Trump. Has he lost his mind?

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[00:00:33] Präsident Trump's tariffs are continuing to send shockwaves and fuel fears of a recession. Stock markets across Asia have seen an absolute sea of red. This is the Debunking Economics podcast with Steve Keen and Phil Dobbie. Now it is clear obviously that President Trump lied to the American people about his reciprocal tariffs. Many of the countries that he is imposing tariffs on do not impose anywhere near those numbers on imports from America.

[00:01:02] It is more a case of people just don't want to buy goods from America or maybe they can't afford them. Is that their fault? And is Trump's whole philosophy misguided? And will Americans be the one paying the ultimate price or maybe even Trump himself? That's this week.

[00:01:25] All right. So Steve, we have these massive tariffs. We've seen the impact of that in that we've had this massive fall in stocks. Two trillion dollars written off the US stock market in the first day. Isn't that fun being a winner? Yeah. Well, this is all for the good of America. Let's remember that. That's true. And then a massive retaliation from China. By the time people are watching this, there might be retaliation from others as well.

[00:01:50] So the question is, Donald Trump and his followers must be asking, is it worth it? And I spoke to one guy who's in America who I think follows this podcast, a mate of mine called Richard, who's saying that, you know, as far as everyone is concerned in America, it's just business as usual. His followers are still his devoted followers. I wonder how long that's going to last for.

[00:02:10] I think there's going to be a bit of chaos coming out of it because one of the one of the reasons that it's so difficult to do what Trump is trying to do now is that when he saw his speech, he blamed all the foreign people coming in and raping. I think I actually use the word raping, raping and pillaging, yada, yada. He did. A man from his background. Well, let's not go there. That's how standards are moved on. We just ignore it. It's just like, oh, that's Donald Trump. I'll grab my cat, kitten. No, no, no. I'll grab my kitten and talk to you later.

[00:02:40] Yeah, he, the raping and pillaging was done by American companies in the opposite direction. This is the reality. And I know I've bored you with this one too many times, but, you know, my trip to China, 81, 82, 50 percent, give away half the business. And they agreed. So it was American corporations taking advantage of cheap wages. Now, with China on the other side, you know, the dramatic transformation of the economy over that time.

[00:03:08] And they have built up that productive capability. That's why they got it. It wasn't because, you know, they raped China, came across and raped and pillaged American corporations. American corporations came across to China. And if any rape and pillaging occurred, it was in the Rust Belt, where they shut down their factories and moved the productive capability across to China and re-exported back. But that has gone so far, and the level of globalization is just stunning.

[00:03:35] I mean, I think I've seen studies saying that there are components from more than 100 countries in the iPhone. Yeah. So there's… Pretty difficult to untangle that, isn't it, really? Yeah. An enormous amount of paperwork, at the very least, is coming their way. Yeah.

[00:03:49] Now, that's all been, you know, with the whole idea of globalization had to go at low tariffs, okay, because what is actually happening and what we call globalized is actually more effectively seen as localized or corporatized because a huge part of international trade now, over 40 percent, I think, of international trade is transactions inside the one country. Sorry, inside the one company that spans national boundaries. Yeah. Yeah. But, okay, yeah, and so this is not going to work for that reason.

[00:04:18] But this is a change in tune from you because you were quite a supporter of tariffs not so long ago. Yeah. I mean, I'm in favor. The anti-tariff argument says if we don't have tariffs, we specialize in what we're better at, comparative advantage. And that simple law means you have to do is take a ship dip, sheep dip if you're Australian, and turn it into a blast furnace, which, you know, we all, you know, you went to that particular lesson in Harry Potter's class of magic, didn't you?

[00:05:11] Yeah. I think in the late 70s, between 77 and 79. And at that stage, a part of what's called the United Nations Commission on Trade and Development, or UNCTAD, tended to be – the people who run the UNCTAD came from third world countries. And they had a very strong focus on multinational corporations locating production in multiple countries and then doing what looked like exports.

