes beyond economic and mercantilist factors. It rests substantially on international recognition that the USA is a (relatively) stable and transparent county and not prone to covert, corrupt or especially self-serving currency manipulation, i.e. the dollar is going to be stable currency and can be used as an international benchmark. This, of course, depends basically on our stable democracy, relatively transparent and well functioning government and, especially our ubiquitous rule of law. The MAGA/Trumpian/Heritage Foundation/Federalist Society/Muskian approach to government challenges these basic principles and the dominance of this ideology will have a bigger negative impact on international economic factors than any specific policy.
This is my biggest concern with MAGA. Musk and his Crypto bros would love to see the fall of the US dollar so they can replace it with their fever dream.
I suspect that the real reason Trump wants tariffs is that he really, really believes they will bring enough money to reduce the budget deficit caused by extending his tax breaks to the top 1%.
Bingo! Trump loves McKinley because tariffs made the US 'rich' without income tax. He wants to eliminate income tax for the wealth and replace the revenue with tariffs.
To understand Trump, you must take the simplest of explanations. He's not very bright and poorly educated, so he never will have a deep understanding of an issue.
Trump's economic "policy" os based upon greed - he has limited to no understanding of economics - dumb as a rock. I am an historian - not an economist -soo "what do I know" . Maybe I a m as dumb as a rock but I recognize stupidity and greed when I see it.Trump wants to look wealthy as he spends others money.
Indeed Fusspot, rocks don't float, and Trump is the rockiest of rocks. Bankrupting your own gambling joints? How is that possible? Even if you set one up in the middle of a desert Costner like your patrons will find you. All that's needed to keep your casino open is alcohol. Your patrons will supply the rest.
Paul, thanks for the reference to Adam Tooze. Needless to say, he -- and especially his 'commentors' -- lead me down lots of fascinating rabbit holes. The consensus is that 'the grift' explains it all better than any other theory of the case.
Trump is the frontman. Look for the 'lever people'; or if you prefer, the puppet masters'. I like your point about the United States role in world economy. In no other political economy could an immigrant college student rise to become the richest man in the world -- and parley that into control of the US government. Certainly not in China -- just ask Jack Ma. Its the grift, and as Tooze points out, marking the US gold reserves to market (now we see why Elon wanted to go to Fort Knox) and converting it to crypto, is the only way for Musk and his ilk to get to becoming trillionaires (every billionaire's goal).
They probably promised Trump he could be a trillionaire too, and he probably believed it.
Meanwhile, back on Earth, some little people might have to do without a Social Security check. And the Innuit in Geenland are googling 'Sitting Bull'.
I think I may sense the madness coming on. Almost the whole world is heading towards a decline in population, and even more in working population. The US is already pretty much at full employment. So if manufacturing jobs did come back to the US, who will work them? Either people work more jobs, or drop some existing jobs to do them. I guess more automation can reduce the need for people in other jobs, or we can export them, or fire more government employees... But how is that an improvement, and for whom. My head hurts.
Look at Florida. Immigration crackdowns have removed enough people from the labor force that the Florida government wants to make up the deficit with child labor.
Increasing automation in manufacturing requires significant numbers of intelligent people with enough integrity that they want to use their intelligence for constructive/productive purposes.
I wouldn’t be surprised to learn that a very significant percentage of the people who have intelligence and integrity (and enough of their working life still before them that their presence or absence makes a significant difference) now consider other countries to be much more attractive than the US under Trumpism.
I was hoping that was the case, but these days you never know…. My last paid job involving manual labor happened my last summer as an undergrad—more than 50 years ago.
1. In 1961 Le Monde Diplomatique published my article arguing that the increase in the price of gold (i.e.. dollar devaluation) would not solve the US Balance of Payments problem. There WAS a problem: trade was in surplus and private capital movements were small, but public capital outflows were causing an overall deficit - solved for a decade by the forced accumulation of dollar reserves by most OCDE members who (except France) refrained from converting them into gold. After Reagan's Wodoo economics Budget deficits and lower private savings increased the overall deficit. Despite fuctuations in the exchange rate this persisted ever since Reagan except for the one year when the US was sreimbursed for expenses in the first Gulf War.
2. Your intuition about the Plaza Accord is correct: the Dollar had been rising because of a bubble and the bubble had burst and the dollar started to decline before Plaza. The value of agreements not conform to market realities had been proven by the Smithsonian Agreement of 1971 whic became invalid as soon as it was concluded.
Which all leads back to reshoring manufacturing. In a future in which factories did return, not only would our national security be more assured, but American companies that returned would enjoy more foreign investment.
So how do you initiate the return of companies? Not with tariffs that impose enormous recession pressure taxation on consumers which run it all, but you raise the 15% foreign profits tax on foreign American owned companies above the national corporate 21% tax rate.
There should be no reservations about taxing corporations. Morally, we are the home nation and the corporations that left are undeserving of favorable treatment.....unless they return to enjoy lower taxes which in the absence of patriotism, will convince companies to return.
The obsession with manufacturing needs to go away. There’s nothing special about manufacturing stuff. This belief is based on nostalgia and nothing else. There’s a case to be made for industrial policy to make certain strategic goods here— microchips, armaments, etc. That doesn’t extend to toys or especially textiles or, for that matter, cars.
