Toward a Nationalist Economic Policy – American Greatness
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Suggesting that managed inflation and currency devaluation are pathways to greater national prosperity is bound to invite howls of derision. But critics may be ignoring factors, which, if acknowledged, might point toward consensus. At the least, they might provoke a more useful discussion.
With that in mind, here are four economic realities in America today.
First, although the word “fiat” is often used as a term of derision, all currencies are fiat unless they’re backed by redeemable commodities. The Chinese are stockpiling gold amid rumors they may try to tie the Renminbi to gold. Good luck with that.
Second, throughout history, nations with the ability to sustain capital formation through financial innovation are the ones that succeed. Prudently managed fractional reserve lending, a financial innovation, allows for far more liquidity in the economy.
Third, the biggest engine of liquidity is not printing currency—only about $5 trillion in actual printed U.S. dollars circulate in the world—it is debt formation, backed by collateral, that finances massive projects and asset acquisitions.
Fourth, the United States has been on a borrowing binge since the 1980s and total market debt—consumer, commercial, and government—now stands at nearly 3.5 times our gross domestic product. This level of debt is unsustainable.
On this final axiom there should be agreement. As for the others, concerned observers might agree to disagree. Suffice to say that the economic disruption, and unintended consequences that would accompany transition to a commodity-backed currency would dwarf what we may expect in most other scenarios for the American dollar.
So how do Americans unwind nearly $80 trillion in hard debt?
The Inflationary Model
If one accepts the premise that this debt is unsustainable, and that further debt accumulation is no longer possible, then broadly speaking, to facilitate the inevitable rebalancing there are only two possible outcomes—inflation or deflation.
The problem with deflation is there is no model of deflation that doesn’t include a complete collapse of liquidity and a near cessation of economic activity. A deflationary collapse would not simply wipe out a few big banks. It would wipe out all banking, big and small, multinational and local, because the value of the collateral that backed all their loans, no matter how healthy their reserve ratios had previously been, would have collapsed.
There is a model of inflation, however, that permits America to continue to prosper economically. It is vital to make the distinction between inflation caused by wages increasing faster than asset values versus inflation caused by asset values increasing faster than wages. Understanding this distinction, and recognizing what is at stake in the choice between them, cuts to the heart of what constitutes nationalist economic policy as opposed to globalist economic policy.
Everything Trump is doing, from restricting immigration to negotiating better trade deals, is designed to shift the U.S. economy from a bad inflation model to a good inflation model.
Environmentalism Abets Globalism (and Vice Versa)
For at least 30 years, American wages have not kept pace with inflation. Examining the core elements of this inflation offers clues as to why most Americans are worse off economically than they were 20 or 30 years ago. And the primary driver of inflation outpacing wage growth is the financialization of the U.S. economy. We’ve relied too much on creating overvalued assets (asset bubbles) to serve as expanded collateral, which in turn allows for increased consumer borrowing.
Allowing consumers more capacity to borrow took momentary pressure off of consumers to earn higher wages. This served the interests of multinational corporations and international banks whose profits were optimized when they exported jobs and imported workers. By importing cheap products from overseas and stimulating borrowing on inflated home equity values, for a time, most Americans weren’t suffering the consequences of an economy running on debt instead of productivity.
It’s worth considering all the ways that financial inflation was imposed on ordinary Americans, forcing them into debt.
Already reeling from the globalist tactic of exporting jobs out of their country, and importing workers (and welfare recipients) into their country, Americans also had to contend with higher prices for everything that couldn’t be imported—which are those items that use up most disposable consumer income—rent or mortgages, and utility bills. Why?
The answer to this exposes the other primary strategy of globalism, in sync with the tactic of exporting jobs and importing low wage workers, which is climate change mitigation in all of its almost endless permutations. In the name of protecting the planet, artificial scarcity has been imposed on Americans from coast to coast, and in those regions where state and local governments are overrun the most with globalists, that scarcity is most acute.
In the name of fighting climate change, globalists—oops, environmentalists—challenge the ability of entrepreneurs to do anything. To the extent new housing developments are permitted, after years, not months, and millions, not thousands, in fees, they must be confined within the boundaries of existing cities.
It is impossible to overstate how misanthropic this policy is in terms of its effect on ordinary Americans. At the same time as millions of immigrants, legal and illegal, continue to pour into the country, draconian environmental laws are cramming all new housing within the footprints of existing cities. Tranquil neighborhoods are being demolished to make room for millions of newcomers. People are literally piled on top of each other. But the investor class sees their real estate portfolio values soar. Collateral grows, enabling more borrowing, enabling more spending.