[00:05:40] But they were actually internal transfers inside the company. And they would set up the pricing so that they would take advantage of differences in tax rates and so on to minimize what they paid outside the firm and get as much as possible inside the firm. Now, back at that stage, something of the order of 40% of trade, I think, from memory, was inside – international trade, you know, 40% was trade inside companies crossing countries. So it isn't really international. It's intracorporate.

[00:06:08] Now, it must be higher these days. And you've also had this whole – particularly with relocating production to China in the first instance, whole lots of subcontractors were also involved. And so the subcontractors sell to the components to the, you know, say, Vietnamese branch of the American company. I'll choose one. Let's say – call it Nike. Yeah. And I'm going to guess that it's got about 115 subsidiary factories in Vietnam, each employing 10,000-plus people, which they indeed do.

[00:06:38] And then so when it sells – that is then sold from Nike Vietnam to Nike America. Now, at the moment, that's going off without any tariffs. Now it's going to face – what's the Nike – I think the tariffs in Vietnam are 90%? Right. Okay. Well, maybe, yeah. Well, it may be like – it's half of 90% because – But then – but is that being applied? Well, that's the thing. Yeah. Will it be applied?

[00:07:01] I mean, because the corporations – a large part of how companies managed to maximise their profits through a globalised system was to use the fact that it was – the transactions were not, you know, what do they call it, hands-off? Therefore, you know, you weren't independent. So the usual mixture – the usual model that economists build is a company in one country exports to a company in another country.

[00:07:28] And therefore, both companies are going to negotiate for the best possible price. So it's a market transaction. When you've got transfers between, you know, IBM America and IBM New South Wales – and I'll use that deliberate reason for using that example – they set whatever price they want because if tax rates are higher in Australia, they'll charge Australia enormous prices for internal operations. And then that transfer – the goods transfer is a cost.

[00:07:57] It doesn't turn up as an income source. And that is Google and all the big tech players. And so if Europe is looking for retaliation, they should be saying, well, we believe – you know, forget the goods. Service is the real issue. You may have a deficit in goods trade. But you've got a massive surplus in services. Absolute massive surplus. I mean, 60% of all the world's stock exchange is in America. All the world's stocks, the value of stocks is in America. And a lot of that is the Magnificent Seven.

[00:08:27] So they are – if we're looking for someone who's raping the rest of the world, it's the U.S. doing it through these tech companies. I don't know why we don't say, OK, we don't believe you're paying your fair share on tech. Let's kick you where it hurts. If this becomes a retaliation, if it becomes a trade war, which it is, why wouldn't we be saying, OK, we don't believe you're paying your fair share. We believe there's transfer pricing, so you're minimizing your tax. So we are going to charge you 20% of all the revenue that you make. So, for example – and we'll do it on subscription.

[00:08:55] So if someone subscribes to Microsoft Office, we're going to take 20%. We're going to take 20%. The government, you're saying, not Microsoft. Yeah, yeah. We'll get that revenue. And we're going to call it a tariff, just as you are. And for every subscription, for every online ad, we'll take that money too. That's our negotiating point. And look, there are more subscribers for these streaming services in Europe than there are in America.

[00:09:23] America, so all of them would suffer rather badly if just Europe was to say, right, we're going to charge excess fees. And the government would, you know, make a lot of money, just as Donald Trump's trying to do. Yeah. So, you know, I don't know why we don't do that. But the other thing as well is, you know, talking about Nike. So some of it comes from Cambodia. Cambodia was actually the place that was leveled with the highest tariff, according to Donald Trump. So what about the penguins?

[00:09:52] Didn't they cop a high rate of tariff? Oh, yeah, that's right. Well, we're talking about penguins. You know, you've got to watch those little fluffy creatures. Yeah. Cute and cuddly boys. Cute and cuddly. You see, they look cute. Then they come over and you think they're cute. And then the next thing they're taking over your neighbourhood. There you go. And they're taking your jobs. That's right. They're there in the restaurants flipping the fish because they're so good at that. And all they want to do is eat the fish. They don't want to be paid as well. Yeah, he's on to that. Pardon the diversion there. But yeah.

