119: Debt Always Wins

It starts with a clip that went viral this week for all of the wrong reasons.

It's actually a clip of Vice President JD Vance before the election, before he was vice president, but what he says has been echoed throughout the Trump administration since they have been in office.

That's, yeah, that's exactly right.

And by the way, you know, I, I am a...

This is, like, s- maybe super heterodox.

I, I am not sure that I think the reserve currency is actually good for the United States of America.

Uh, I think there is a good argument that reserve currency status is akin to coal in Appalachia.

It's a resource curse, right? It allows your consumers to consume very cheaply, right? That's been the story of the American economy for the last 15 or so years, uh, even before that, is we can just borrow, basically in an unlimited way, because we have the reserve currency.

Well, what, what he got a lot of heat for is actually a well-known economic theory.

It's called the Triffin dilemma.

Eco-- We talked about it.

Economist, uh, Robert Triffin identified this problem in the 1960s.

I did a little bit a- about this, uh, a while ago.

The idea is, a country issuing the global reserve currency has to run chronic trade deficits to supply the world with the liquidity that they need, if everybody has to trade in the dollar, right? So there's constant demand.

It ultimately undermines and weakens the currency of the nation that is the reserve currency, because it leads to things like exporting your manufacturing.

And then the money that, uh, is out there in dollars often comes back into the economy through financialization, not through investment in infrastructure.

So, um, I mean, this has just been a general way of thinking that's been echoed by the Trump administration for quite a while.

In fact, here is President Trump shortly after taking office.

You might remember this exact moment.

Bring our industry back.

We wanna bring pharmaceuticals back to the country, and the way you bring it back to the country is by, uh, putting up a wall, and the wall is a tariff wall.

We were r- the richest country in the world.

We were at our richest from 1870 to 1913.

That's when we had-- We were a tariff country.

And then they went to an income tax concept and, you know, how did that work out? It's fine.