Trump’s tariff chaos explained | Yanis Varoufakis

his long-term project to bring manufacturing back to the United States involves a very uh delicate uh exercise on the one hand he wants to reduce the value of the dollar the exchange rate between the dollar and the Stelling uh the Euro and so on he wants to bring it down in order to make American exports more competitive and imports into the United States more expensive and therefore shift jobs back to the Midwest let's say at the same time and that's why I'm saying it's delicate he wants to maintain the hegemony of the dollar now on

Thursday last week president Trump signed an executive order to establish an official government reserve of uh Bitcoin ahead of crypto Summit at the White House on Friday that's a significantly big step towards mainstream acceptance of crypto currency and also we should say an about face of Donald Trump who just a few years ago was fairly skeptical of digital currency so could this be a good thing for the U us could it be a good thing for World economy well joining us now with his thoughts is yanis vakis Economist author and former Greece fin Finance Minister

Kaki Alexis hello how are you I'm very good thank you Yanni uh let's talk about cryptocurrency I suppose your thoughts about cryptocurrency and whether you think they do belong as part of any country National Reserve look my personal views are not particularly material here I personally think that the technology on which crypto Bitcoin is based is fascinating but uh I don't believe in uh a privatized version of money I don't believe in the what I call the apolitical fantasy or the fantasy of apolitical money that will replace the pound the Yen the dollar and the

Euro and so on and so forth but that do that's neither here nor there what's what is happening in the United States is fascinating because on the one hand you you correctly pointed out that Donald Trump was not a great believer in crypto but the fact of the matter is that a very large section of his constituency the mag constituency the people who follow people like uh Elon Musk and Peter Teel they are libertarian um Libertarians within me and they they they Lo the state they Lo at least ideologically from an ethical point of view

the Federal Reserve Fiat money state money and for them the idea of apolitical money that is the kind of digital gold Bitcoin or ethereum and so on is appealing to them so on the one hand Trump is very cynical that is he's U um he he's bolstering the crypto uh reserves of his friends who have within the Maga movement invested in in he let's not forget that him and Millennia actually issued their own mean currencies cryptocurrencies and they made hundreds of millions of dollars so he he always likes a quick buck doesn't he but besides

that Alexis I think there's a very interesting and very serious aspect to this Reserve that he is pushing forward which has nothing to do with anything of what I said and if I if I'm allowed to just explain what that is look uh Donald Trump and the very serious thinkers that he's got in his economic Steam and I'm saying this as a very harsh and fierce critic of him and his team so you know we need to understand and not to dismiss our opponent as a buffoon when he may look like a buffoon walk like

a buffoon but he's not a buffoon when it comes to his Economic Policy right look his long-term project to bring manufacturing back to the United States involves a very uh delicate uh exercise on the one hand he wants to reduce the value of the dollar the exchange rate between the dollar and the Stelling uh the and so on he wants to bring it down in order to make American exports more competitive and imports into the United States more expensive and therefore shift jobs back to the Midwest let's say at the same time and that's why

I'm saying it's delicate he wants to maintain the hegemony of the dollar right so he doesn't want some other currency to replace the exorbitant privilege that the dollar um affords anyone who happens to be in the White House and the way he's okay so what how is this connected to bitcoin to the reserve the Strategic reserve it for the dollar to fall he needs the Chinese the Japanese the Brits and the Europeans primarily to sell many of their dollars of their hoarded bucks green bags but he doesn't want them to buy uh the Chinese currency

he doesn't want them to buy the Euro he doesn't want want them to buy the British pound because that would defeat the purpose so if you can create a flow of capit capital from the American dollar to um a malange of cryptocurrencies uh and especially these cry cryptocurrencies are back stopped through some kind of stable coin as it's called the currency board by the US dollar he has achieved his objective that I think is what is really lying at the heart of the thinking behind establishing this strategic reserve of cryptocurrencies so do you think that

we're going to see an explosion of cryptocurrency then not just in the us but elsewhere it's highly possible uh there were two steps two two steps two moves that have already done that one was when Wall Street started establishing trading uh platforms for Bitcoin in other words uh this is the the great iron isn't it Bitcoin was established as an anti-wall Street anti-establishment currency and but however the great Philip the great boost in his value came when theya embraced it that already has happened from the perspective of Wall Street and the second one is the