[00:10:23] But Cambodia is an interesting example because this is a country where, I mean, we should talk about how he's arrived at his figures. But I think he's like 47 or 48 percent tariff, which is halving the tariff, basically, that he said he could apply. And we'll talk about the logistics behind that. Which is just crazy because the man lied, clearly lied about what this was all about. But take Cambodia, for example, 49 percent tariff that he's imposing on them.

[00:10:50] And the reason that Cambodia is, you know, doing, has this big trade deficit with the United States is because the United States is buying Nike. A lot of Nike clothes are actually made in Cambodia as well. And a lot of knitwear. They're getting a lot of clothes. Now, you could say, well, that's, you know, they're taking away the clothing manufacturing from America. So we've got to put this massive tariff on. The fact is, even at 49 percent, those clothes are still going to be cheaper made in Cambodia than they are in America.

[00:11:20] So it's not going to achieve its desired effect. And unless America says, no, we'll start making those clothes here. In which case, to match the price, American workers would have to work at the average salary for Cambodia, which is 500 U.S. dollars a year. A year. And the reason, oh, yeah. And the reason Cambodians are not buying American goods is for the same reason. It's because they earn 500 U.S. dollars a year. You have to save a lot of years to buy an American car for that sort of money. Yeah.

[00:11:50] So whatever he's trying to do, it will achieve nothing in the case of Cambodia. So you can put a high tariff on. What do you want them to do? Do you want them to suddenly increase their standard of living to such an extent that they can buy American goods, but then it also makes it more expensive for Americans? Or do you just want them to stop sending stuff to America, in which case, what do they do for a living? Yeah. You know, what's his end game here?

[00:12:14] Well, I'm not going to try to do mental diagnostics of Trump here, you know, conclusively. But what he's doing is effectively living in a 19th century world, a 19th century mindset and imposing on a 21st century world where transnational production means that companies like Nike are taking advantage of cheap wages in Cambodia

[00:12:42] and then exporting the goods to, say, all over the world, but also America. And now they're going to have a tariff. If they're lucky only once, this is the real dilemma is that there are plenty of manufacturing processes where part of the production chain goes from one third world country to America to be shipped to another third world country, back to America, back and again.

[00:13:03] And I think I saw one element of building a transmission system for a car that crossed five, the American border five times. So if you, the companies themselves will face the requirement that they're supposed to record these transactions and pay taxes each time they do, whereas they've been able to ignore those costs in the era of low tariffs. So it's going to cause chaos.

[00:13:32] But like part of partly my point about whether you benefit from trade or not, it isn't specialisation that gives you that benefit. It's investment and development over time. And the trouble with trying to relocate that production back to America is that over that 40 years' time, the skill level has risen in countries like Vietnam, Cambodia and China. It's fallen in America.

[00:13:58] So the capacity to restart that, let alone the wage levels, as you're saying, doesn't exist back in America. So it's one of the many ways in which this ain't going to work because we're not living in a 19th century world anymore, we're living in 21st. And that just massively complicates the cost because there's so much transnational trade. Yeah. It's also quite a handy way, isn't it, of ignoring standards that you might have in your own country and recruitment restrictions.

[00:14:28] Because I'm pretty sure even in America, you couldn't get away with charging someone, paying someone $500 a year. So, you know, but you can in Vietnam. So there's – and that's America's fault. So he talks about, you know, America has been raped by these countries. Is Vietnam raping America? I think the Vietnamese might have a different opinion on who raped whom when it comes to America versus Vietnam. Yeah. I would have thought so, wouldn't you? Yeah, yeah. So, I mean, it's Trump's worldview versus the world. Yeah.

[00:14:58] And I think it's – I mean, I'd love to get back and sit back and watch some popcorn except that I'm – you know, we're all going to be starring in this movie. So we've got to work out what the consequences are. Well, what do you think the consequences will be? I mean, a global recession. I mean, the World Trade Organization and I'm trying to think – various bodies are basically predicting now, aren't they, that this is going to turn us into a global recession. You know, from maybe 2% or 3% growth this year, we're now expecting that we're going to get a minus 1% or minus 2%.

