Category: Economics

Immigrants

Aside from Native Americans (a story we should study more carefully), virtually all Americans at our founding were immigrants. Throughout our history immigrants have contributed enormously to our economic growth and wealth. Even today the United States is home to over 125 foreign-born billionaires, making up a massive segment of the nation’s top wealth brackets. Most of these leaders are self-made, primarily building their fortunes in the technology, finance, and aerospace sectors.

These immigrants did not become billionaires by taking income from the rest of us. They became billionaires by creating products and services that we benefited from. They became rich by raising our (the common man’s) incomes and standards of living.

Immigrants represent a disproportionately high percentage of business owners relative to their share of the total U.S. population even today. According to data from the U.S. Census Bureau’s Annual Business Survey and economic research groups, there are over 6 million business owners in the United States who were born abroad.

Immigrants also occupy a massive share of top leadership positions. A landmark study by the National Foundation for American Policy found that nearly 80% of America’s privately held, billion-dollar companies (“unicorns”) have either an immigrant founder or an immigrant in a top executive role, such as CEO or Chief Technology Officer (CTO). While not all current CEOs are foreign-born, 46% of Fortune 500 companies were founded by immigrants or the children of immigrants. Over 1 in 5 business owners nationwide is an immigrant, and nearly 4 out of 5 highly valued modern tech companies rely on foreign-born leadership at the executive level.

Why is this important and why should we oppose the Trump administration’s efforts to reduce immigration? Immigrants do not choose to come to America to change it. They come generally to join what it offers, which is personally freedom to work hard and prosper. We must never forget that in free markets, transactions benefit both the seller and the buyer—win-win. Attracting innovating and hardworking people from around the world lifts their incomes but also ours. Why would we want to slow or stop that process?

Foreign students studying in American universities and colleges are a temporary form of immigration (as are agricultural guest workers) from which we benefit in several ways. One benefit is making friends. Foreign students learn first-hand what America is about and take that understanding home with them. They are also an important export (i.e., they earn dollars for the schools that teach them), thus reducing our balance of payments deficit. Surely, we should encourage more students to come, but over the last four academic years the number of Chinese students studying here has fallen every year.

There are other benefits. Immigrants also tend to bring bits of their culture with them. This is most obvious for cuisine, the variety of which is a wonderful contribution to the quality of our lives. Along with hamburgers, hot dogs and T-bone steaks, I have first-rate Chinese, Japanese, Italian, French, Lebanese, Mexican, Peruvian and mixed-cuisine restaurants within walking distance.

We need much more legal immigration (those vetted for the appropriateness of their character and skills) while preventing the illegal type. Those who are afraid of immigrants should move somewhere else themselves in my opinion.

The Rights of Sovereign Countries

The 193 sovereign countries in our world determine when and if people and goods of other countries may cross their borders into their territory. The safety and other standards required for their own products (cars, planes, medicine, breakfast food, etc.) are equally required for those imported. For example, US chicken is banned from EU and UK because of American post-slaughter Pathogen Reduction Treatments (PRTs), specifically the use of chlorine or other antimicrobial chemical washes to kill bacteria like Salmonella and Campylobacter, which are not approved of in these countries.

But the extensive cross-border trade and movement of workers and tourists have so enormously benefited the standard of living of almost every person on the globe that countries have generally cooperated to harmonize these standards. Two hundred years ago almost 80% of the world’s population lived in extreme poverty. That figure fell to almost 60% a hundred years ago and almost 10% today. ” Study finds wealthy nations reap huge benefits from immigration”.

This dramatic increase in wealth has been greatly facilitated by establishing international standards for many of these goods and services for which international standard bodies have been created such as the International Organization for Standardization (ISO), International Telecommunication Union (ITU), World Health Organization (WHO), and the World Trade Organization (WTO). The World Bank (WB) and International Monetary Fund (IMF, for which I worked for 26 years) are among a broader group of international institutions promoting global cooperation.

Obviously, a country cannot allow the airplanes of other countries to enter and fly over or land in its territory without agreed standards for flight path reporting and control tower protocols. But what about satellites? They are part of the amazing story of telephone communications overseen by ITU in Geneva, Switzerland. On my cell phone I can connect to any other telephone in the world and have a conversation. It is unbelievable really.

On my first trip to Kabul in January 2002 we had to step outside to use our iridium satellite phones to connect with IMF headquarters in Washington DC (or anyone else for that matter). Landmines were later discovered in the garden we walked around while talking on our iridium phones.

