"Magical thinking is indispensable to understanding Team Trump's economic policymaking. The White House often seems to believe two opposing policies can work together while one policy can do two or three contradictory things. A heavy dose of hocus pocus will be needed to make the administration's dollar policy work in the interest of the United States, for it appears that they want to end the US dollar's supremacy in global finance."
"And, reportedly, some members of the administration want to encourage more countries to adopt the dollar outright. But what is also true is that Stephen Miran, the president's chief economic adviser, on leave to act as board member of the Federal Reserve, thinks the dollar's position as the main reserve currency of the world is an undue burden for the US and a principal driver of the large trade deficit that Trump finds so odious."
The administration exhibits contradictory economic thinking, combining opposing or mutually exclusive policies and expecting incompatible outcomes. Some officials want to discourage or even end the dollar's global dominance, while others seek to promote dollar adoption abroad. Stephen Miran argues that reserve-currency status forces the United States to export Treasury bonds, causing dollar overvaluation and large current-account deficits. Policy choices or incompetence could debase the dollar, producing unwelcome outcomes for the United States and harm to foreign holders of Treasuries. Viable alternatives to the dollar are scarce, and the euro has failed to provide a unified safe asset.
Read at www.theguardian.com
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