[00:15:27] Yeah, I think a recession is pretty much guaranteed. Also, what they're doing in government spending is going to have the same impact. So I'd be surprised to see a positive number for – at the end of the year against America's GDP print. But it's going to cause chaos in the globalized system. Now, I've been a critic of that system all the way through because I saw – well, two sides to it. But I saw – speaking as I was an Australian at the time that I wrote those papers critiquing transnational trade, we were like the host country.

[00:15:57] We were the third – the first world country that American corporations had operations in as well as having in America. Then what they do when they decide to take advantage of globalization and cheap wages, they shut down factories in both America and Australia and shift the productive capability to a third world country. We'll use Cambodia this time. And then what that means is Cambodia gets the investment to build the factory. It gets the wages. Even though they're trivial, they still get the wages.

[00:16:25] And local profit for local Cambodian capitalists as well. America loses the wages, gains in terms of a profit share, which goes to the ultra-rich in that country. Australia loses all around. It was getting the investment. That's gone. It was getting the wages. That's gone. And then it's importing. So its trade balance gets worse as well.

[00:16:49] So all these factors, when you look at it for host countries, developed countries that don't have transnationals, they were the definite sufferers. But certainly I had to say that depending on how it was handled by the third world country – and here China is the ultimate example – they get the investment. They get the wages. What they didn't normally get was the profit share. Now China worked out how to get hold of the profit share. And that means they can reinvest. And with the reinvestment, they've technologically completely leapt past America.

[00:17:18] So – but now if you try unwinding it the way Trump is doing, will that technology go back? America is still obviously a major source of demand for consumer goods. So that will be a major reason why they would move production back to America. Okay. But they haven't been training the workers, the sort of – the skilled work involved, the machining and so on, for 40 years. And they couldn't find workers to accept the lousy wages as well. So the cost of –

[00:17:47] And those people who might do it, they're busy trying to get out of the country at the same time anyway. So they're trying to get rid of all the foreign workers who are undocumented who might have done that kind of work. But also what about, you know, those countries? So countries like Cambodia, for example, where the wages aren't great but they are trying to pull themselves out of poverty. They lost USAID. You know, they were getting some support. So we have all decided we're going to neglect developing nations and not give them any money to help them on their way. And now we're not going to buy from them.

[00:18:17] So what do they do? I mean, it's inhumane. I mean, it's not very humane having people working in sweatshops but then saying, well, okay, you're not working in a sweatshop anymore. Just try poverty because there's no work at all. I mean, what do these countries do? Well, see, a country that's been doing it for long enough, China basically says, well, screw you. We'll make it all for ourselves. And China's got that capability. They're already starting to produce, you know, chips that only AMSL could make in the past. It's not the same technology.

[00:18:46] It's a cheat code, in effect, rather than replacing AMSL's micron-level technology. They're using some other – I don't know what it is. I don't understand. And they've got artificial intelligence that can work with lower processing power. Yeah. So China's fine. China's already made it past. What this is doing is cutting off countries like Vietnam and Cambodia that are trying it later than China because they won't have – the technology transfer hasn't occurred.

[00:19:14] They don't have the local capitalists investing. So there'll be a cheap source of labor for China, though. Yeah. Well, China will probably take advantage of it. Yeah. And there's the ironic thing. Who's going to win most of this is probably going to be China. We'll actually become the world's greatest economic superpower, helped along by America, who's sort of like going to go into second place by shooting themselves in the foot, basically. I think so. So we'll take a break. When we come back, let's look at the formula. I mean, everyone will know it by now, I should imagine.

[00:19:43] But this is nothing at all about tariffs, is it? I'll bring it up on screen and have a bit of fun when we get back. Yeah. Okay. We'll do that when we come back on the Debunking Economics podcast. He's going to bring it up on screen. So that means, obviously, there's a video to this. If you're listening to the audio version, hunt out the video version of the Debunking Economics podcast. We are back in a moment. This is the Debunking Economics podcast with Steve Keane and Phil Dobby.