Satellites can be stationary (i.e. move at the same pace the earth rotates so that it remains above the same territory below), or not and can be in a low or high orbit. Rules govern how a satellite should behave when passing over or near other satellites to prevent interference.

Satellites, unlike airplanes, are governed by a framework of international agreements and treaties, most notably the Outer Space Treaty.  Satellites move freely through orbital paths because a nation’s airspace only extends upwards to a certain (though legally undefined) altitude, while satellites operate in “outer space.” A satellite is governed by the laws and regulations of the specific country that launched or registered it. That launching country is completely responsible for authorizing, continuously supervising, and regulating the satellite’s operations. Nonetheless it is expected to abide by ITU regulations and assignment of the use of radio frequencies. ITU manages satellite frequency rights by acting as a global registry and coordination body to prevent signal interference, rather than by directly issuing operating licenses.

The United States is officially withdrawing from 66 international organizations. This includes 31 United Nations entities (such as the UNFCCC, UN Women, and the UN Population Fund) and 35 non-UN organizations (including the IUCN, the Green Climate Fund, and the World Health Organization). In my view, this dismantling of the global system of cooperation is a serious mistake—damaging both the US and the global system. The US has not, however, withdrawn from the ITU. But will the US play by the rules? The unpredictability of the Trump administration has the world wondering and worrying how far American destruction of the global order will go.

Gas Taxes??

The US/Israel attack on Iran and resulting closing of the Straights of Hormuz has reduced the world’s oil supply. As a result, gasoline prices are increasing. Is that good or bad? Should the federal and state government suspend gasoline taxes until normal supply is restored?

When the supply of something is artificially reduced, its price increases to equate the new supply and demand. For gasoline, the impact of the supply shock can be moderated by releasing oil from the reserve the US and most countries maintain for such shocks. Thus the fall in gasoline supply would be kept smaller than it would other wise be. But how long will the supply shock last and how large is the reserve.?

The natural price increase in the face of a supply shock has several helpful effects. Those who need it most can still get it. Some non essential travel is reduced. President Nixon’s wage and price freeze in the early 1970s when confronted with the 1973 Arab oil embargo produced long lines of cars at gas stations that still had some gasoline. Price rationing is better than waiting in long lines

President Trump has proposed temporarily suspending government taxes on gasoline. This is a very bad idea not only because of the Nixon shock effect of non-price rationing but because it will reduce government revenue when its debt and deficits are already dangerously large. In the May 11 Washington Post Mitch Daniels provides an excellent account of that danger. “US national debt disaster looms-ai cant-stop it”   If you click on his link to a Cato Institute article on MMT you will be able to enjoy my article on that subject. “Modern Monetary Theory-critique”

Trump’s Record so far

So far Trump II has made or is making a number of changes that have benefited our economy.  However, his delivery on his key campaign promises is mixed.

Trump promised to “stop the migrant invasion,” and to carry out “the largest deportation operation in American history.” He delivered. Southern border attempted entries that were blocked in 2023 and 2024 of 2,475,670 and 2,135,000, dropped to 237,538 in 2025 and authorized new arrivals dropped from 2.9 to 2.8 million in 2023 and 2024 to less the 2,000 in 2025. Deportations and voluntary exit jumped from over 460,000 and 700,000 in 2023 and 2024 to over 2,500,000 in 2025 of which and estimated 1.9 million were self exits.

However, the behavior of masked ICE agents, including the deaths of over 30 people in ICE custody in 2025 have created a public outcry.  In 2024 and earlier, the majority of ICE arrests focused on those with criminal records. In 2025, the government stated that 70% of ICE arrests involved individuals with criminal charges or convictions. However, independent analyses of 2025 data suggested that only 23% of those targeted in broader sweeps actually had prior criminal convictions, with many of those being for minor traffic or immigration offenses.

Trump also promised to “End inflation and make America affordable again,” and to “Stop outsourcing” and turn the U.S. into a “manufacturing superpower” by bringing factories back to the United States by tightening trade policy. The high CPI inflation rate of 4.1% in 2023 has fallen to 2.9% in 2024 and 2.7% in 2025. Manufacturing value added to US total output was $2.91 trillion in 2024 rising to $2.95 in 2025 all in 2017 dollars.

