Steve Miran is the Chairman of President Trump’s Council of Economic Advisors.
CEA Chairman Steve Miran Hudson Institute Event Remarks – The White House, Apr 7 2025
Today I’d like to discuss the United States’ provision of what economists call “global public goods,” for the entire world. First, the United States provides a security umbrella which has created the greatest era of peace mankind has ever known. Second, the U.S. provides the dollar and Treasury securities, reserve assets which make possible the global trading and financial system which has supported the greatest era of prosperity mankind has ever known.
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Let me clarify that by “reserve currency,” I mean all the international functions of the dollar—private savings and trade included. I’ve often used the example that when private agents in two separate foreign countries trade with each other, it’s typically denominated in dollars because of America’s status as the reserve provider. That trade entails savings housed in dollar securities, often Treasurys. As a result of all this, Americans have been paying for peace and prosperity not just for themselves, but for non-Americans too.
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I’m an economist and not a military strategist, so I’ll dwell more on trade than on defense, but the two are deeply connected. To see how it works, imagine two foreign nations, say China and Brazil, trading with each other. Neither country has a currency that is trusted, liquid, and convertible, which makes trading with each other challenging. However, because they can transact in U.S. dollars backed by U.S. Treasuries, they are able to trade freely with each other and prosper. Such trade can only occur because of U.S. military might ensuring our financial stability and the credibility of our borrowing. Our military and financial dominance cannot be taken for granted; and the Trump Administration is determined to preserve them.
From an economic standpoint the theory Miran describes is bonkers. “Savings housed in dollar securities, often Treasurys” are not U.S. savings as he implies. They are money the U.S. has borrowed, i.e. the savings of foreigners.
His example of the U.S. dollar enabling trade between Brazil and China is just as wrong as his treasuries theory:
Brazil, China ditch US dollar for trade payments, favour yuan – News.au, Mar 31 2023
Brazil has just cut a deal with China to ditch the US dollar when paying each other for trade goods. It’s the latest victory in Beijing’s long-term drive to stomp on the greenback and establish the yuan as the dominant international currency.
The deal, announced Thursday, has revived concerns about the US dollar’s future.
Brazil and China will directly exchange payments without first converting their currencies to a trusted third-party economy.
That’s the traditional role of the greenback.
These ain’t just small numbers:
According to Chinese customs statistics, the bilateral trade volume between China and Brazil in 2023 was US$181.53 billion, a year-on-year increase of 6.1 percent. Of this, China’s exports to Brazil amounted to US$59.11 billion, a year-on-year decrease of 4.3 percent, while imports from Brazil totaled US$122.42 billion, a year-on-year increase of 11.9 percent.
Brazil is not alone in doing this. Several other big countries, Russia, Saudi Arabia, Iran etc., have dropped U.S. Dollar intermediation in trade with China.
The Trump administration is aware of the problem:
Elon Musk @elonmusk – 22:51 UTC · Mar 29, 2023
Serious issue. US policy has been too heavy-handed, making countries want to ditch the dollar.
Combined with excess government spending, which forces other countries to absorb a significant part of our inflation
Steve Miran says the U.S. military ensures the “financial stability and the credibility” of U.S. borrowing. It does so only in that it destroys small countries which are trying to turn away from trading in dollars. Iraq and Libya are prime examples of this.
Brazil and China are too big to extort them. The consequences of Trump’s tariff mania will show that again.
Reprinted with permission from Moon of Alabama.