[00:20:05] Well, we are talking about the madness of the U.S. tariffs. Steve Keane, who was a supporter of protectionism, thinks that the world has – I might be putting words in your mouth here – that the world is so entwined now it is impossible to pick apart. Certainly in a week or in a few days. That's what I love as well. Well, you know, these are the new tariffs we are introducing.

[00:20:33] We'll be introducing them in four days. Plenty of time for you to shift your whole method of production and set up a factory in the United States. I mean, that's the whole thing. And get ready to bargain with Trump as well, which is what he's looking forward to. Yeah, but I'm not so sure there will be too much bargaining on this. He seems like – because let's remember the intention of this is, number one, to get companies to move to America. I don't think he's too fussed about that, is he, because he's also seeing it as a tool of revenue.

[00:21:00] And I think he thinks that, okay, if I get revenue from the goods that are coming into the country, which aren't being paid by Americans, then I'm taxing the consumer a bit like a GST, really, but just on imports. Maybe that's not a bad idea. And I can get rid of other tax, like income tax. I think that's his end game. I mean, he would like to get rid of income tax altogether. Well, I think the thing which I've taken as an angle is that his real objective is to eliminate trade deficits. Okay.

[00:21:27] Now, he's trying to do it using tariffs and that crazy formula. We'll talk about the crazy formula in a moment. But the real way to eliminate trade deficits is to borrow an idea from John Maynard Keynes that was never implemented called the Bancorp. Because the whole objective of the Bancorp was to eliminate trade deficits as well. Keynes and Trump were as one on this argument that trade deficits are dangerous. And you have a better global economy if you minimize trade deficits.

[00:21:55] But Keynes' idea about how to get rid of it was a bit brighter than what Trump has been persuaded to try, particularly the stupid formula. And I think if Trump wants to really do it, drop the tariffs nonsense, bring in the Bancorp and strong-arm people to go Bancorp. Well, he has to do something, doesn't he? Because if it is a concern, and you can tell me whether it is a big concern or not, but the idea of a growing trade deficit, if it is a big concern, they've got a problem. Because it has. It does just keep on rising. In the last year, it's risen a great deal.

[00:22:26] And so if you're keeping tabs on that, you would have cause for concern. So they have to do something. Or does it not matter? Well, it does matter. Looking at – I read the justification as well as the formula. I read the justification that was done by the trade secretary, I think it was, for the formula that they used. And to me, two possibilities. Either it was some – and for once in my life, I feel sorry for a neoclassical economist.

[00:22:54] Some neoclassical economist forced to come up with a bullshit explanation to justify the tariff formula, which I presume Trump, at a guess, dreamt up himself or somebody in his inner circle. Or, this is the other possibility, it may have been designed by an AI. Why? And, yeah, I've seen quite a few. Because one of the arguments in favour of the formula being designed by an AI is that they lump tariffs on a couple of islands that have an enormous population of penguins and nothing else.

[00:23:24] And so what they did was it wasn't by country. It was by internet – what do you call it? IP address. And there's IP address, you know, .ch. Is that Switzerland? I think it is. .nl is Netherlands. And dot something, something else is an island in the South Pacific full of penguins. So – and what happened – apparently there was some transmitter that was sent down to the island and they had to send it back because it needed repairs.

[00:23:52] And by sending it back, it got classified as an export. So they got an export and an import and the imbalance was huge. So the people who were paying the highest tariffs for America are penguins. So, yeah, fantastic. So what they did – and maybe you can show on your screen – but what they did was they've taken a country's – trade deficit with America. Yeah. And they divided it by the value of the imports from that country. So if we take Cambodia as an example, just because that's the one with the highest tariff. Cambodia has a trade deficit of $11.4 billion.

[00:24:22] The U.S. imports $11.7 billion from Cambodia. So divide the deficit by the imports and you get 96%. And then he says they're being very kind and they're going to halve that. So that's why he arrived at 49% tariff on Cambodia. But that's the simplified formula, isn't it? So that's the spin. So this is exports – like the XI is exports by country I, which in this case we can take to be Cambodia.