Reality is, manufacturing wages are, by sector, slightly below median. What made those jobs good decades ago wasn’t the magic power of manufacturing— it was unions. Which have declined sharply. If we want to bring back the decent paying middle class job, the way to do that is probably to unionize Amazon warehouses.
Strategic goods, yes. German ball bearing factories were targets for US bombers in WW II. What are the present day analogues for ball bearings and wouldn’t it be a good idea if they were made closer to home and not subject to “supply chain disruptions” of one kind or other?
If your nation is isolated enough politically and militarily that you can’t get shoes, it means that Trump’s managed to turn the US into North Korea, and trade is the least of our worries.
But even then, it’s not hard to pivot your existing capacity to making shoes. The reason not to do it in normal times isn’t that it’s hard— it’s that it’s low value added work that is most efficiently done elsewhere.
“Essentials” meaning… what? Toothbrushes? Tee shirts? No, we very much do not. We very much have a competitive disadvantage in those things. We do not need to pay more for things that will pay workers poverty wages domestically. There’s no rationale, security or otherwise, for that.
Increasing manufacturing in the US leads to higher prices and lower demand. Increasing certain aspects of manufacturing, could offset some of the wage and benefit costs (cost of goods sold), but overall, any increase in US manufacturing will mostly go to increased automation of the manufacturing process.
There isn’t a panacea for bringing back manufacturing jobs, unless incentives are introduced, which would mean subsidies. And once you start picking winners and losers, consequences will emerge.
Negative. My point was Congress created the lower foreign profits tax as an incentive to leave America, and my proposal is to raise the foreign tax so the companies return. Lower taxes here would be the incentive to return.
Okay, I’m confused. Do you mean taxing foreign companies more, or American companies that keep foreign currencies and profits overseas; just taxing their foreign investments at a higher rate? There is a difference. Additionally, it won’t solve the manufacturing issue. Consumers will still be hit with higher manufacturing costs.
That said, I do agree that taxing American companies that keep investments overseas, and taxed at a lower rate, is an issue, but just leveling an additional tax won’t work, because it would provoke a retaliatory response from foreign governments to offset any losses in revenue they incur from the US tax code.
Additionally, it doesn’t touch all the tax loopholes of countries that are essentially tax havens for offshoring tax liabilities. And for the record, Trump takes advantage of these tax loopholes and tax havens, so good luck with that!
Additionally, we just lost $500 billion in revenue from DOGE cuts to the IRS. Perhaps we should focus on the issues that actually are having a tremendous impact to our bottom line, before we start causing more problems than we’re solving. Just a thought!..:)
To clarify, American companies exported manufacturing for many decades. It seems it's all made in foreign nations. Raise the 15% foreign profits tax on American holdings outside the country to well over the 21% national corporate rate so manufacturing returns. Tax 'em back I say.
Trump chose to victimize consumers and that will cause a recession. Raise the foreign tax and companies will return, with less suffering by consumers.
Don't reward unpatriotic companies that left. Pay up or return.
And that tax will be passed on to the consumer. Where are the incentives? And exactly what aspects of manufacturing do we want returned to America. We live in a global economy where the supply chain is fragile.
Additionally, if we increase domestic steel and Aluminum production, it will only lead to higher prices (eg, cans of aluminum in soft drinks, cars, buildings), as we could never meet the internal demand our nation needs. Manufacturing parts for cars, increases the cost of goods sold, which is passed on to the consumer, so I’m not sure what you plan to accomplish with just a tax on foreign investments?
Robert. Consider the national security imperatives of reshoring manufacturing. That is my personal incentive and focus and it is even more important now that Trump appears to be deliberately making enemies that will isolate us making reshoring imperative. It's a Trump dirty trick to force reshoring that will go against us.
sneakers alone...hmmmmm from a base of say 50.00 to 150.00+++ at US manufacturing costs(how long to build ALL these factories ???) ...and you have to sell alot of those to Americans alone ( the rest of the world will look at the US as the PARIAH WE ARE ) so .... sell TONS - two pairs per person ?? To keep those factory workers jobs safe so they can also have jobs and buy groceries and pay rent....wonder what will happen when the whole debacle IMPLODES and the 78 year old D might not be around forever ??? hmmmmm what THEN? wait..russia is our friend..they will help us out... right ??!!
We need to tax the rich more, but the idea that we will centrally plan private enterprise is China. Our innovation depends on investment in R&D and financial incentives and most of all FREE markets. Manufacturing is not coming back. That is a stupid racist Trump idea. The Canada, Mexico, US low tariff trade zone developed naturally in order to serve business. We need to move forward and figure out the jobs of the future. Not backwards.
As someone who has always followed multiple news sources, I was surprised to read Mr. Krugman's statement that "...back in the day, some people on the left claimed that the real reason we invaded Iraq was to prevent Saddam Hussein from moving away from the dollar." I had not read or heard that "back in the day". I thought it was about oil. After all, didn't the W. Bush Admin first call the invasion "Operation Iraqi Liberation", until they realized what the initials would spell on a ball cap? Back in 1971, I was aware that Nixon had taken the U.S. off the Gold Standard, but, was not paying attention to the other parts of the "Nixon Shock", that is: "Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices in order to counter inflation.", and, "An import surcharge of 10 percent...to ensure that American products would not be at a disadvantage because of the expected fluctuation in exchange rates." All three align with the concept of an "Imperial Presidency" that many "Conservatives" wished for at the time. Of course, Trump now wants to turn that concept into an oligarchical autocracy, while following Roy Cohn's mentorship about lies, law and order, and the Constitution. History shows me that fluctuations in economies can be extremely volatile, and, there are no solutions where "one size fits all". Why do so many people still believe in an economic short term tooth fairy? The Bretton Woods Accord did not last very long, and, that was put together by intelligent adults from many Nations after WWII. What serious person would put any faith in a Trump Admin "Mar-a-Lago Accord"?
