**"Incisive debut treatise... Mohsin brings to the proceedings a reporter's eye for story" — Publisher's Weekly
From Bloomberg News reporter Saleha Mohsin, the untold story of how one of America’s most invincible institutions—the Treasury—has used the U.S. dollar to define America’s role in the world, and our economic future.**
In 1995, Treasury Secretary Robert Rubin re-defined the next thirty years of currency policy with the mantra, “A strong dollar is in America’s interest.” That mantra held, ushering in exceptional prosperity and cheap foreign goods, but the strong dollar policy also played a role in the devastating hollowing out of America’s manufacturing sector. Meanwhile, abroad, the United States increasingly turned to the dollar as a weapon of war. In Paper Soldiers , Saleha Mohsin reveals how the Treasury Department has shaped U.S. policy at home and overseas by wielding the American dollar as a weapon—and what that means in a new age of crisis.
For decades, America has preferred its currency superpower-strong, the basis of a "strong dollar" policy that attracted foreign investors and pleased consumers. Drawing on Mohsin's unparalleled access to current and former Treasury officials like Robert Rubin, Steven Mnuchin, and Janet Yellen, Paper Soldiers traces that policy's intended and unintended consequences, including the rise of populist sentiment and trade war with China—culminating in an unprecedented attack on the dollar’s pristine status during the Trump presidency—and connects the dollar's weaponization from 9/11 to the deployment of crippling financial sanctions against Russia. Ultimately, Mohsin argues that, untethered from many of the economic assumptions of the last generation, the power and influence of the American dollar is now at stake.
With first-hand reporting and fresh analysis that illustrates the vast, often unappreciated power that the Treasury Department wields at home and abroad, Paper Soldiers tells the inside story of how we really got here—and the future not only of the almighty dollar, but the nation’s teetering role as a democratic superpower.
Review
“ Paper Soldiers is a deeply reported, authoritative examination of Washington’s hidden power center — the U.S. Treasury — and how the men and women who've overseen it have helped turn the U.S. dollar into a powerful, contentious, and ultimately risky weapon of global influence. A must-read book for anyone looking to go beyond the headlines and truly understand how power works in Washington.”
— Joshua Green , #1 NYT bestselling author of Devil's Bargain , and a writer for Bloomberg Businessweek
“With thorough reporting and enlightening, propulsive writing, Saleha Mohsin ushers readers into the gilded rooms and global hotspots where the American dollar has shaped history. A brilliant feat of explanatory journalism."
— Toluse Olorunnipa , Pulitzer Prize–winning author of His Name Is George Floyd: One Man’s Life and the Struggle for Racial Justice
“Saleha Mohsin expertly guides us through the last several decades of mistakes and triumphs in our dollar policy with meticulous fly-on-the-wall detail. The result is a vital read for anyone who worries that the best days for the dollar are behind us."
— Jesse Eisinger , Pulitzer Prize winner, author of The Chickenshit Club , and a senior editor and reporter at ProPublica
"Essential reading... [ Paper Soldiers ] brings to life the narrative of how Treasury officials have used the U.S. dollar as a tool of American foreign policy over the last three decades — along with the hazards that has created"
— Neil Irwin , author of The Alchemist
"Phenomenal"
— Anthony Scaramucci , founder of SkyBridge and former White House Director of Communications
About the Author
Saleha Mohsin is the Senior Washington Correspondent for Bloomberg News, covering policy, politics, and power in Washington, D.C. An Ohio native, she previously lived in Oslo, Norway, and in London.
It was January 24, 2018, and the seventy-seventh United States secretary of the Treasury, Steven Mnuchin, was in the bucolic resort town of Davos, Switzerland. Hundreds of the alpine city's residents had fled to make room for an exclusive group of self-described thought leaders gathered for the World Economic Forum's annual conference. This year, for a weeklong winter camp dedicated to big problems, lavish parties, and cigar bars, the security bill topped $9 million. In attendance was an incongruous collection of people: 53 heads of state, 116 billionaires, and, for some reason, Elton John.
