Trump’s Next Move

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The New York Sun

The best column yet on Donald Trump is by the economist Judy Shelton in tomorrow’s Wall Street Journal. The heroine of honest money acknowledges the stigma that attaches among conservatives today to “any kind of global economic initiative.” Yet by insisting that America label China a currency manipulator, she argues, Mr. Trump may be “laying the groundwork for a significant breakthrough in international monetary relations” — one that could eventually “restore free trade as a vital component of economic growth.”

What is so shrewd about Ms. Shelton’s observation is how deftly it dovetails with the potential political alliance between Mr. Trump and a just-vindicated Paul Ryan, who handily trounced his opponent in the Republican primary in Wisconsin. We now have at least the prospect of a leadership team comprising three figures — Messrs. Trump, Ryan, and Pence — who comprehend that the current system of fiat money, detached not only from specie but from even a monetary rule, has proven to be a failure.

The way Ms. Shelton puts it is that “Mr. Trump’s emphasis on currency manipulation brings into focus the shortcomings of our present international monetary system — volatility, persistent imbalances, currency mismatches — which testify to its dysfunction.” She notes that “today’s hodgepodge of exchange-rate mechanisms is routinely described as a ‘non-system.’” She quotes the former managing director of the International Monetary Fund, Jacques de Larosière, as terming it an “anti-system.”

One could add the Democratic sage Paul Volcker, former chairman of the Fed. “By now,” he has said, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.” Like Ms. Shelton, The Great Volcker hasn’t nominated a particular system (the Sun wants a dollar defined in law as a specified amount of gold). Their importance, along with Mr. de Larosière, and others, is that they see that there has been a monetary policy failure at the root of our recent travail.

Mr. Trump, in his economic speech on Monday at Detroit, did a fine job in respect of taxes. They are too high, and he offered a fine combination of tax cuts. They are important in restoring growth. If Mr. Trump really wants to be president, though, that can hardly be the only stop he plays on the vast organ of policy in Washington. He’s going to have to find a way to turn his abhorrence of monetary manipulation into system reforms designed to restore predictability and confidence to the international and domestic economies.

In other words, he’ll have to seize the lead in the monetary debate. He certainly is in the position to do so. Mr. Pence, an early advocate of monetary reform, was an ideal pick to become vice president, whose constitutional assignment is president of the Senate. Were Mr. Trump elected and the GOP to hold the House, we would have in the White House, at the head of the Senate, and as Speaker a triumvirate that grasps the importance of monetary reform. Plus a GOP platform that includes a monetary plank.

That is, the party has endorsed the idea of a Centennial Monetary Commission, which would undertake a strategic review of what Congress — which holds all of the monetary powers granted in the Constitution — ought to do about reform. The last time we had a monetary commission, at the start of the Reagan presidency, advocates of sound money lost, in no small part because the staff director, Anna Schwartz, was opposed. If a new monetary commission is established, what better director than Ms. Shelton?

Let us, though, not get ahead of ourselves. Between now and November, Mr. Trump has plenty of room to move from his terrific start in Detroit to another major economic speech that would knit his fiscal initiatives together with a program for monetary reform. “By focusing on currency manipulation as an unfair trade practice,” Ms. Shelton writes, “Mr. Trump has not only identified the crux of the economic dilemma, he has also spotlighted the social and political tensions its consequences have fostered.” What a moment she has lit up to bring this all home.

The New York Sun

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