Former Greek Finance Minister Breaks Down Trump’s ‘Economic Master Plan’—A Must-Read Analysis

There are several reasons for the strong dollar, of course. One is that it remains the world’s preferred foreign reserve currency. Central banks in countries like China and Japan hold dollar-denominated bonds and cash in their reserves, driving up demand beyond global trade in dollar-priced commodities like oil and soybeans. Additionally, central banks may purchase dollars to deliberately weaken their own currencies. Lastly, the U.S. has the world’s largest securities market, making it a hub for institutional investors from Europe to Japan who invest in American stocks and bonds—further increasing demand for the dollar.

Like any business, investors want their money to stretch as far as possible. In most cases, it goes further in Mexico and Asia than it does in California and Illinois.

For Trump, “American producers are undercut by foreigners whose central bankers exploit a service (dollar reserves) that America provides them for free to keep the dollar overvalued,” Varoufakis writes. “America is undermining itself for the glory of geopolitical power and the opportunity to accumulate other people’s profits. These imported riches benefit Wall Street and realtors, who buy up iconic American hotels in New York City, but only at the expense of the people who elected him twice—Americans who produce goods such as steel and automobiles, which a nation needs to remain viable,” he said.

CPA’s Chief Economist Emeritus, Jeff Ferry, said Varoufakis is right.

“The dollar is a burden for the U.S., and I think his hunch is correct that at some point in this presidency Trump will address that problem,” Ferry said.

Varoufakis should know. When he was Minister of Finance in Greece, he recognized that the euro was a big burden for Greece. 

“What he should have done was take Greece out of the euro, while simultaneously implementing controls and discipline to prevent the Greek government bureaucrats and bankers from going wild and indulging in more corruption, inflation, and extravagance,” Ferry said. “The trouble with those like Varoufakis, who are on the far left, is that even though they know in their hearts that tough action is necessary, they can’t bear to implement it. They always want to offer voters a sugar-coated solution but devaluation is not a sugar candy. Devaluing a currency, in the short term, will impact the living standards of labor. The benefits can be strong, but will come through in the medium term.”