[00:24:49] Exports to Cambodia from KDV to America minus imports. Hang on. I think MI is the American imports, okay? So that's what America imports minus what America exports to Cambodia. So the XI is really small. The MI is really big. And I don't know whether they've got a – I think they've got the – I'm guessing the equation is backwards. I haven't actually had a real – I just laughed too much to take it seriously. But that's the trade deficit and that's the imports.

[00:25:19] So the ratio of the two. And then these two numbers turn up here. And it was – In a nutshell, though, it is just that, isn't it? It's taking the trade deficit and then divide it by the value of imports. Yeah. And the two little constants they bring in there as well, ETA is – I think ETA is the extent to which the price elasticity. So one big thing in conventional economic thinking is what they call the elasticity of demand.

[00:25:45] And that says how much does the quantity demanded change given a change in the price? Now, the number that they use is that a 1% fall on the price will cause a 4% rise in sales. That gives you an elasticity number of 4. That's the first number there. Then the second one is – For all the imports from that country or to the American consumer? Yeah. And that's nonsense. I mean that's a ridiculously high elasticity of demand. You don't find that sort of thing in real world. Oh, so they apply that to everything?

[00:26:15] What you're saying? Everything, yeah. So they say the figure is 4. So a 1% fall in prices will cause a 4% increase in demand. That's why it's a negative, okay? The price goes down, demand goes up. They use a 4 there. And then the next one is how much of the tariff change is passed on. And that is a 0.25. So you multiply the 4 by the 0.25, you get 1.

[00:26:39] But what they did as well – and this is – I'm almost certain now it's an AI that created the justification for this formula. They said we'll use 2 instead. That gives you a half. Like you have a 0.25 by a 2. You get 2 coming out of that. Or whatever, forget it. I'm happy to make numerical mistakes here because, hey, I'm in good company. I could be president. The number here becomes a 2.

[00:27:06] So that's the trade deficit divided by the import level multiplied by 2. So you get half. That's where the half came from. Look, if you're not following this, don't worry because – It's bullshit. Because fundamentally it's the trade deficit divided by the value of imports. And I went through and I did it for about 30 countries based on published data. And I got the percentage tariff, you know, divided by 2 and I got the percentage. So you've got all those other extraneous considerations. But there have not been considerations at all.

[00:27:35] That's why Cambodia is on 49 percent. Vietnam on 45 percent. Sri Lanka on 45 percent. Iraq on 39 percent and so forth. So this is all – so when Donald Trump says it's all about equalizing the tariffs, so Cambodia does have tariffs. They max out at 35 percent, not 49 – not 97 percent. Not 97 percent, yeah. So it has nothing to do with the tariffs imposed. So he lied about that. That's strange, isn't it? Is that the first time Donald Trump's lied?

[00:28:05] He never really lies. We should check back. We should check back. He's the most honest human being that God has ever created. He's the God, also the greatest. The greatest and the most honest and the most handsome and the healthiest. All of those things. So we should – Hey, you can do it. You can do it. You can do it with Trump and George Galloway coming up. I can do it. George Galloway. Hey, how are you doing there? Anyway, so yeah. So anyway, it's all been one big lie. Yeah. And it's a – so how do people respond to this?

[00:28:32] Because if he's saying, look, I'm applying the – it's a like for like. He said, you know, all we're doing is we're applying what you're applying to us, which is not the case at all. It's an imbalance. It's America's choice to buy cheap clothes from Cambodia. How does Cambodia respond? They can't say we're going to drop our tariffs because their tariffs are 35%. It doesn't apply anyway because they can't afford to buy anything from America. So what – how do they respond to this? How do people negotiate when the whole reason for the negotiation is false? Yeah.

[00:29:02] I mean, I can't answer that question. I'm just in – you know, you expected something silly but not this silly. Yeah. So it's a question of how long does this last for because there'll now be, you know, American corporations that the real interest is what do American companies producing in third world countries do with these cost imports that are now screwing their profitability? I've got a feeling they're going to get on the phone. That's the most effective thing.