But before Steven Mnuchin could even begin to hobnob with the global elite gathered, the Treasury chief made a faux paus that put the dollar on an immediate weakening streak and momentarily brought the world to the precipice of a full-blown currency war for the first time in more than three decades.
All because of just seven words: "A weaker dollar is good for us."
While there was more to the statement that Mnuchin made to reporters shortly after breakfast, this was the only part that the world's economic policymakers, business leaders, and investors cared about. To the untrained ear, it was a dull phrase. But for Mnuchin's constituents in economics and finance, it was scary: secretaries aren't supposed to yearn for a weak value for the dollar.
To world leaders like Angela Merkel, the battle-tested German chancellor at the time, Mnuchin had just obliterated a rule that took decades to hone: world leaders do not talk about their currencies. Such chatter amounts to verbal intervention, or "jawboning" in policy parlance, which is intended to hint at a government plan that includes a preferred value for its currency. It suggests that the government is willing to use its own cash to jump into foreign exchange markets, to influence the forces of supply and demand on currency values by buying or selling dollars. As a mark of sophistication and commitment to fair economic integration, in recent decades the world's most influential nations, the Group of Twenty, had refrained from such activities, a pledge enshrined in dozens of joint statements and agreements. Mnuchin now appeared willing to defy that.
It would quickly emerge that the Treasury chief had no intention of signaling anything new in U.S. currency policy. But to investors, the comment was a green light to sell the dollar-which is what they did that day, pushing down its value by 2.1 percent to reach the lowest level in three years. The remarks fueled an existing trend of depreciation due in part to an optimistic outlook for European economies, but also to uncertainty about where the United States was headed now that President Donald Trump was installing an increasingly protectionist economic agenda. Mnuchin's seven words on the dollar also threw into question the value of investors' stake in precious American government bonds, called Treasuries. A weak currency erodes the value of trillions of dollars in U.S. debt held by foreign countries, banks, and individuals.
For failing to speak about the dollar without absolute care and caution, Mnuchin faced a barrage of criticism. Christine Lagarde, the head of the International Monetary Fund, said that his seven words amounted to an opening salvo of a currency war. Merkel called the nationalistic policies that Mnuchin's words represented "poison," and another European official, unwilling to be named making such a comment, called the incident an example of "buffoonery."
You could say that Mnuchin had succumbed to a common malady among Treasury secretaries. The dollar must be spoken about with the utmost care, but sometimes in the energetic rush of meetings on Capitol Hill, Wall Street, and around the world, there's the inevitable mishap. It doesn't help that Treasury secretaries are frequently asked to elaborate on their views. After all, the Treasury department's decisions affect so much of our daily lives-our tax burden, spending power, and the ability to innovate and operate in a free and fair market, and more. But in reply to persistent questions, all anyone really wants to hear is a boring reaffirmation of a basic tenet of economic order: the U.S. government will not meddle with currency markets, because they should be free and fair, just like a democracy.
But in the Swiss mountain ski resort on that Wednesday in January, the most revealing part of Mnuchin's statement on the dollar was overlooked.
Yes, he boldly said what few predecessors have: a weak foreign exchange rate has some economic benefits. But that's simply a fact. For some parts of the economy, like the manufacturing and services sectors that export goods to those buying in foreign currencies, a weak dollar boosts profits. These companies can sell more at competitive prices, rather than be drowned out by cheaper products made in other countries. Take chocolate, for example: America has Hershey, and Britain has Cadbury. If the dollar is strong against the British pound, then there will be less demand for Hershey's Kisses in England, because their homegrown candy is cheaper. And it makes Cadbury in the United States cheaper and perhaps more appealing than a made-in-America brand.
But it is the rest of Mnuchin's statement that was more revelatory and more reflective of an emerging new era of economic policy, whether the global elite at Davos liked it or not. "A weaker dollar is good for us," his phrase began-but it was what came next that was the most revelatory: "as it relates to trade and opportunities."