You may have had relatively few if any true mavericks among your news sources. I certainly remember the claims about the currency issue —of preserving the dollar as the currency of the oil trade— being a major reason for the “liberation” invasion.
Or, that non recognition of the equation you make, "the currency of the oil trade", is simply on me. My wife has mentioned that I have (had?) an excellent, if selective, memory. I focused on the oil. Over the years: The Nation, The NYT's, The NY Review of Books, PBS, Democracy Now, among others, and, I won't forget The Daily Show with Jon Stewart at the time of the invasion and subsequent five years of the W. Bush Admin for wit and comfort. Mr. Krugman mentioned "people on the left". The Nation and Democracy Now certainly fall into that category
I bought American cars because I was patriotic. After a while, I got tired of paying for my cars twice because of excessive repairs. Foreign cars like Toyotas required less maintenance and were cheaper. Our manufacturers let foreigners get a foothold here by their complacency. Tariffs won’t change bad protectionists policies that hurt consumers.
Thank you for your past commentary in the NYT, and now this Substack. If I had only one paid subscription in Substack, it would be yours. I really benefited from your video with Kim Lane Scheppele - and many of the videos you have published here.
But tonight I may lose some sleep. In your 1984 paper on the International Role of the Dollar, you quoted a mathematical model for liquidity that contained the fundamental mathematical constant 𝝿. This is a model seeking to describe human behavior - a domain of the social sciences.
The social sciences are critically important - a deficit of knowledge here led us to elect a criminal imbecile, and he brought friends. I do worry now, though, that using 𝝿 may lead you to a dark place of mixing the social with the physical sciences. And, if you google the terms "Liquidity" and "pi," you indeed find the dark place du jour - a Crypto Coin named "Pi" that ran into a liquidity crisis recently. Q.E.D.
Thank you again for making difficult ideas easier to understand. One other thing: Although you will be remembered for your Nobel (Memorial) Prize, all nerds everywhere will remember that you were escorted to your seat in Stockholm by a Swedish Princess.
When I hear Trump talk about the benefits of tariffs, I hear three things. One is the argument that it will help to re-industrialize America, another is the mercantilist idea that it will stop other countries from taking advantage of us. But I think his third argument is more telling as to his motivation -- that tariffs will raise revenue, both for child tax credits (as he talked about during the campaign) and, more importantly, to boost the revenue side of the federal budget and facilitate his tax cutting program. He has recently talked about using prospective tariff revenues to help with the scoring for his tax cuts.
“Yet the idea that foreign demand for dollar reserves is driving U.S. trade deficits is out there, as is the idea that we need to fix this alleged problem. For now, I don’t expect anything to happen. But if the trade war, which is happening, fails to deliver the promised revival of U.S. manufacturing, which it will, Trump might decide to back some kind of grand currency scheme. What might that entail, and what would it do?”
I think we al know where this is heading; can anyone say Trump’s “StableCoin?” One thing about Trump; he never lets a crisis to go to waste, even if he manufactured the crisis on his own.
Right now, Trump is sitting on a lot of gold; it’s his prized possession; given he’s the “gilded” mad King! So inflation, and the destruction of the dollar isn’t a flaw in his agenda, it’s the point!
Helping Russia at all costs is the goal, America was never his priority. He owes Russia his entire existence, and wealth. They were the only game in town for him, after his 90’s Empire meltdown. Let that sink in….:)
What is so weird about the idea of spheres of influence is Russia is a pathetic country economically — its economy is smaller than just California’s or Italy’s . It is not remotely in the same league as the US, the EU or China. Someone needs to explain that to Trump.
Russia isn’t remotely in the same league as China, the US or the EU yet that is the country our supposedly “great on the economy” Banana Republicans and their fearless leader have put on a pedestal.
Now it’s starting to look like some in the mainstream media are using the idea of a Mar-a-Lago Accord the way they used the idea of Trump pivoting to being presidential in his last term. They grasp at anything to samewash Trump and downplay the danger and recklessness of his destructive policies.
45-47 doesn’t have any policies. He has whims. He is the dumbest president ever. He lurches from one whim to the next, or whatever someone tells him will make him look tough. He has no idea how financial policy works.
“[he] doesn’t have policies, he has whims” is an absolutely brilliant take. I’m going to see if I can have a bumper sticker made of it
Good idea Don. You can put any number of them on your bumper:-)
I found a site where I could create one. Ordered 4 of them. My car; my wife’s car; our daughters car; and a spare
Go for it!
I am really tempted to get magnetic bumper stickers that say things like “I voted for this disaster” then surreptitiously put them on cars I see in parking lots that have MAGA stickers. I could probably get away with it because I’m an old white woman so nobody notices me.