Renewable energy, also mandated by law in the interest, supposedly, of cooling the planet, also creates artificial scarcity. The cost of renewable energy far exceeds that of conventional energy, which itself costs far more than it should because of permitting delays, lawsuits, and excessive regulations.
Renewable energy requires costly upgrades to the power grid. It requires storage assets to make up for the daily intermittent nature of wind and solar power. The lifecycle costs to manufacture, operate, decommission, and periodically replace wind and solar power arrays are grossly underestimated, especially when considering how these systems have to be oversized to account for seasonal fluctuations in renewable energy output.
Power management systems at the grid level and within the home, extending to every “wired” appliance, also add stupendous costs. But public utilities earn far higher revenues when they deploy renewables, which, since their profit percentages are regulated, is the only way they can increase their profits. And everyone up and down the supply chain, from green entrepreneurs to high tech companies, exploit mandated market opportunities that otherwise would not exist.
Climate change panic has turned our school children into manipulated puppets and morphed a generation of environmentalists from sincere activism to militant hysteria. These minions support every piece of legislation and every lawsuit, despite the impact: higher prices for everything, artificial scarcity, and inflated collateral to keep the borrowing party going.
Other significant sources of inflation, college tuition and health care in particular, have other primary causes—in particular, unionization and the inefficiencies and higher costs that come with unionization—but the pretext for demanding higher wages and benefits in the first place, or even the drive to unionize itself, stem from the reality of unaffordable homes and unaffordable energy.
What a Nationalist Economic Policy Offers America
It is important to emphasize that nationalist economic policy is not “conservative,” nor is it Republican. The only reason nationalists, or conservatives, for that matter, vote for Republicans is that Republicans are not Democrats.
While far too many Republican politicians are still just members of the establishment uniparty, at least they haven’t had their vanguard completely taken over by international socialists and climate change zealots. But to suggest that a nationalist economic policy is further evidence of yet another betrayal of alleged Republican, “fiscal conservative” principles is to miss the point entirely.
A nationalist economic policy should have one goal: unwind American debt in a manner that will avoid a deflationary collapse while at the same time shifting the weight of ongoing inflation from financial asset inflation to wage inflation. To do this, both of the key premises of globalism have to be broken. Immigration must be limited to reduced quantities of highly skilled immigrants, and climate change alarmist legislation must be replaced with practical policies designed to promote private sector development of cheap and clean fossil fuel throughout the United States and around the world.
The reality of accumulating debt and persistent federal spending deficits will eventually push Americans to a crossroads.
Reducing the supply of labor via more restrictive immigration policies will cause wages to inflate. Increasing the supply of housing and energy by reforming absurdly restrictive environmentalist laws will cause prices for these commodities to level off or at least not rise as quickly as wages. And this might be enough to let the real value of debt in the economy erode slowly through inflation. But why stop there?
Fiat currencies maintain their value based on the underlying economic strength of the nations that issue them. The U.S. dollar is the reserve and transaction currency of the world because no other large national economy has anywhere near America’s industrial diversity, demographic vitality, wealth of natural resources, top universities, broad and deep leadership in high technology, political stability, and military strength.
What if devaluing the dollar would actually increase America’s underlying economic strength, and what if the only way to devalue the dollar were to continue to engage in federal deficit spending, and incrementally lower the federal reserve lending rate?
Cue the howls.
Strong vs. Weak Dollars
About a year ago, President Trump reportedly asked his economic advisers, “What’s better, a strong dollar or a weak dollar?” Literally everyone, from the entire media establishment to every anti-Trump pundit, took the opportunity to ridicule the president, as if he should have already known the answer to this question.
But there is huge disagreement among experts on this question, and Trump, as usual, was displaying common sense by asking to hear both sides of the issue.
Trump’s gut instincts appear to favor devaluing the dollar. A devalued dollar means it costs relatively more to import raw materials than to extract them domestically (note to environmentalists—it’s also less hypocritical). It also means it costs relatively more to import manufactured goods than to manufacture them domestically. This not only creates jobs, it further bids up the cost of wages. These policies would also help mitigate potential negative impacts on Americans of yet another rising mega-trend, automation.
Everything Trump is doing, from restricting immigration and developing oil and gas wells and pipelines to trying to repatriate money and negotiating better trade deals, is designed to shift the model of inflation that we’re dealing with from a bad inflation model to a good inflation model.