In this messy delivery of the president's America First agenda through currency policy, Trump's Treasury secretary was inadvertently conditioning markets to understand that a hands-off approach to the U.S. dollar wasn't a given, especially when its sheer strength in value and the free trade environment that it underpinned were hurting so many Americans.
It was something that Trump had been talking about vociferously since he emerged as a presidential candidate in 2015. The dark vision he conjured of a U.S. economy that was crumbling (despite record economic expansion) resonated with an overlooked part of the electorate. And on November 8, 2016, 62.9 million Americans validated that vision-perhaps because he was the only candidate who acknowledged the pent-up frustration over low wage growth and trade-related job losses that had hollowed out swaths of the heartland. At first glance, the states that voted for Trump represented those Americans who were left behind in the much-celebrated recovery from the Great Recession that lasted from 2007 to 2009. But the pain that Trump found in so-called flyover states had been building for years. Since the 1980s, the decay of steel towns and car factories in the industrial heartland had given rise to a new name for the region that included mostly Midwestern states, like Ohio, Michigan, and Wisconsin: the Rust Belt.
Manufacturing and services jobs, once the backbone of the working-class economy, paid less and less as foreign goods from Europe, Mexico, and Asia were offered at a cheaper price, slashing demand for American-made products. In shops across the nation, made in china or made in vietnam was stamped on everything from Victoria's Secret underwear to Cadillacs. Take-home pay for factory workers had been declining since around 1980, but it worsened after China joined the World Trade Organization and the North American Free Trade Agreement took off. In the three decades leading up to Trump's presidential bid, the United States saw 20 percent of its manufacturing jobs disappear. And in the years since the global financial crisis hit, the share of voters considered "working class" (according to their net income) grew by almost one-third.
To be sure, all advanced economies were seeing a decline in manufacturing. But for those who'd lost their jobs across the Rust Belt and American South, the rest of the world didn't matter-their standard of living had plunged. They blamed their leaders for ignoring it, and competitors were often a bogeyman. During a campaign rally in Indiana, referring to China's high number of exports compared to the United States, Trump declared, "We can't continue to allow China to rape our country, and that's what they're doing." This was a politician who appeared to put American needs above any free trade ideology or notion of global leadership.
The concept of free trade as a bad thing was so alien to mainstream policymakers and economists that they spent much of 2017 in shock that Trump had the support of 47 percent of the U.S. electorate. What many didn't understand, or perhaps were unwilling to see, was that as blunt as his words were, he showed the kind of attention that these voters had been craving for more than a decade.
President Trump’s plans to fix these deep-seated economic problems were the opposite of the stable and predictable message that the world came to expect from America. He talked of punitive tariffs on imports, a move that amounted to a trade war (something the world hadn’t seen in at least half a century), and scarlet-letter treatment for countries found to be gaming their currencies to gain an unfair trade advantage. He also wanted to use the country’s national security apparatus to protect certain industries, like military equipment components manufacturers. All of this amounted to the exploitation of American power and the weaponization of the dollar.
And this is where the final part of Secretary Mnuchin's ad hoc statement on that snowy day in Switzerland came into play. With his first seven words, he boasted about the benefit of a weak dollar in a way finance ministers of rich nations aren't supposed to. With the subsequent seven words, he shed light on the plight of a part of the American economy that desperately needed attention. With the very last portion of this extemporaneous dollar talk that day, he reminded the world of the power he and his president could wield to rebalance global trade ties: "Longer term, the strength of the dollar is a reflection of the U.S. economy and the fact that it is and will continue to be the primary currency."
This was the exorbitant privilege that Mnuchin would find himself at times weaponizing-for the sake of the America First agenda that he believed in-and at other times protecting from the president's most dangerous instincts. Like those before him at the Treasury department, for the four years he was in office, Mnuchin was a steward of the almighty dollar. But he would come to work harder to keep it intact for future use than perhaps any of his predecessors ever had because he had to protect it from the U.S. president himself.
