The Breakdown - Can Bitcoin Fix What Tariffs Can't?

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Sunday, April 13th, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or get to bit.ly slash breakdown pod. All right, friends, well, like it or not, we are living in tariff land, and of course, today's Long Read Sunday is about that exactly. Still, I think even for those of you who are getting a little bit tired of this, you'll like this piece. It comes from Ghafer Hussein, originally published

Starting point is 00:00:49 in Bitcoin Magazine, and is called Why Trump's Tariffs Can't Fix the Broken Fiat System. The Trump tariffs will not revitalize the American economy like he thinks, but maybe Bitcoin can help where tariffs can't. Let's turn it over to the AI version of myself to read the piece and then we will come back and discuss it. Trump's America First Platform, which he built his successful campaign around, promised to reconfigure global trade in favor of the U.S. This involved encouraging businesses to manufacture domestically, bringing jobs, industry, and prosperity back to parts of the country that liberalized trade and outsourcing left behind. The U.S. had, or so the argument goes, become more and more

Starting point is 00:01:27 reliant on competitively priced imports that were often manufactured by countries where labor and transportation is much cheaper. This led to the emergence of Rust Belt states in which blue-collar workers saw their living standards decline whilst the cities they lived in were hollowed out. The chosen tactic for this grand economic reconfiguration, it seems, is trade tariffs. By imposing tariffs on foreign goods, especially Chinese imports, Trump hopes to make it more expensive for consumers to buy products that are made abroad, and for companies to outsource manufacturing. This, he claims, will breathe life back into the U.S. industrial heartland and make the country more self-sufficient in times of crisis. It will also reduce the trade deficit, making the U.S.

Starting point is 00:02:09 less vulnerable to currency manipulation, which Trump accuses China of, and less dependent on consumption. Another critical aspect of Trump's tariff policy is its effect on the U.S. dollar. By imposing tariffs on foreign imports, Trump hopes to weaken the dollar, since global demand for the dollar will decline as a result. As such, this would make American-made products more competitive in the global market, which, in turn, will boost exports. This, Trump hopes, would provide long-term stability and prosperity for the American economy and reward blue-collar voters who overwhelmingly backed him. However, not only do tariffs have serious economic drawbacks that make their success uncertain, they also fail to address the root cause of the problem. Tariffs are essentially taxes on

Starting point is 00:02:53 imported goods, and while they may benefit some domestic producers in the short term by making foreign goods more expensive, they also increase the cost of imports for U.S. consumers and businesses. These higher costs, combined with potential retaliatory tariffs from trading partners, could hurt U.S. consumers who would face higher prices on a range of goods, from electronics to clothing, which would hurt economic growth. In fact, China has already announced a retaliatory tariff of 34%, and they are even considering not enforcing U.S. intellectual property rights, which could have a devastating impact on U.S. businesses. The European Union, as well as India and Turkey, are also preparing countermeasures which will harm U.S. exports. Whilst the USA does have a huge

Starting point is 00:03:35 domestic market that the entire world wants to tap into, U.S. businesses are also heavily reliant on consumer markets around the world. Tariffs can have unpredictable consequences, since there are so many moving parts, and, as such, they are no quick fix for the economic woes of the U.S. Furthermore, it is not possible to simply revitalize domestic industry overnight after decades of outsourcing. High-quality manufacturing requires significant investment in machinery, skilled workers and infrastructure, all of which have been in steep decline in the U.S., whilst countries like China have been forging ahead. This gaping chasm cannot be narrowed in a few short years. The increased adoption of automation and AI also means domestic manufacturing is less likely

Starting point is 00:04:17 to bring jobs and economic prosperity back to depressed parts of the U.S. since these technological advancements reduce dependence on physical labor. Even if there were suddenly a lot more blue-collar jobs in Rust Belt states, they would not have the desired effect Trump supporters are hoping for. The average salary for a blue-collar worker in the U.S. is around $53,000, which after taxes amounts to around $3,300 a month. The average monthly rent is around $1,750. The average monthly health insurance is around $700. The average monthly food bill is around $350. And on average, utility bills amount to around $600. In other words, this average salary is barely enough to let a single worker live, let alone raise a family or support a partner. Today's episode is brought to you by Cryptotax

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Starting point is 00:05:50 What's more, Ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live. and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks and Ledger Flex, introduce the world's first secure touchscreens, making it easier and safer to manage your transactions and assets. Alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app,

Starting point is 00:06:20 offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show. The real challenge facing the U.S. economy can be traced back to a much deeper issue. The decoupling of the U.S. dollar from the gold standard in 1971. Before this, the U.S. dollar was tied to gold, meaning the government could only issue as much currency as it had in reserves.

