Trump’s ‘Sound Money’ Stance

Authored by Judy Shelton, originally posted Op-Ed via The Wall Street Journal,

The source of trade anxiety is a broken global monetary system that distorts price signals with sharp currency moves.

The surest way to become alienated from Donald Trump supporters is to invoke the word “global” with regard to trade or economic interests. Even if you embrace the Trump economic agenda for enhancing U.S. competitiveness by lowering taxes and easing regulation, even if you support an “America First” approach for tackling domestic shortcomings from education to infrastructure – there is still a negative stigma attached to proposing any kind of global economic initiative.

Yet by insisting that the U.S. Treasury label China a “currency manipulator” and by promoting trade that is both free and “fair,”Mr. Trump may be laying the groundwork for a significant breakthrough in“Trade flows are affected more by ten minutes of movement in the currency markets than by ten years of (even successful) negotiations.”

Mr. Trump’s forceful rhetoric may help put an end to the politically correct attitude so prevalent among economists that breezily dismisses what was once accepted as a truism: Stable exchange rates foster long-term prosperity by maximizing the productive use of economic resources and financial capital. Why continue to passively accept the negative economic consequences of global monetary disorder? Why permit legitimately earned profits from business operations and investments in foreign countries to be wiped out by unpredictable currency losses? Why hold global economic growth prospects hostage to antiquated exchange-rate arrangements?

It’s time to end the intellectual vacuum and focus on serious initiatives for global monetary reform. The goal is to maximize prosperity by harnessing the power of free-market signals across borders. Monetary clarity is the key to reconciling the principles of free trade with the promised benefits of an open global marketplace.

By focusing on currency manipulation as an unfair trade practice, 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.

Reprinted from Zero Hedge.

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