During that first official trip to Switzerland, Mnuchin spent most of his time trying to untangle himself from the rhetorical crosshairs of U.S. currency policy.
Those first seven words did not signify "a shift in my position on the dollar at all," he said as he urgently attempted to correct the record that afternoon. "I thought my comment on the dollar was actually quite clear." During a panel discussion the next day, he assured the audience that he believed in currencies being priced in open markets, not at the whim of government policy. His colleague, Secretary of Commerce Wilbur Ross, said that investors were overreacting to Mnuchin's words.
Even Trump weighed in to help with the cleanup, possibly because it appealed to his ego. The ultimate strongman ruler, Trump came to understand that a strong dollar meant he was running the economy well.
"Ultimately, I want to see a strong dollar," he told reporters after he landed in Davos on Air Force One shortly after Mnuchin's flub.
The Trump presidency was filled with a head-spinning range of poli cies in which U-turns on publicly stated plans became weekly occurrences. Republicans, Democrats, officials inside the administration, foreign allies, and investors were all frequently left reeling from the whiplash. One moment, China was blamed for the “rape” of America’s manufacturing sector, and the next, Trump declared that he and President Xi Jinping “love each other.” Then there was the wall for the U.S.-Mexico border that he vowed Mexico would pay for, until he decided to force a government shutdown at home in a bid to get Congress to fund the project.
So it's no surprise that his promise to support a strong value for the U.S. dollar would be turned upside down.
By June 2019, Trump was frustrated by the difficulties of renegotiating trade deals to benefit American workers. His administration had just imposed tariffs on $200 billion of imports from China, but it increasingly looked like officials in Beijing were forcing down the value of the yuan by selling loads of it in open markets. (Since a higher-valued currency makes a nation's imports cheaper and makes its exports pricier in foreign markets, countries that rely on an export industry for economic bliss want a weak currency-hence the temptation to force down an exchange rate.) The yuan dropped to a level not seen since the global financial crisis, despite there being no significant change to the nation's growth prospects. It was an action that amounted to the currency manipulation that everyone in Davos just eighteen months earlier had warned the United States not to even hint at.
Trump was angry. He wanted China to promise to buy more American-made products and to stop cheating in currency markets. He directed his team to start plans to impose another $300 billion in tariffs on Chinese imports to the United States, a measure certain to ratchet up the trade war between the two largest economies that was putting the whole world at risk of an economic slowdown.
With burgeoning frustration over the state of his trade war, Trump turned to U.S. dollar policy. Behind closed doors, he started ranting to his advisers that the buck was too strong. He wanted the Federal Reserve to weaken it by lowering interest rates-which have a bigger and more immediate impact than anything the federal government could do.
To say such a move would be devastating to America's superpower status in the world would be an understatement. Aside from interest rates and inflation, the value of a country's currency is a key indicator of economic health (a strong currency means investors see signs of continued economic growth, and a weak one indicates fears of a slowdown ahead as investors look elsewhere for profits). The Fed's policy decisions had ramifications for every nation on Earth. The dollar was on one side of 90 percent of currency transactions worldwide, and two-thirds of international debt was issued in it. Virtually all oil trade is priced in dollars. All of this makes pretty much the whole world beholden to swings in the currency's price and in its management-and now Trump wanted to meddle. It was the kind of undemocratic behavior common in authoritarian regimes, like Turkey, where the president essentially dictates monetary policy.
But Trump's view of the world was colored by such schemes. On June 18, the European Central Bank (ECB) president Mario Draghi signaled looser monetary policy (meaning cheaper credit to spur investment, thus weakening the euro's price) to juice economic growth. The way Trump saw it, other governments were manipulating their currencies with the help of their central banks. Trump's fixation emerged publicly through tweets directed squarely at the United States' central banker, the ECB's Draghi, and others. "Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others," Trump tweeted on June 18, just hours after the ECB's announcement. "Very unfair to the United States!"