As for deficit spending, it’s very principled to talk about deficit spending as if it’s an evil, and it’s certainly something that’s created a problem. But, at least in the short run, it is not possible to eliminate deficit spending.
If wages are increasing faster than the cost-of-living, then spending on entitlements, including Social Security, can be indexed to stay at or below the rate of inflation, slowly reducing its share of the federal budget. Immigration reform can reduce that burden on federal, state, and local budgets. Maybe military spending can settle in at a somewhat lower percentage of GDP than it did during the Cold War.
We can certainly use federal money more efficiently, and probably save a few hundred billion there. But precipitously eliminating the federal budget deficit is impossible, and continuing deficit spending might actually help devalue the dollar, stimulate “good” inflation, and diminish the real value of government and consumer debt.
International Globalism vs. Nationalist Globalization
Ultimately the choice of economic policies for the United States comes down to only one: inflation where wages grow at a faster rate than assets appreciate. The reverse of that is the financialized economy we’ve lived with, which has enriched the globalist political donor class but impoverished everyone else in America.
The catastrophic third option is deflation, which carries a high risk of cascading implosions of collateral, putting the economy into a depression-era tailspin.
No policy comes without risk and without a downside. Inflation, for example, would victimize holders of fixed-income investments no matter what. But it might as well be wage inflation rather than asset inflation, particularly since asset inflation can lead to property tax increases that are particularly harmful to people on fixed incomes.
And it’s a bit disingenuous for budget hawks to attack economic solutions involving inflation, when these are typically the same folks who want to throw America’s seniors onto 401K plans. Such a strategy would imply supreme confidence in every American individual’s ability to manage their own personal retirement portfolios, including, presumably, inflation-hedged investments.
Globalists want to ration availability of energy, water, land and raw materials, justifying it in the name of saving the planet.
Americans, along with citizens in every nation, have a choice. They can become commodities in a global marketplace, where the assets they’ve earned and accomplishments they’ve logged have no meaning and no merit. Or they can assert their sovereignty, preserving their culture, their wealth, their independence, and the privileges they’ve earned as citizens.
They can compete with other nations, they can coexist with other nations, they can cooperate with other nations, but they can survive with their identity and traditions intact.
In America’s case, the challenge is particularly complex, because of America’s leadership role in the world. The U.S. military doesn’t have to engage in nation-building. It can be more judicious in deciding when to engage in police actions. But no matter how much those activities are attenuated, America’s military still has to pursue international terror networks, wherever they are, and America’s military still has to deter Chinese expansionism. Like it or not, America is in an undeclared cold war with China, and has been for decades. This is a war that can only be kept cold through deterrence, and deterrence, while fabulously expensive, is cheaper than a hot, horrific war.
Globalization is not the same thing as globalism. Technological advances make globalization inevitable. Intercontinental travel is now available and affordable for billions of people. The internet has made mass communication available from anyone, anywhere on Earth, to anyone, anywhere else on earth. Electronic transfers of funds occur instantaneously from anywhere to anywhere. Trade between nations has never been easier. And multinational corporations and banks have lost their national identities and operate as global entities.
Globalism, by contrast, is an ideology. In the crudest, most accurate terms possible, globalism can be described as the naïve belief that turning global governance over to an unelected cadre of corporate and financial elites is the best possible future for humanity. But it’s not, because globalists want to cram humans into congested cities like cattle, erasing cultural and national identities and traditions.
Globalists want to ration availability of energy, water, land and raw materials, justifying it in the name of saving the planet. And they’re willing to relentlessly demonize, marginalize, ostracize, and silence anyone who questions their agenda, stigmatizing them as racists and climate “deniers.”
Perhaps some globalists are truly naïve, while others are cold and cynical. If so, naïve globalists apparently think that rampant population growth among the impoverished nations constitutes less of a burden on the planet and its peoples than empowering these nations with cheap fossil fuel which would induce them voluntarily to check their population growth.
And perhaps cynical globalists simply don’t care. They just want the power that globalism offers them, and if renewable energy fails to deliver a sustainable civilization and chaos ensues, so what? The great cull would be a violent but very effective shortcut for the elites to establish their breakaway civilization, their privileged Elysium.
The reality of accumulating debt and persistent federal spending deficits will eventually push Americans to a crossroads. Most everyone agrees about that. Hyping the tropes that keep donor dollars flowing into libertarian think tanks is not the same as offering constructive alternatives. Those critics who wish to offer up a solution more realistic than what is proposed herein are emphatically invited to do so.