Or what Sean Hannity just said on Faux.
See John McCain. "Russia is a gas station with nuclear weapons."
Agreed, it’s a joke. They treat Trump with kid gloves, as though anything he does is normal, and his policies mainstream. Even venerated economists like Krugman, have been parsing their words; up and until now.
And it’s not just CA with a higher GDP than Russia; Texas, Florida and NY, respectively, all have higher GDP’s than Russia. Russia is nothing more than the world’s largest gas station, with nukes!
They should be a footnote in economics, and just serve as a warning to other strongmen throughout the world. IMHO…:)
Good points, but I would suggest that it was the stuffy, triangulating editors at the NYT who were parsing Paul Krugman's words. That's why so many of us find joy and hope in his newfound independence and prolific writing on Substack. 🥳
I agree, I should have clarified on Krugman. I did notice a lot of investigative journalists, and experts, give Trump the benefit of the doubt at first; even after the ludicrous pardons, when it should have been obvious to anyone, that his administration was going to be anything, but normal….:)
PK on Substack almost daily makes it easy to forget his years at NYT. It is a beautiful thing! I took some basic econ course in college, mostly learned that economics has way too much to do with politics. I try to read all Paul's stuff and understand it, but it isn't always easy. Maybe Paul should also write "Basic Econ for dummies" for those of us who don't want to be dumb.
Ditto! I wish I understood it better. It sounds like our trade deficits aren't as simple as the % of tariffs from country to country on "goods" but that the investments in the dollar have more bearing. Maybe?? 🤷🏻♂️
Trump doesn't understand economics. He likes Putin's power and wants it for himself.
Trump has far more power than Putin ever will. He is the leader of the world’s strongest economy (until he wrecks it) and military. Putin would give anything to have that kind of true power. What he has is nukes and a macho act.
But Putin has more money , controls everything , and can kill people just for looking at him the wrong way .
It's not really that weird.
His connection with Russian oligarchs and Putin enabled Trump to maintain and secure his corporate survival and wealth, and has increased his ability to expand his corrupt and illegal access to the wealth of the USA. He's now literally running the USA, and Republican legislators at every level are protecting his ability to spread his tentacles and remove all the checks and balances that have been put in place to protect the country and Americans from people like him.
Very true. Six bankruptcies in rapid succession do tend to make reputable financial institutions skeptical about lending you more money. If it weren’t for the Russian oligarchs (and Deutsche Bank’s money laundering), Trump would be just another homeless old man with a tin cup standing on street corner.
Russia's power is the pee tapes they have on Trump. When you are the only piece protecting the naked King, you are a big guy even though the reality is you are only a pawn.
"I think we al[l] know where this is heading; can anyone say Trump’s “StableCoin?”
If he could pump a lot of money into his stablecoin, he would profit both from the increase in value and from the transaction fees. So why not privatize Social Security and promise to distribute payments in stablecoin? Then he really would be a stable genius.
It's gonna take more than a Hercules to clean out King Trump's augean stables.
I guess he could hire immigrants, if there are any left
I suppose there's more than one confused Schwarzenegger.
Touché!…:)
It IS Russia takes Europe, trump North America and Xi Asia...that is the plan of "friends with no limits" - oh and now we have to include the dumb Donald. trump tells you what he will do and acts as if......he can't help himself.
Agreed. There is no doubt that the three blind mice have plans to divide the world into three spheres of influence. However, there is one flaw in the arrangement. The EU plus Great Britain, Canada, Japan, Mexico, S. Korea and several other nations, have combined economies almost equal to the size of the US, Russia and China combined. And don’t forget, it’s not just North America that Trump covets, he wants all of South America as well. Europe goes to Russia, and China can control the S. China Seas.
And militarily, Germany, Britain and France, Ukraine and Poland can deal with Russia on their own; if need be…:)
"There is no doubt that the three blind mice have plans to divide the world into three spheres of influence. " Oceania, Eurasia, & Eastasia? Hmm, seems like a bad idea.
Oh what a TANGLED web we weave….when first we practice to deceive
I sure hope they start preparing for that eventuality now.
I know this is a very popular take but I see no evidence that it's true. Trump loves autocrats and aspires to be one. His desire to advance Putin's agenda is based not in any sense of obligation but in admiration. The reason I think the assumption of Trump's fealty to Putin is dangerous is because, following this logic, if Putin falls Trump would somehow be rudderless. On the contrary, such an event would cause him to double down on totalitarianism and choose a new autocratic role model. Orban, for instance.
No evidence. Threatening Mexico and Canada; two of our biggest trade partners? Tariffs on every ally, which weakens them economically and militarily. Taking Russia’s side on this war, yet has done nothing to rein in Israel militarily, when both were attacked?
Even Project 2025, is a carbon copy of Orban’s Hungarian Playbook for cementing a coup in a democracy.
Com’on, there’s a reason he’s trying to destroy the economy, and it all points to Russia. Authoritarianism is part of it; his loyalty to Putin is another.
Great primer again. What I am missing is that the only way to rebalance the Balance of Payments is that the USA is going to pay for it's budget deficit themselves, by considerably raising taxes. Then they don't have to rely on selling treasury bonds to the world.