Description:
**"Incisive debut treatise... Mohsin brings to the proceedings a reporter's eye for story" — Publisher's Weekly
From Bloomberg News reporter Saleha Mohsin, the untold story of how one of America’s most invincible institutions—the Treasury—has used the U.S. dollar to define America’s role in the world, and our economic future.**
In 1995, Treasury Secretary Robert Rubin re-defined the next thirty years of currency policy with the mantra, “A strong dollar is in America’s interest.” That mantra held, ushering in exceptional prosperity and cheap foreign goods, but the strong dollar policy also played a role in the devastating hollowing out of America’s manufacturing sector. Meanwhile, abroad, the United States increasingly turned to the dollar as a weapon of war. In Paper Soldiers , Saleha Mohsin reveals how the Treasury Department has shaped U.S. policy at home and overseas by wielding the American dollar as a weapon—and what that means in a new age of crisis.
For decades, America has preferred its currency superpower-strong, the basis of a "strong dollar" policy that attracted foreign investors and pleased consumers. Drawing on Mohsin's unparalleled access to current and former Treasury officials like Robert Rubin, Steven Mnuchin, and Janet Yellen, Paper Soldiers traces that policy's intended and unintended consequences, including the rise of populist sentiment and trade war with China—culminating in an unprecedented attack on the dollar’s pristine status during the Trump presidency—and connects the dollar's weaponization from 9/11 to the deployment of crippling financial sanctions against Russia. Ultimately, Mohsin argues that, untethered from many of the economic assumptions of the last generation, the power and influence of the American dollar is now at stake.
With first-hand reporting and fresh analysis that illustrates the vast, often unappreciated power that the Treasury Department wields at home and abroad, Paper Soldiers tells the inside story of how we really got here—and the future not only of the almighty dollar, but the nation’s teetering role as a democratic superpower.
Review
“ Paper Soldiers is a deeply reported, authoritative examination of Washington’s hidden power center — the U.S. Treasury — and how the men and women who've overseen it have helped turn the U.S. dollar into a powerful, contentious, and ultimately risky weapon of global influence. A must-read book for anyone looking to go beyond the headlines and truly understand how power works in Washington.”
— Joshua Green , #1 NYT bestselling author of Devil's Bargain , and a writer for Bloomberg Businessweek
“With thorough reporting and enlightening, propulsive writing, Saleha Mohsin ushers readers into the gilded rooms and global hotspots where the American dollar has shaped history. A brilliant feat of explanatory journalism."
— Toluse Olorunnipa , Pulitzer Prize–winning author of His Name Is George Floyd: One Man’s Life and the Struggle for Racial Justice
“Saleha Mohsin expertly guides us through the last several decades of mistakes and triumphs in our dollar policy with meticulous fly-on-the-wall detail. The result is a vital read for anyone who worries that the best days for the dollar are behind us."
— Jesse Eisinger , Pulitzer Prize winner, author of The Chickenshit Club , and a senior editor and reporter at ProPublica
"Essential reading... [ Paper Soldiers ] brings to life the narrative of how Treasury officials have used the U.S. dollar as a tool of American foreign policy over the last three decades — along with the hazards that has created"
— Neil Irwin , author of The Alchemist
"Phenomenal"
— Anthony Scaramucci , founder of SkyBridge and former White House Director of Communications
About the Author
Saleha Mohsin is the Senior Washington Correspondent for Bloomberg News, covering policy, politics, and power in Washington, D.C. An Ohio native, she previously lived in Oslo, Norway, and in London.
Excerpt. © Reprinted by permission. All rights reserved.
Surviving Donald Trump
It was January 24, 2018, and the seventy-seventh United States secretary of the Treasury, Steven Mnuchin, was in the bucolic resort town of Davos, Switzerland. Hundreds of the alpine city's residents had fled to make room for an exclusive group of self-described thought leaders gathered for the World Economic Forum's annual conference. This year, for a weeklong winter camp dedicated to big problems, lavish parties, and cigar bars, the security bill topped $9 million. In attendance was an incongruous collection of people: 53 heads of state, 116 billionaires, and, for some reason, Elton John.