[00:29:29] Ring Donald and say this is what – this is screwing with our profitability. You know, we're going to pull out of your pack, et cetera, et cetera. I think that will work better than anything that any national government does. So why are they not doing – why have they not been doing that all the way along the line? I think they're still in shock. It is only a couple of days, you know. I mean, a couple of days is a year and a half in Trump time. But if you're his friend, then you get benefits. That's the thing, isn't it? And that's – I think the friends are most likely calling right now about what to do.

[00:29:57] Like I think the only – it is – the only way out of this is to say, well, what are you really trying to achieve? And what he's really trying to achieve is to eliminate trade deficits. And that's a good idea, OK? This is, you know, one of areas that I disagree with modern monetary theory who are sort of pro-deficits. I'm going to come out and explain why I think that's nonsense sometime in the next few months with my online course and then publicise that. But if you look back at what Keynes said back at the time of the formation of the Britain Woods Agreement,

[00:30:27] Keynes also was anti-trade deficits. He said – and particularly anti-trade surpluses in both systems, he said, when you have a trade deficit or a trade surplus, you're exporting your problems to another country. So the mechanism we need for international trade is one that should minimise trade deficits. And for that reason, amongst many others, Keynes said we should not have a national currency being used for international trade. We should make up a currency which is only used for trade. And that's he called the Bancor.

[00:30:55] And then the whole idea of the Bancor was to limit trade deficits and trade surpluses. And it was a very clever scheme. We got shot down by Harry Dexter White, who was America's representative at Britain Woods. And just to rub a bit of – you know, I'm hoping this will work. Dexter – he was a Democrat, so that's one thing again him. But he's also accused of being a Russian spy. Yeah. OK. So, like, you know, there's good reasons to undermine what Harry Dexter White did. So let's get Keynes' plan. We can call it the Trump Corp.

[00:31:26] OK? So you bring in the Trump Corp for international trade. Good idea. We'll put Trump's name in it. It's bound to apply. He would love it. OK. Call it the Trump. OK. What we're going to do, we're going to set up the International Clearing Union that Keynes wished to establish for the Bancor. We're going to call it the Trump. OK? And everybody gets – hey, that's – you all come up Trumps. It works. There we are. OK. So you get an account at the ICU, and it starts with zero. Nobody's got any Trumps at all. And then if you run a trade surplus, you'll get a positive balance.

[00:31:54] You get – you know, you're getting more Trumps than other people are – you're getting more Trumps than other people than they're giving to you. Your account goes into positive. Everybody else gets negative Trumps. And then what the ICU does is charge interest on both the surpluses and the deficits. So countries running a balanced trade pay no interest at all to the ICU. But countries that are running either a large trade surplus or a large trade deficit, they both pay interest to the ICU.

[00:32:23] And then the ICU uses that – pays the interest to third world countries. So Cambodia gets a guernsey in all this stuff. So hang on. So I've got a trade deficit, and I pay interest on the fact that I'm not getting as much money. Yeah. The whole thing is – let's get rid of them, OK? Keynes' idea was that particularly – like the people talk about the smooth tariffs and stuff like that. Keynes understood that it was a private credit crash that caused the Great Depression. But he saw that response as adding to the problem as well.

[00:32:52] So he said we have to find a form of international trade after World War II that doesn't use a national currency. Of course, at the time he was doing that, the currency being used for international trade was a British pound. So he wanted to eliminate that. But the Americans are like, we're going to take over from you. Well, it's a poison chalice because if you are being used – if your currency is being used for international trade, then people need your currency not just to buy your goods but to buy goods from everybody else as well.

[00:33:19] That gives you an inflated demand for your currency. It overvalues it. It means your manufacturing sector can't compete. And guess what? You end up with a trade deficit. So the way to reverse it is to Trump to outdo Keynes and actually bring in the Bancorp. Well, let's call it a Trump just to make a – Yeah, I wonder whether it would apply everywhere because there will be countries that are too small. They're never going to get a balance of trade that's zero. But anyway, I think we need to visit that in another podcast.