What we in Europe don't understand is the American revulsion towards paying taxes. If you have an efficient government almost all your taxdollars will go to very important uses as education, health care, safety and security, infrastructure, etc. My marginal income tax is 51%, already kicking in at around $70k. On top of that 21% sales tax for everything you buy, plus local taxes and in the end inheritance tax. And we are totally happy with that, because we live in a well organized and safe country, number 5 in the world happiness report 2025.
I have been asking the same question and arguing the same point for the last nine years. I will be 69 yo in a month. After Trump's first inauguration, I sat down at my desk and started jotting down everything I remember about the economy and world/domestic events since ~1960 trying to figure out how America got to the point of electing him President. As I was writing stuff down, I was researching it online to supplement my memory, and That document grew to around 50 pages I think. This little exercise motivated me to start writing again after a fifty-year break.
I gave a lot of thought to America's divisions, but one thing I realized early on is that there are no simple causes or solutions; there are a lot of reasons for a lot of people to be unhappy, and each of those unhappy people have their own reasons for their discontent, but I do think a few things stand out.
As Ezra Klein has said, "In America, everything comes back to race." I'm reading Good Reasonable People - The Psychology Behind America's Dangerous Divide now, by Keith Payne, a psychology professor at the University of North Carolina. In the book, he shows how American voters are influenced by race, income and education. He concludes that how people's opinions about whether or not Black people have been and are treated fairly is one primary determinant of which party they vote for.
Another factor that I think plays into our divide is the concept of "American Exceptionalism." A lot of people, mostly people born with inherited advantage, believe that success is due solely to ability and hard work, and that no effort should be made to mitigate past wrongs that have put minorities at a disadvantage. I think this also reflects the nostalgia of the American frontier and self-reliance that is centuries out of date.
Like other Western democracies, globalization and the post-industrial economy have left many Americans behind, but I think some our policies and lack of a social safety net have compounded the problem, and again, race plays into that. Economists Angus Deaton and Anne Case, as well as Heather McGee, have pointed out that some poor White people vote against policies that would help them because they would also help people unlike them. I will note here that Professor Payne offers a contrary opinion to this in his book - again nothing is simple and all of this stuff is intertwined.
Shortly after I started writing again, I wrote a piece about the American conscience and what defines it. IMO, if we want to crawl out of the abyss, we will have to recommit ourselves to the principles that all people are created equal and that democracy is worth defending.
For some reason, Americans don't like seeing other people get stuff "for free" (i.e., paid for with tax dollars.) We can be really generous when other countries have disasters (or we used to be), but poor Americans getting help with food and medical costs - no way. They need to work harder or go without. It may have to do with a racist idea that the people getting the "free stuff" are Black, or now, illegal immigrants. That's not true - there are more White people on welfare than Black people, but I think most people either aren't aware of this or don't believe it.
Another thing to consider is that most of the people who don't want to see other Americans get "free stuff" are Republicans. They think getting pibluc assistance makes people lazy, though there's no evidence to support this. I, and most liberals I read, are with you: helping each other helps us all and makes our country stronger. But 50% of the country hates this idea.
The reason I don't like paying taxes is because my tax dollars have gone for pointless invasions of other countries (Iraq and to some extent Afghanistan). Our military isn't efficient. There's a lot of private profit taking through military contracts.
I also am irritated that the wealthy don't pay taxes. Trump proudly announced that he was a "good businessman" and that's why he doesn't pay income tax. The wealthy buy special tax laws so they can avoid paying.
We don't have a decent healthcare system and our social safety net is far from generous.
Rietveld can probably point to service after service that government provides and here in the US we can't. Childcare, health, higher education, social safety net...we're pretty much on our own.
To be fair, we have a culture of complaining about paying taxes. It's a matter of pride to see how little you can pay in taxes. Not a healthy thing really.
Not only don't the super rich pay taxes like regular folks, now with the cuts to the IRS they won't ever find the wealthy cheaters. And when Biden added $$ to the IRS to hire and modernize the R's said they'd be coming after the middle class - a blatant lie
Well, I do have three questions. Which EU country do you live in, is it accepting refugees from the U.S. and, if so, how do I apply?
Well, nr 5 on the world happiness index is..... drum roll . The Netherlands.
18 million inhabitants on 40,000 km2. Not without problems, but generally speaking quite satisfactory. We have universal world class healthcare, based on madatory insurance. Tuition is (almost) free all the way through university. Higher education has a nominal annual fee of €2,600. Our judiciary is free from political influence, judges are appointed based on their proven professional track record and not based on political affiliation, we have full employment, a GDP per capita close to the US and a Gini Index of around 26 (US around 40). Could be worse.
And yes we are happy with skilled immigrants, because immigration is a major source for wealth growth.
Correction: Gini Index of course .26 respectively .40
Here’s one problem with your premise. “If you have an efficient government” - most Americans don’t believe our government is efficient. That’s basically how Trump was re-elected. I am very liberal and I don’t know that we have an efficient government, although what Musk is doing makes me furious. That, what someone else commented about the American independent streak, and racism - the fear that people of color are getting stuff that I deserve (goodness knows based on what) - explains a lot of the mistrust Americans have. And Trump is just playing that for all it’s worth.
Back in the '60s, we stayed in a small apartment complex. We became friends with the couple who were "managing" the complex, compensated mainly in their rent. They were white, and had recently moved to SoCal from Arkansas. It soon became evident that they were deeply racist. Their attitude had become one of privilege, and I posited that the were very happy to be on the bottom rung of the ladder, one step above "the blacks". In most other ways, they were "very nice people".