But before Steven Mnuchin could even begin to hobnob with the global elite gathered, the Treasury chief made a faux paus that put the dollar on an immediate weakening streak and momentarily brought the world to the precipice of a full-blown currency war for the first time in more than three decades.
All because of just seven words: "A weaker dollar is good for us."
While there was more to the statement that Mnuchin made to reporters shortly after breakfast, this was the only part that the world's economic policymakers, business leaders, and investors cared about. To the untrained ear, it was a dull phrase. But for Mnuchin's constituents in economics and finance, it was scary: secretaries aren't supposed to yearn for a weak value for the dollar.
To world leaders like Angela Merkel, the battle-tested German chancellor at the time, Mnuchin had just obliterated a rule that took decades to hone: world leaders do not talk about their currencies. Such chatter amounts to verbal intervention, or "jawboning" in policy parlance, which is intended to hint at a government plan that includes a preferred value for its currency. It suggests that the government is willing to use its own cash to jump into foreign exchange markets, to influence the forces of supply and demand on currency values by buying or selling dollars. As a mark of sophistication and commitment to fair economic integration, in recent decades the world's most influential nations, the Group of Twenty, had refrained from such activities, a pledge enshrined in dozens of joint statements and agreements. Mnuchin now appeared willing to defy that.
It would quickly emerge that the Treasury chief had no intention of signaling anything new in U.S. currency policy. But to investors, the comment was a green light to sell the dollar-which is what they did that day, pushing down its value by 2.1 percent to reach the lowest level in three years. The remarks fueled an existing trend of depreciation due in part to an optimistic outlook for European economies, but also to uncertainty about where the United States was headed now that President Donald Trump was installing an increasingly protectionist economic agenda. Mnuchin's seven words on the dollar also threw into question the value of investors' stake in precious American government bonds, called Treasuries. A weak currency erodes the value of trillions of dollars in U.S. debt held by foreign countries, banks, and individuals.
For failing to speak about the dollar without absolute care and caution, Mnuchin faced a barrage of criticism. Christine Lagarde, the head of the International Monetary Fund, said that his seven words amounted to an opening salvo of a currency war. Merkel called the nationalistic policies that Mnuchin's words represented "poison," and another European official, unwilling to be named making such a comment, called the incident an example of "buffoonery."
You could say that Mnuchin had succumbed to a common malady among Treasury secretaries. The dollar must be spoken about with the utmost care, but sometimes in the energetic rush of meetings on Capitol Hill, Wall Street, and around the world, there's the inevitable mishap. It doesn't help that Treasury secretaries are frequently asked to elaborate on their views. After all, the Treasury department's decisions affect so much of our daily lives-our tax burden, spending power, and the ability to innovate and operate in a free and fair market, and more. But in reply to persistent questions, all anyone really wants to hear is a boring reaffirmation of a basic tenet of economic order: the U.S. government will not meddle with currency markets, because they should be free and fair, just like a democracy.
But in the Swiss mountain ski resort on that Wednesday in January, the most revealing part of Mnuchin's statement on the dollar was overlooked.
Yes, he boldly said what few predecessors have: a weak foreign exchange rate has some economic benefits. But that's simply a fact. For some parts of the economy, like the manufacturing and services sectors that export goods to those buying in foreign currencies, a weak dollar boosts profits. These companies can sell more at competitive prices, rather than be drowned out by cheaper products made in other countries. Take chocolate, for example: America has Hershey, and Britain has Cadbury. If the dollar is strong against the British pound, then there will be less demand for Hershey's Kisses in England, because their homegrown candy is cheaper. And it makes Cadbury in the United States cheaper and perhaps more appealing than a made-in-America brand.
But it is the rest of Mnuchin's statement that was more revelatory and more reflective of an emerging new era of economic policy, whether the global elite at Davos liked it or not. "A weaker dollar is good for us," his phrase began-but it was what came next that was the most revelatory: "as it relates to trade and opportunities."