Starting point is 00:06:52 This system imposed natural limits on money supply and kept inflation under control. When President Nixon ended the dollar's convertibility into gold, it allowed the U.S. government to print money freely without any backing, leading to the rise of fiat currency. Fiat currencies are not backed by any physical commodity, which essentially renders them government-issued IOUs. While such a system offers flexibility in the short term, it leads to inflation over time. As more money is printed to fund government's spending and cover national debts, the purchasing power of each dollar diminishes. In practice, this means everyday goods and services become more expensive, while wages rarely keep pace with rising prices, making it harder for people to maintain

Starting point is 00:07:32 their standard of living. This is why the average blue-collar worker could buy a house, run a car, and raise a family quite comfortably in the 1980s but cannot do so today. Quantity has a quality all of its own, as the saying goes. What the U.S. really needs is an alternative to fiat and a form of currency, whose value is determined by market forces rather than government policies. Such a currency can provide a hedge against the inflationary pressures that have been exacerbated by decades of fiat monetary policy. It can also cultivate the conditions for fairer trade and stabilize the global economy by providing an alternative store of value that is free from the whims of central banks,

Starting point is 00:08:10 traditional banking systems, and currency exchange rates. Fortunately, such a currency does exist in the form of Bitcoin. The Trump trade tariffs are unlikely to achieve the desired goals of revitalizing the Rust Belt or solving the deeper systemic problems within the American economy. This is because they do not address the core issue, that has led to a decline in living standards, namely inflationary pressures caused by fiat currency and constant money printing. To address these challenges, a fundamental shift in the way we approach monetary policy may be necessary and in Bitcoin with its decentralized nature

Starting point is 00:08:43 and limited supply. There is now a viable alternative. All right, guys, back to Real NLW here. Now, there are no shortage of armchair quarterbacks, myself included out there, who are talking about what they think about how these tariffs are or are not going to work. I think many of the critiques inherent in this piece are ones that you see across the political and economic spectrum. The concern that U.S. consumers are going to face a higher range of goods hurting economic growth. The concern that there's going to be tit-for-tat escalation with other trading partners, the big one, which I think is extremely salient, that, quote, it's not possible to simply revitalize domestic industry overnight after decades of outsourcing.

Starting point is 00:09:23 To me, this is the one where I see the greatest percentage of people who are sympathetic theoretically with the goals of the Trump tariffs, but who don't think that the particular strategy being deployed is likely to work, even if they wish it would. What's different about this piece and why I thought you guys would enjoy it is that it offers an alternative argument for the core root issue. Now, obviously, many people do not agree that the core challenge is fiat currency. This is a very core Bitcoin or belief, but isn't necessarily mainstream in other economic circles. And yet still the reason that it's a relevant point to share at this moment in time is that if nothing else, the tariff process is absolutely smashed open the Overton window for just how transformative

Starting point is 00:10:01 and big policies can be right now. Indeed, I think that if you were an alien with no horse in the race one way or another, it's likely that you would be cheering on all of what's happening right now, if only because it's the grandest experiment we've ever seen in trying to radically and quickly readjust the global economic order. These moves are not slow, they are not incremental, they are designed to cause havoc and make a major change. And in that environment, it makes sense that other people would come in and offer their own big radical change visions. Bitcoin has come into this moment better position than ever before to be legitimate in these conversations. And I think Bitcoiners have a moment right now to

Starting point is 00:10:41 offer this type of alternative take and see if they can't get it into the discourse. I don't anticipate this all of a sudden becoming a mainstream opinion, but everything is going to feel less crazy or at least more realistic than it did just a couple of months ago. And so I'm glad to see these types of think pieces finding their way into the conversation. I'll continue to share the interesting ones as I see them. For now, though, as always, I appreciate you listening. Until next time, be safe and take care of each other. Peace.

The Breakdown - Can Bitcoin Fix What Tariffs Can't?

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