The concept of contributing to the greater good has a deep and wide countercurrent in American society. Individualism, bootstraps, self-made man, however you categorize it has a profound grip on American imaginations. If I can make it there, I'll make it anywhere, it's up to you New York, New York. As a result, any towing along of the unproductive is viewed as an unfair burden.
Yep, racism: Heather McGee "The Sum of Us".
"What we in Europe don't understand is the American revulsion towards paying taxes." - its just greed. For example: slavery, native American dispossession and genocide, natural resource extraction, pollution, minimum wage, healthcare and many more.
Tariffs will work like the sales tax you're paying, except, if Trump gets way, the revenues will be used to extend and expand tax cutting rather than for supporting government services.
This explainer on the balance of payments and the dollar as a reserve currency is useful and very readable. The problem is we are not currently living under an administration that gives a damn about facts or reason.
The reality is the situation is more like the Twilight Zone episode “It’s a good life”, where everyone is desperately trying to stay on the good side of a child with vast powers.
…and avoid the corn field
Stepping outside economics for a moment, it is important to recognize the $$$$ as an international reserve currency, goes beyond economic and mercantilist factors. It rests substantially on international recognition that the USA is a (relatively) stable and transparent county and not prone to covert, corrupt or especially self-serving currency manipulation, i.e. the dollar is going to be stable currency and can be used as an international benchmark. This, of course, depends basically on our stable democracy, relatively transparent and well functioning government and, especially our ubiquitous rule of law. The MAGA/Trumpian/Heritage Foundation/Federalist Society/Muskian approach to government challenges these basic principles and the dominance of this ideology will have a bigger negative impact on international economic factors than any specific policy.
This is my biggest concern with MAGA. Musk and his Crypto bros would love to see the fall of the US dollar so they can replace it with their fever dream.
I suspect that the real reason Trump wants tariffs is that he really, really believes they will bring enough money to reduce the budget deficit caused by extending his tax breaks to the top 1%.
Bingo! Trump loves McKinley because tariffs made the US 'rich' without income tax. He wants to eliminate income tax for the wealth and replace the revenue with tariffs.
To understand Trump, you must take the simplest of explanations. He's not very bright and poorly educated, so he never will have a deep understanding of an issue.
Yup!
Trump's economic "policy" os based upon greed - he has limited to no understanding of economics - dumb as a rock. I am an historian - not an economist -soo "what do I know" . Maybe I a m as dumb as a rock but I recognize stupidity and greed when I see it.Trump wants to look wealthy as he spends others money.
Indeed Fusspot, rocks don't float, and Trump is the rockiest of rocks. Bankrupting your own gambling joints? How is that possible? Even if you set one up in the middle of a desert Costner like your patrons will find you. All that's needed to keep your casino open is alcohol. Your patrons will supply the rest.
In the absence of Trumpism, the US would still offer plenty of good investment opportunities.
Now, not so much. Erratic uncertainly is not something that anyone in their right mind would want to invest in.
Paul, thanks for the reference to Adam Tooze. Needless to say, he -- and especially his 'commentors' -- lead me down lots of fascinating rabbit holes. The consensus is that 'the grift' explains it all better than any other theory of the case.
Trump is the frontman. Look for the 'lever people'; or if you prefer, the puppet masters'. I like your point about the United States role in world economy. In no other political economy could an immigrant college student rise to become the richest man in the world -- and parley that into control of the US government. Certainly not in China -- just ask Jack Ma. Its the grift, and as Tooze points out, marking the US gold reserves to market (now we see why Elon wanted to go to Fort Knox) and converting it to crypto, is the only way for Musk and his ilk to get to becoming trillionaires (every billionaire's goal).
They probably promised Trump he could be a trillionaire too, and he probably believed it.
Meanwhile, back on Earth, some little people might have to do without a Social Security check. And the Innuit in Geenland are googling 'Sitting Bull'.
Musical coda of the day: https://www.youtube.com/watch?v=5IsSpAOD6K8&ab_channel=TalkingHeads
Great comment! 👍
I think I may sense the madness coming on. Almost the whole world is heading towards a decline in population, and even more in working population. The US is already pretty much at full employment. So if manufacturing jobs did come back to the US, who will work them? Either people work more jobs, or drop some existing jobs to do them. I guess more automation can reduce the need for people in other jobs, or we can export them, or fire more government employees... But how is that an improvement, and for whom. My head hurts.
Look at Florida. Immigration crackdowns have removed enough people from the labor force that the Florida government wants to make up the deficit with child labor.
Increasing automation in manufacturing requires significant numbers of intelligent people with enough integrity that they want to use their intelligence for constructive/productive purposes.
I wouldn’t be surprised to learn that a very significant percentage of the people who have intelligence and integrity (and enough of their working life still before them that their presence or absence makes a significant difference) now consider other countries to be much more attractive than the US under Trumpism.
Who? Let all the retired folks go back to work! Hence, the social security cuts! /s
Doesn’t work particularly well when you’re no longer as physically capable as younger folks (speaking from experience-unfortunately).