In this messy delivery of the president's America First agenda through currency policy, Trump's Treasury secretary was inadvertently conditioning markets to understand that a hands-off approach to the U.S. dollar wasn't a given, especially when its sheer strength in value and the free trade environment that it underpinned were hurting so many Americans.
It was something that Trump had been talking about vociferously since he emerged as a presidential candidate in 2015. The dark vision he conjured of a U.S. economy that was crumbling (despite record economic expansion) resonated with an overlooked part of the electorate. And on November 8, 2016, 62.9 million Americans validated that vision-perhaps because he was the only candidate who acknowledged the pent-up frustration over low wage growth and trade-related job losses that had hollowed out swaths of the heartland. At first glance, the states that voted for Trump represented those Americans who were left behind in the much-celebrated recovery from the Great Recession that lasted from 2007 to 2009. But the pain that Trump found in so-called flyover states had been building for years. Since the 1980s, the decay of steel towns and car factories in the industrial heartland had given rise to a new name for the region that included mostly Midwestern states, like Ohio, Michigan, and Wisconsin: the Rust Belt.
Manufacturing and services jobs, once the backbone of the working-class economy, paid less and less as foreign goods from Europe, Mexico, and Asia were offered at a cheaper price, slashing demand for American-made products. In shops across the nation, made in china or made in vietnam was stamped on everything from Victoria's Secret underwear to Cadillacs. Take-home pay for factory workers had been declining since around 1980, but it worsened after China joined the World Trade Organization and the North American Free Trade Agreement took off. In the three decades leading up to Trump's presidential bid, the United States saw 20 percent of its manufacturing jobs disappear. And in the years since the global financial crisis hit, the share of voters considered "working class" (according to their net income) grew by almost one-third.
To be sure, all advanced economies were seeing a decline in manufacturing. But for those who'd lost their jobs across the Rust Belt and American South, the rest of the world didn't matter-their standard of living had plunged. They blamed their leaders for ignoring it, and competitors were often a bogeyman. During a campaign rally in Indiana, referring to China's high number of exports compared to the United States, Trump declared, "We can't continue to allow China to rape our country, and that's what they're doing." This was a politician who appeared to put American needs above any free trade ideology or notion of global leadership.
The concept of free trade as a bad thing was so alien to mainstream policymakers and economists that they spent much of 2017 in shock that Trump had the support of 47 percent of the U.S. electorate. What many didn't understand, or perhaps were unwilling to see, was that as blunt as his words were, he showed the kind of attention that these voters had been craving for more than a decade.
President Trump’s plans to fix these deep-seated economic problems were the opposite of the stable and predictable message that the world came to expect from America. He talked of punitive tariffs on imports, a move that amounted to a trade war (something the world hadn’t seen in at least half a century), and scarlet-letter treatment for countries found to be gaming their currencies to gain an unfair trade advantage. He also wanted to use the country’s national security apparatus to protect certain industries, like military equipment components manufacturers. All of this amounted to the exploitation of American power and the weaponization of the dollar.
And this is where the final part of Secretary Mnuchin's ad hoc statement on that snowy day in Switzerland came into play. With his first seven words, he boasted about the benefit of a weak dollar in a way finance ministers of rich nations aren't supposed to. With the subsequent seven words, he shed light on the plight of a part of the American economy that desperately needed attention. With the very last portion of this extemporaneous dollar talk that day, he reminded the world of the power he and his president could wield to rebalance global trade ties: "Longer term, the strength of the dollar is a reflection of the U.S. economy and the fact that it is and will continue to be the primary currency."
This was the exorbitant privilege that Mnuchin would find himself at times weaponizing-for the sake of the America First agenda that he believed in-and at other times protecting from the president's most dangerous instincts. Like those before him at the Treasury department, for the four years he was in office, Mnuchin was a steward of the almighty dollar. But he would come to work harder to keep it intact for future use than perhaps any of his predecessors ever had because he had to protect it from the U.S. president himself.