The US imports more than it exports. The US trade deficit in 2024 of $903.5 billion changed little at $901.5 billion in 2025, but the highly criticized and erratic US tariffs on imports (both threatened and actually imposed) where eventually struct down as illegal by the Supreme Court. They were not approved by Congress and where not justified to correct unfair trade practice by China, the EU and others. Rather they were threatened punishments if the target country did not give in to some other Trump demand. Here is an example of such an attempted abuse of tariffs. https://x.com/spectatorindex/status/2041842665172693207

Trump was right to promise to reduce costly and unproductive regulations and bureaucrat bloat. But his approach with the help of Elon Musk and the DOGE swat teams was misdirected and destructive. https://wcoats.blog/2025/04/27/trumps-chainsaw/

https://wcoats.blog/2025/07/01/econ-101-government-budgets/  Just how bad the Musk DOGE chainsaw was can been seen in the following deposition of one of the totally unqualified kids swinging the chainsaw. He is being questioned by a lawyer for an agency suing DOGE https://www.youtube.com/watch?v=NXXvgZzK0Cc

And then there is the rest. Unlike previous US Presidents, Trump’s style of governing was that of a bully making threats. The result has not been good.

Trump the Egomaniac:  Putting his name on the Kennedy Center was sort of harmless (but distasteful) but then shutting it down all together is much less so and, and as is so often the case with Trump, hard to understand. The United States Institute of Peace is now the Donald J Trump Institute of Peace. Then there are programs he has created in his name: Trump accounts, Trump Gold Card, TrumpRx, Trump National Parks pass, etc. But he hasn’t stopped there, creating the “Trump-class” battleship. Though it violates the tradition of the U.S. Treasurer, currently Brandon Beach, signing our currency notes, Trump will do so in the future. While most of these displays of Trump’s name might be taken as the actions of an immature child, his proposal to issue special one dollar coins with his likeness seems to violate more than just good taste.

Trump the Authoritarian (postliberal)–domestic:  We have gotten used to Trump using his Truth Social or X/twitter accounts to damn and/or label as stupid or evil those who have criticized him, but he has used the power of his office to much more seriously attack his enemies or to force compliance with his policy views.

For example, after firing FBI director James Comey, who oversaw the probe of ties between Russia and Trump’s 2016 Presidential campaign, Trump repeatedly called for investigations of Comey over alleged leaks and handling of memos, and his current Justice Department has pursued renewed inquiries premised on those same grievances. Similarly motivated DOJ indictments or investigations have been made against Trump appointed officials John Bolton, Letitia James, Robert Mueller, Andrew McCabe, John Brennan, and others who played leading roles in Russia‑related or Ukraine‑related investigations.

Beyond criminal investigations, Trump has repeatedly used or threatened non‑criminal tools of the presidency—regulation, funding decisions, security clearances, and administrative enforcement—to punish domestic opponents. He has used threats to cut off federal funds to Democratic‑led “sanctuary cities” or jurisdictions whose leaders criticize him, framing them as “anarchist” or lawless and directing DOJ and other agencies to look for legal hooks to withhold grants.  Reuters and civil‑society trackers describe cases where universities, law firms, and other entities changed diversity or governance policies after threats of lost contracts, funding, or investigations from the administration. https://protectdemocracy.org/work/retaliatory-action-tracker/

If you have wondered, as I have, why the Republicans in Congress have not exercised their constitutional rights to block Trump’s abuses of power, often in direct contradiction of Republican party principles, I assume that it is their fear of his vindictive attacks on anyone who criticizes him.

Trump has both threatened and actually moved to cut federal funds to a small but high‑profile group of universities, mainly to force changes on campus protests, DEI, admissions, and governance policies. At Harvard University billions in federal research grants and contracts were frozen or terminated starting in spring 2025. The reasons given by the Trump administration were the alleged failure to protect Jewish students and to tolerate antisemitism linked to pro‑Palestinian activism and criticism of “woke” policies, DEI programs. The Trump administration demanded leadership and governance changes, review of academic departments for perceived ideological “bias,” and changes to admissions policies. Harvard has filed legal challenges and publicly refused to accept some of the administration’s conditions, while still facing a major funding freeze.

Similar reasons were given for stopping and/or threatening to stop funding of contracts and projects at Columbia, Cornell, Northwestern, and Princeton, University of Pennsylvania and UCLA.  These are the tip of an ugly iceberg that are very inappropriate in our liberal, limited government, freedom loving country.

