Ralph Benko: Trade deficits are the price of issuing the world reserve currency

Financial writer and gold standard advocate Ralph Benko this week joined those explaining that huge trade deficits are inevitable for any country that enjoys the "exorbitant privilege" of issuing the world reserve currency.

Benko writes:

"World War II -- in which my heroic father Max Benko fought along with millions of others -- left America relatively unscathed. After V-Day our allies and our vanquished enemies' economies lay in shambles. We could (and did) give ourselves a treat while extending an invisible helping hand -- one much greater than the Marshall Plan -- to war-torn Europe and Japan.

"How? After World War II, the world, led by America, entered into an arrangement called Bretton Woods. This made the U.S. dollar the world's 'reserve currency.'

"In practice, Bretton Woods meant that Americans could consume more than we produce -- an exorbitant privilege -- by exporting dollars rather than goods. How, exactly, did that work? ....

"As American economist Barry Eichengreen summarized: 'It costs only a few cents for the Bureau of Engraving and Printing to produce a hundred-dollar bill, but other countries had to pony up $100 of actual goods in order to obtain one.'

"That privilege, which made great sense during the period immediately after World War II, became a curse.

"How did our 'exorbitant privilege' transform into a curse? By inequitably prejudicing our manufacturers.

"The key element -- the reserve currency status of the dollar -- of the Bretton Woods 'Calvinball' monetary treaty remains in place. Time to end that ... as Donald Trump seems to almost preternaturally intuit."

Benko's commentary is headlined "Exit Gary Cohn. Enter Lewis Lehrman, Steve Forbes, or Larry Kudlow?" and it's posted at Forbes here:

https://www.forbes.com/sites/ralphbenko/2018/...-cohn-enter-...