Strategic Reserve so anything that increases the demand of anything increases its price and creates speculatory flow of capital into it so in that sense you may be right but on the other hand because these cryptocurrencies do not reflect any intrinsic value whatsoever uh trying to trying to to predict their value is like a cat chasing its own tail because it's like you know average opinion trying to imagine what average opinion will be well that's that's my point in the fact that it's not based on any intrinsic value I mean if you buy shares in apple

essentially you have a bit of that company and that company consists of Hardware it consists of stores it consists of infrastructure not quite sure what you get when you have a Bitcoin I mean Warren Buffett has compared these cryptocurrencies to a gambling device almost like what you just described now predicting its value becomes a bit of a Gamble and perhaps that's the addictive nature of cryptocurrency well yes absolutely and the fact is that look when when average opinion is trying to um second guess average opinion uh Anything is Possible the sky is the limit and

you can go all the way down to zero uh but what is driving the there is a there is an objective demand for crypto uh that comes from uh crime from uh terrorists it comes from friends of mine who have been like Julian Assange for instance who was completely blocked from any access he had to MasterCard to visa and so on uh so there is a utility in cryptocurrencies what I find interesting and potentially uh lethal for the for financial stability is a so-called stable coins uh now for the benefit of our audience who don't

know what they are just very briefly if you buy uh one of those table coins the company that issues it guarantees or says that it guarantees uh the parity between the say the dollar and one of those stable coins so one stable coin is one US dollar and therefore supposedly it offers you some kind of security some kind of insurance from fluctuations of this currency now for this to work that company would have to have somewhere store hoarded an equal number of dollars as the stable coins that it issues of course they never do that

and nobody checks them it's a bit like the gold standard before you know 1930 nobody checked could have checked whether governments have as much gold as they say they have in order to back uh gold backed uh Sterling or dollars and so on which means that if people believe that these stable coins are worth their sold they're worth the guarantee that they were they are being being sold with then they a lot of money is going to flow into them because it gives you a lot more flexibility regarding making payment receiving payments but the more

people trust that the greater the incentive of the companies that issue them to FIB to say that they they do have uh the dollars that are necessary to back to back up that that you know those stable coins without having it and therefore this for me is a clear and present danger for a future Financial Clash or crash I should say in amazing how much of of our monetary system has to be come down to beliefs uh Yanni before we uh wrap this up I want to get your thoughts on what we've been seeing at

the moment with the American economy uh the tariffs the uncertainty of the tariffs have all contributed to the American economy suffering prices are not coming down the stock market is suffering what do you think is going to be the result of what looks like a very unstable time in US markets is this an opportunity for the EU group to to come together and show its economic might is that number one spot going to be filled by China uh already waiting uh with with what seems to be a much more stable economy than the us at

the moment where do you see this going for many many years the stock markets in the United States have been booming they they never had it so good but but at the same time Main Street the average blocks and girls out there in the United States suffered and that's that's the reason why Donald Trump was reelected so Donald Trump's uh prospects political prospects will depend not so much on uh Wall Street but on whether he manages to boost the economy at the lower end of the social stratum and hierarchy and for him to succeed in

doing this they make have to be a correction in the markets so seeing the the small they are small drops in the stock exchanges in NASDAQ in in uh Wall Street and so on well that's not necessarily sign that uh his policies are flailing uh the the true test will be whether there is going to be any degree of reindustrialization we already see Capital flowing from Germany from France from Italy into the United States we already see BS for the great chemical giant uh relocating to the United States that is is going to determine whether

um whether the new administration's policy works or not from the perspective of the European Union uh well the European Union has been stagnating now for 15 years we've missed out on an industrial revolution we had zero net investment of for 15 years this is why Germany is the industrializing so you're absolutely right Alexis this was the time when the European Union should get together and uh you know take a long good look at itself in the mirror uh come to the conclusion that we have failed Europe because we have not done anything really to divert

liquidity masses of liquidity don't forget that you know the European Central Bank printed more than 6 trillion 6,000 billion euros and almost none of that went into investment uh and do something about it instead we have rearm Europe and we have another program of smoke and mirrors the one that was announced by the president of the European commission and what what do I mean by smoke and mirrors these huge announcements with very impressive numbers that come from Brussels but the moment you you look at them a bit more carefully under the microscope they dissolve there's

no real money there and Europe again I very much fear is missing an opportunity to turn the crisis into an opportunity well Yan I'm going to have to leave it there uh because of time I wish we had a little bit longer thank you as always for giving us your time yanis verik is there The Economist author and of course uh former Greece Finance Minister give