Trump's Tariffs: He Who Has the Gold Makes the Rules
The US economy is based on exporting dollars in exchange for cheap imports. As US industry has been hollowed out following the end of the gold standard in 1971, Americans have relied both on welfare and foreigners needing dollars to engage in international trade (petro-dollar) to buy things. If we effectively cut off that trade with China by making imports expensive via tariffs, then Americans will have to pay higher prices, and interest rates could rise. Higher interest rates means that the USA cannot afford to go further into debt. Trump wants lower interest rates to keep the US debt bubble economy from imploding.[1][2]
The taxpayer is the largest employer in the USA. If Congress cuts spending, then Americans will lose their jobs. So, either the Federal government engages in deficit financing (continuing resolutions) and interest rates stay low- or break- as imports become more expensive in response to inflation, or we reckon with the debt and interest rates rise as most Americans lose their income and their ability to import goods and services.[3]
Tariffs will bankrupt American businesses that rely on cheap imports.[4]
However, even if Congress keeps passing spending bills, interest rates could break higher, if China sells their US treasuries because they suddenly don’t have a profitable export market with their biggest trading partner. They’re already in a depression.[5]
Japan might just have to sell theirs too- to keep their money from being funny.[6]
Considering that China, Japan, and the Federal Reserve are the biggest buyers of US debt, that would only leave the Federal Reserve to print money to buy US debt from the USA, China, and Japan. Trump knows how the game ends if the Federal Reserve is not the lender of last resort, which is why he advocated for the continuing resolution (deficit spending) championed by Democrats when he came into office. No politician is going to get re-elected by cutting grandma’s social security payments, and they’d scape-goat the Federal Reserve for not financing their spending bills.[7]
Trump knows how to play the game, and that he who has the gold makes the rules. Hopefully, China won’t sell their treasuries to buy gold, either out or necessity or as a negotiation tactic in response to Trump’s tariffs.
Whether or not they are selling their US debt treasuries, China is already buying gold. US Treasury Secretary Scott Bessent was interviewed in September 2023 on the Money Maze Podcast by Simon Brewer. At the 19:40 minute mark, Bessent said, “The PBOC [People’s Bank of China] is the largest buyer of gold now. Could we imagine some kind of an renminbi that is exchangeable into gold- maybe at a premium?”
In conclusion, the US economy is based on exporting dollars in exchange for cheap imports. China is buying gold because they know that the Federal Reserve will keep printing money. At some point, China will dump treasuries in response to tariffs, causing interest rates to spike and for Americans to reckon with the debt. Gold is money by [debt] default. History repeats.
[1]August 15, 1971 — Hamilton Mobley
[2]The Golden Age — Hamilton Mobley
[3]Printing Money Lowers Interest Rates — Hamilton Mobley
[4]Walmart, Target And Home Depot CEOs Meet With President Trump To Talk Tariffs
[5]Blowback (Chinese Tofu Dreg) — Hamilton Mobley
[7]Trump signs spending bill to fund the government for 6 months : NPR
