00:00A mighty dollar is crucial for keeping America a powerful world leader.
00:09Hello, I'm Steve Forbes and this is What's Ahead, where you get the insights you need to better navigate these turbulent times.
00:17National security experts ignore how a strong currency is critical for a country's global strength.
00:23They understandably focus on armaments, military research and development, intelligence gathering, the quality and quantity of a nation's armed forces.
00:34Today, they're grappling with the impact of AI, the extraordinary proliferation and rapid improvements of battlefield drones in the Ukraine war,
00:42and the ominous implications of space warfare for the safety of our now-can't-live-without-satellites.
00:48But, a currency that is reliably stable in value and is trusted to stay that way can enable a country, if it so chooses,
00:57to exercise a seemingly outsized influence in the world economically and militarily.
01:04Strong, stable currencies are essential for economic growth.
01:07They lead to the development of domestic capital markets and financial institutions that can both fuel internal expansion
01:14and facilitate the creation of international supply chains.
01:18The trustworthy dollar was key in making the U.S. the financial center of the world.
01:24Centuries ago, the small Dutch state not only fought off their Spanish overlords,
01:29who on paper were far richer and stronger, but also, thanks to its trusted currency,
01:34became a capital powerhouse and created a globe-girdling empire.
01:39The world's first stock exchange opened in Amsterdam in 1602.
01:44When a Dutch prince, William of Orange, became king of England in 1689, his new realm was at best a middling power.
01:53But William brought with him a Dutch sense of finance,
01:56and this attitude helped lead to the creation of the Bank of England that undergirded the British pound,
02:01which would not change in value in terms of gold for well over two centuries.
02:06Britain developed an increasingly sophisticated financial system.
02:11Even though this smallish island was a fraction of the size of France,
02:16its capital markets enabled it to successfully finance the global contest with Paris.
02:21France's crude financial system was a severe handicap in financing those wars.
02:27Great powers don't have feeble currencies.
02:30A particularly misbegotten idea seriously hobbled France's economy in those times.
02:36The belief that economic strength came from a government micromanaging the economy
02:41and maintaining trade surpluses.
02:44The more gold and silver you could get your hands on and hoard,
02:48the more powerful you were, went their thinking.
02:51This status approach was called mercantilism.
02:55Adam Smith's The Wealth of Nations demolished this constipated notion.
03:00Trade, internal-external, was not a zero-sum activity.
03:04Both buyer and seller gained from a transaction, he correctly pointed out.
03:09Trade enhances the creation of wealth and leads to greater and more widespread prosperity.
03:16Smith's Britain leapt ahead of France.
03:19Unfortunately, various forms of mercantilism emerged in the 20th century and in this century.
03:25One variation poisoned the 1930s, whereby a country would devalue its currency
03:31to supposedly gain a competitive advantage against its trading partners.
03:35No surprise, other nations would follow suit.
03:38The result was chaos and economic immiseration, and ultimately World War II.
03:44The U.S. triggered a global trade war and depression in 1929 and 1930 with its notorious Smoot-Hawley tariff.
03:53No surprise, other nations followed suit.
03:57The result was chaos and economic immiseration, and ultimately World War II.
04:03The U.S. triggered a global trade war and depression with its notorious Smoot-Hawley tariff in 1929 and 1930.
04:12We fell again for the illusion that cheap money could stimulate growth
04:16when President Richard Nixon began a series of dollar devaluations in 1979,
04:22ushering in a decade of virulent inflation and the belief that the U.S. was a nation in decline.
04:28Today, certain Trump administration officials are taken in by the siren call of a cheap dollar.
04:36A weak dollar begets a weak country, and there's nothing great about that.
04:41I'm Steve Forbes. Thanks for listening.
04:43Do send in your comments and suggestions.
04:45I look forward to being with you soon again.
04:47I look forward to being with you soon again.
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