[00:33:50] Because we can talk about that because it's worth talking about now. The amount of currency in circulation for each country as well and how that interplays. But look, the McKinley Tariff, you're familiar with that in 1890. So McKinley was a president. He introduced tariffs at 50%. Again, he was a Republican. There was a panic in 1893. There was an eight-month depression but it actually sort of like the repercussions were felt for a lot longer than that. But it was the worst recession that America had had up to the Great Depression. No, that's not true.

[00:34:20] 1837 is worth the panic of 1837. We'll cover that one later too. Well, there was a panic in 1893 as well. And it was fairly short-lived. I mean the Democrats came in, swept to a majority and got rid of all of those tariffs. So I wonder whether we're going to – so it's been tried. Yeah. And that was in the olden days before we had this more entwined trade operation. And in the 19th century, Michael Hudson's PhD thesis is called America's projectionist takeoff.

[00:34:48] And when you look at what happened in the 19th century, tariffs were used to force local manufacturers to give them an opportunity but also force them to produce goods which were previously imported from Europe. And a large part of America's industrialization occurred behind those tariff walls as applied for China, as applied for Japan, Korea, et cetera, et cetera. And Danny Roderick's done, as I said once before, the very good work here establishing that. But that was in a world which wasn't globalized.

[00:35:17] So now, you know, 2025 is something that would be far too interesting for my liking. Yeah. And look, his argument has to be used back against him, doesn't he? Because he is saying that everybody is ripping off America. You know, it's disgusting. It's disgusting what they're doing. What Europe is doing to us is disgusting, he said, because Europe is not buying as much from America as it's sending to America in goods.

[00:35:43] But it's disgusting what America is doing to the rest of the world in services, which he manages to conveniently avoid. If you were to apply that same formula, that trade deficit, you know, take the trade deficit divided by the value of the imports and apply that to the services sector, to the tech sector, that would be an interesting calculation. America would be putting a tariff up against itself. Yeah, exactly. Stranger things have happened.

[00:36:11] And then there are sectors as well, just before we go, that will always be protected. So he talks about American farmers. And it's not just a question of value or tariffs. Well, it's not at all tariffs, as we now know from this calculation. But it's also standards as well. So there are standards that apply in Europe, which would stop American cattle. I mean, you know, disease was part of it.

[00:36:35] But generally, you know, I mean, people say, well, you know, in Europe, you just got to get used to chlorinated chicken. What's wrong with it? But we don't want it. Yeah, that extra flavor. And it's clean. And, you know, and it improves your teeth. You don't clean your teeth after the chlorinated on the floor. This is why Americans have such good teeth, isn't it? It's the chlorinated. It is true. Or it's fluoride rather than chlorine. Lousy guts, but great teeth. Exactly. And, you know, it might not be good for the brain either, given what they've voted for. What's that?

[00:37:04] Yeah, you don't need it. So, but we're not, you know, so there's a, you know, irrespective of what he does, it's going to be a lot for Europe to start taking produce from farmers in America. But also, I mean, it's so cheap. There's the example. They are the cheap producers. Just like Cambodia is producing the cheap clothes.

[00:37:26] They are producing the cheap agricultural goods that if we accepted that into Europe and the UK and into Australia, it would just flood the market and destroy the domestic industry. And that has to be protected because, you know, food security is the thing. And that's what's going to be the ultimate dominant issue for the next decade is going to be food security. And, you know, don't let anything destroy your food security in terms of, you know, trade wars and tariff wars and competitive advantage and so on.

[00:37:55] You've got to produce your own food. It's not the thing to give away, is it? All right. Well, we'll see how it unfolds. I suspect the McKinley example from 1890 might be repeated, but it might not take four years. I mean, midterms. Maybe four days is the way things work in Trump time. Exactly. All right. Very good to talk again, Steve. We'll catch you next time. I can hope to see you then. Bye. The Debunking Economics Podcast.

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