I know! My "/s" meant I was sarcastic! I worked all my life in IT, the last time I worked physically was sorting letters for the post office 🤣
I was hoping that was the case, but these days you never know…. My last paid job involving manual labor happened my last summer as an undergrad—more than 50 years ago.
1. In 1961 Le Monde Diplomatique published my article arguing that the increase in the price of gold (i.e.. dollar devaluation) would not solve the US Balance of Payments problem. There WAS a problem: trade was in surplus and private capital movements were small, but public capital outflows were causing an overall deficit - solved for a decade by the forced accumulation of dollar reserves by most OCDE members who (except France) refrained from converting them into gold. After Reagan's Wodoo economics Budget deficits and lower private savings increased the overall deficit. Despite fuctuations in the exchange rate this persisted ever since Reagan except for the one year when the US was sreimbursed for expenses in the first Gulf War.
2. Your intuition about the Plaza Accord is correct: the Dollar had been rising because of a bubble and the bubble had burst and the dollar started to decline before Plaza. The value of agreements not conform to market realities had been proven by the Smithsonian Agreement of 1971 whic became invalid as soon as it was concluded.
Jean BANETH
Which all leads back to reshoring manufacturing. In a future in which factories did return, not only would our national security be more assured, but American companies that returned would enjoy more foreign investment.
So how do you initiate the return of companies? Not with tariffs that impose enormous recession pressure taxation on consumers which run it all, but you raise the 15% foreign profits tax on foreign American owned companies above the national corporate 21% tax rate.
There should be no reservations about taxing corporations. Morally, we are the home nation and the corporations that left are undeserving of favorable treatment.....unless they return to enjoy lower taxes which in the absence of patriotism, will convince companies to return.
The obsession with manufacturing needs to go away. There’s nothing special about manufacturing stuff. This belief is based on nostalgia and nothing else. There’s a case to be made for industrial policy to make certain strategic goods here— microchips, armaments, etc. That doesn’t extend to toys or especially textiles or, for that matter, cars.
Reality is, manufacturing wages are, by sector, slightly below median. What made those jobs good decades ago wasn’t the magic power of manufacturing— it was unions. Which have declined sharply. If we want to bring back the decent paying middle class job, the way to do that is probably to unionize Amazon warehouses.
Strategic goods, yes. German ball bearing factories were targets for US bombers in WW II. What are the present day analogues for ball bearings and wouldn’t it be a good idea if they were made closer to home and not subject to “supply chain disruptions” of one kind or other?
You might be young. Where will you get boots if our nation is isolated politically or militarily?
If your nation is isolated enough politically and militarily that you can’t get shoes, it means that Trump’s managed to turn the US into North Korea, and trade is the least of our worries.
But even then, it’s not hard to pivot your existing capacity to making shoes. The reason not to do it in normal times isn’t that it’s hard— it’s that it’s low value added work that is most efficiently done elsewhere.
Um, we need essentials manufacturing here and now.
“Essentials” meaning… what? Toothbrushes? Tee shirts? No, we very much do not. We very much have a competitive disadvantage in those things. We do not need to pay more for things that will pay workers poverty wages domestically. There’s no rationale, security or otherwise, for that.
Do you know the story of "Rosie the riveter"?
Increasing manufacturing in the US leads to higher prices and lower demand. Increasing certain aspects of manufacturing, could offset some of the wage and benefit costs (cost of goods sold), but overall, any increase in US manufacturing will mostly go to increased automation of the manufacturing process.
There isn’t a panacea for bringing back manufacturing jobs, unless incentives are introduced, which would mean subsidies. And once you start picking winners and losers, consequences will emerge.
Negative. My point was Congress created the lower foreign profits tax as an incentive to leave America, and my proposal is to raise the foreign tax so the companies return. Lower taxes here would be the incentive to return.
Okay, I’m confused. Do you mean taxing foreign companies more, or American companies that keep foreign currencies and profits overseas; just taxing their foreign investments at a higher rate? There is a difference. Additionally, it won’t solve the manufacturing issue. Consumers will still be hit with higher manufacturing costs.
That said, I do agree that taxing American companies that keep investments overseas, and taxed at a lower rate, is an issue, but just leveling an additional tax won’t work, because it would provoke a retaliatory response from foreign governments to offset any losses in revenue they incur from the US tax code.
Additionally, it doesn’t touch all the tax loopholes of countries that are essentially tax havens for offshoring tax liabilities. And for the record, Trump takes advantage of these tax loopholes and tax havens, so good luck with that!
Additionally, we just lost $500 billion in revenue from DOGE cuts to the IRS. Perhaps we should focus on the issues that actually are having a tremendous impact to our bottom line, before we start causing more problems than we’re solving. Just a thought!..:)
To clarify, American companies exported manufacturing for many decades. It seems it's all made in foreign nations. Raise the 15% foreign profits tax on American holdings outside the country to well over the 21% national corporate rate so manufacturing returns. Tax 'em back I say.
Trump chose to victimize consumers and that will cause a recession. Raise the foreign tax and companies will return, with less suffering by consumers.
Don't reward unpatriotic companies that left. Pay up or return.
And that tax will be passed on to the consumer. Where are the incentives? And exactly what aspects of manufacturing do we want returned to America. We live in a global economy where the supply chain is fragile.