During that first official trip to Switzerland, Mnuchin spent most of his time trying to untangle himself from the rhetorical crosshairs of U.S. currency policy.
Those first seven words did not signify "a shift in my position on the dollar at all," he said as he urgently attempted to correct the record that afternoon. "I thought my comment on the dollar was actually quite clear." During a panel discussion the next day, he assured the audience that he believed in currencies being priced in open markets, not at the whim of government policy. His colleague, Secretary of Commerce Wilbur Ross, said that investors were overreacting to Mnuchin's words.
Even Trump weighed in to help with the cleanup, possibly because it appealed to his ego. The ultimate strongman ruler, Trump came to understand that a strong dollar meant he was running the economy well.
"Ultimately, I want to see a strong dollar," he told reporters after he landed in Davos on Air Force One shortly after Mnuchin's flub.
The Trump presidency was filled with a head-spinning range of poli cies in which U-turns on publicly stated plans became weekly occurrences. Republicans, Democrats, officials inside the administration, foreign allies, and investors were all frequently left reeling from the whiplash. One moment, China was blamed for the “rape” of America’s manufacturing sector, and the next, Trump declared that he and President Xi Jinping “love each other.” Then there was the wall for the U.S.-Mexico border that he vowed Mexico would pay for, until he decided to force a government shutdown at home in a bid to get Congress to fund the project.
So it's no surprise that his promise to support a strong value for the U.S. dollar would be turned upside down.
By June 2019, Trump was frustrated by the difficulties of renegotiating trade deals to benefit American workers. His administration had just imposed tariffs on $200 billion of imports from China, but it increasingly looked like officials in Beijing were forcing down the value of the yuan by selling loads of it in open markets. (Since a higher-valued currency makes a nation's imports cheaper and makes its exports pricier in foreign markets, countries that rely on an export industry for economic bliss want a weak currency-hence the temptation to force down an exchange rate.) The yuan dropped to a level not seen since the global financial crisis, despite there being no significant change to the nation's growth prospects. It was an action that amounted to the currency manipulation that everyone in Davos just eighteen months earlier had warned the United States not to even hint at.
Trump was angry. He wanted China to promise to buy more American-made products and to stop cheating in currency markets. He directed his team to start plans to impose another $300 billion in tariffs on Chinese imports to the United States, a measure certain to ratchet up the trade war between the two largest economies that was putting the whole world at risk of an economic slowdown.
With burgeoning frustration over the state of his trade war, Trump turned to U.S. dollar policy. Behind closed doors, he started ranting to his advisers that the buck was too strong. He wanted the Federal Reserve to weaken it by lowering interest rates-which have a bigger and more immediate impact than anything the federal government could do.
To say such a move would be devastating to America's superpower status in the world would be an understatement. Aside from interest rates and inflation, the value of a country's currency is a key indicator of economic health (a strong currency means investors see signs of continued economic growth, and a weak one indicates fears of a slowdown ahead as investors look elsewhere for profits). The Fed's policy decisions had ramifications for every nation on Earth. The dollar was on one side of 90 percent of currency transactions worldwide, and two-thirds of international debt was issued in it. Virtually all oil trade is priced in dollars. All of this makes pretty much the whole world beholden to swings in the currency's price and in its management-and now Trump wanted to meddle. It was the kind of undemocratic behavior common in authoritarian regimes, like Turkey, where the president essentially dictates monetary policy.
But Trump's view of the world was colored by such schemes. On June 18, the European Central Bank (ECB) president Mario Draghi signaled looser monetary policy (meaning cheaper credit to spur investment, thus weakening the euro's price) to juice economic growth. The way Trump saw it, other governments were manipulating their currencies with the help of their central banks. Trump's fixation emerged publicly through tweets directed squarely at the United States' central banker, the ECB's Draghi, and others. "Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others," Trump tweeted on June 18, just hours after the ECB's announcement. "Very unfair to the United States!"