Additionally, if we increase domestic steel and Aluminum production, it will only lead to higher prices (eg, cans of aluminum in soft drinks, cars, buildings), as we could never meet the internal demand our nation needs. Manufacturing parts for cars, increases the cost of goods sold, which is passed on to the consumer, so I’m not sure what you plan to accomplish with just a tax on foreign investments?
Robert. Consider the national security imperatives of reshoring manufacturing. That is my personal incentive and focus and it is even more important now that Trump appears to be deliberately making enemies that will isolate us making reshoring imperative. It's a Trump dirty trick to force reshoring that will go against us.
sneakers alone...hmmmmm from a base of say 50.00 to 150.00+++ at US manufacturing costs(how long to build ALL these factories ???) ...and you have to sell alot of those to Americans alone ( the rest of the world will look at the US as the PARIAH WE ARE ) so .... sell TONS - two pairs per person ?? To keep those factory workers jobs safe so they can also have jobs and buy groceries and pay rent....wonder what will happen when the whole debacle IMPLODES and the 78 year old D might not be around forever ??? hmmmmm what THEN? wait..russia is our friend..they will help us out... right ??!!
We need to tax the rich more, but the idea that we will centrally plan private enterprise is China. Our innovation depends on investment in R&D and financial incentives and most of all FREE markets. Manufacturing is not coming back. That is a stupid racist Trump idea. The Canada, Mexico, US low tariff trade zone developed naturally in order to serve business. We need to move forward and figure out the jobs of the future. Not backwards.
As someone who has always followed multiple news sources, I was surprised to read Mr. Krugman's statement that "...back in the day, some people on the left claimed that the real reason we invaded Iraq was to prevent Saddam Hussein from moving away from the dollar." I had not read or heard that "back in the day". I thought it was about oil. After all, didn't the W. Bush Admin first call the invasion "Operation Iraqi Liberation", until they realized what the initials would spell on a ball cap? Back in 1971, I was aware that Nixon had taken the U.S. off the Gold Standard, but, was not paying attention to the other parts of the "Nixon Shock", that is: "Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices in order to counter inflation.", and, "An import surcharge of 10 percent...to ensure that American products would not be at a disadvantage because of the expected fluctuation in exchange rates." All three align with the concept of an "Imperial Presidency" that many "Conservatives" wished for at the time. Of course, Trump now wants to turn that concept into an oligarchical autocracy, while following Roy Cohn's mentorship about lies, law and order, and the Constitution. History shows me that fluctuations in economies can be extremely volatile, and, there are no solutions where "one size fits all". Why do so many people still believe in an economic short term tooth fairy? The Bretton Woods Accord did not last very long, and, that was put together by intelligent adults from many Nations after WWII. What serious person would put any faith in a Trump Admin "Mar-a-Lago Accord"?
You may have had relatively few if any true mavericks among your news sources. I certainly remember the claims about the currency issue —of preserving the dollar as the currency of the oil trade— being a major reason for the “liberation” invasion.
Or, that non recognition of the equation you make, "the currency of the oil trade", is simply on me. My wife has mentioned that I have (had?) an excellent, if selective, memory. I focused on the oil. Over the years: The Nation, The NYT's, The NY Review of Books, PBS, Democracy Now, among others, and, I won't forget The Daily Show with Jon Stewart at the time of the invasion and subsequent five years of the W. Bush Admin for wit and comfort. Mr. Krugman mentioned "people on the left". The Nation and Democracy Now certainly fall into that category
"Maybe the important thing to understand about Trump’s policy framework is that he doesn’t have one."
The essential truth in all his madness.
I bought American cars because I was patriotic. After a while, I got tired of paying for my cars twice because of excessive repairs. Foreign cars like Toyotas required less maintenance and were cheaper. Our manufacturers let foreigners get a foothold here by their complacency. Tariffs won’t change bad protectionists policies that hurt consumers.
Dear Prof. Krugman:
Thank you for your past commentary in the NYT, and now this Substack. If I had only one paid subscription in Substack, it would be yours. I really benefited from your video with Kim Lane Scheppele - and many of the videos you have published here.
But tonight I may lose some sleep. In your 1984 paper on the International Role of the Dollar, you quoted a mathematical model for liquidity that contained the fundamental mathematical constant 𝝿. This is a model seeking to describe human behavior - a domain of the social sciences.
The social sciences are critically important - a deficit of knowledge here led us to elect a criminal imbecile, and he brought friends. I do worry now, though, that using 𝝿 may lead you to a dark place of mixing the social with the physical sciences. And, if you google the terms "Liquidity" and "pi," you indeed find the dark place du jour - a Crypto Coin named "Pi" that ran into a liquidity crisis recently. Q.E.D.
Thank you again for making difficult ideas easier to understand. One other thing: Although you will be remembered for your Nobel (Memorial) Prize, all nerds everywhere will remember that you were escorted to your seat in Stockholm by a Swedish Princess.
Respect.
When I hear Trump talk about the benefits of tariffs, I hear three things. One is the argument that it will help to re-industrialize America, another is the mercantilist idea that it will stop other countries from taking advantage of us. But I think his third argument is more telling as to his motivation -- that tariffs will raise revenue, both for child tax credits (as he talked about during the campaign) and, more importantly, to boost the revenue side of the federal budget and facilitate his tax cutting program. He has recently talked about using prospective tariff revenues to help with the scoring for his tax cuts.