But not all demands were objectionable.In October 2025, the White House offered a formal “compact” tying preferential access to federal funding to a raft of ideological and policy conditions that were agreed to by nine universities.Vanderbilt University.Dartmouth College.University of Pennsylvania.University of Southern California.Massachusetts Institute of Technology (MIT).University of Texas at Austin.University of Arizona.Brown University and University of Virginia.

Key policy demands in the compact included:

  • Ban consideration of race or sex in admissions and hiring.
  • Cap international undergraduate enrollment at around 15% and subject foreign students to additional vetting.
  • Freeze tuition for several years.
  • Eliminate or sharply curtail DEI offices and programs.
  • Guarantee “ideological balance” or a “vibrant marketplace of ideas” without a dominant ideology

Trump the untrustworthy Bully –International: Trump pledged to serve American interests first, promising to end America’s forever wars and claimed to deserve the Nobel Peace Prize. Virtually every aspect of his foreign policy has been a failure, weakening our standing abroad and our national security.

The second Trump administration has ended no wars, conducted military strikes in at least seven countries, and with Israel started a new war in Iran. It has been complicit with Israel in the ethnic cleaning of Gaza and increasingly the West Bank, and by financial and armament support of Israel. Trump has weakened or lost the support of traditional allies with his threats to annex Canada and Greenland and his insults of European and other countries for not supporting his illegal war in Iran and more generally.

Bully Trump’s approach is illustrated by his spat with Pope Leo XIV. On Truth Social Trump proclaimed:

“Donald J. Trump

@realDonaldTrump

A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will. However, now that we have Complete and Total Regime Change, where different, smarter, and less radicalized minds prevail, maybe something revolutionarily wonderful can happen, WHO KNOWS?”

On April 19, 2026, Trump warned that the U.S. would “knock out every single Power Plant, and every single Bridge” in the country if they did not accept a new “DEAL,” Not that Trump cares but many of his threats, specifically those targeting civilian infrastructure like water and power plants, have been flagged by international human rights groups as potential violations of international humanitarian law.

Pope Leo XIV declared President Donald Trump’s threat to destroy “a whole civilization” unacceptable and suggesting Americans should contact their representatives in Congress to stop the conflict.

“Today, as we all know, there has also been this threat against the entire people of Iran.  And this is truly unacceptable. There are certainly issues of international law here, but even more, it is a moral question concerning the good of the people as a whole, in its entirety.

“I would like to invite everyone to think in their hearts of so many innocent children, so many totally innocent elderly people who would also be victims of this escalation. I would like to invite everyone to pray, but also to seek ways to communicate. Perhaps with congressmen, with authorities, saying that we don’t want war, we want peace.”

Trump responded by calling the Pope “Weak on crime” and “Weak on Nuclear Weapons” and falsely claiming the Pontiff agreed that Iran should have nuclear capabilities. In his Easter Sunday message the Pope said: “Let those who have the power to unleash wars choose peace.”

Trump’s failure to understand market trades and deals as win-win has fed his zero sum bully approach. America has been seriously damaged as a result.  Trump has either ignored or withdrawn from the international agreements or organizations such as the WTO, and WHO that have provided the basis of global cooperation and flurishing since WWII. And we have suffered as a result. https://wcoats.blog/2026/03/21/america-alone/  

Trump’s disregard for law has also been an element of his financial corruption, the details of which will hopefully be properly investigated.  Since returning to the White House for his second term, Trump’s net worth has grown by approximately $2.5 billion to $3 billion according to most financial trackers. Trump’s Presidency has been very bad for America.

My Blogs

From the time I could vote (1964) I have indevoured to evaluate each president’s policies on their merits (as seem by me of course). Thus, at one time or another I have praised or criticize policies of LBJ, Richard Nixon, Gerald Ford, Jimmy Carter, Ronald Reagan (my favorite president), George H.W. Bush, Bill Clinton, George W Bush, Barack Obama, Joe Biden, and Donald Trump. I often condemned a policy but not the President promoting it, in the belief that each President thought his policy was for the welfare of our country even if I disagreed. The exception is Donald Trump. 

Unique in my lifetime, we have a President whose primary interest is in seeing his name on things (Kennedy Center, Peace Institute, maybe Dulles Airport), filling the White House with gold to look like a palace, being praised by strong men (Putin, Orban, Mohammed bin Salman), dropping bombs where ever he chooses (having given up begging for the Nobel Peace Prize) and throwing his weight around (bullying), irrespective of the considerable damaging he is doing to our country. Now he wants his name on US currency (not to mention his likeness on gold coins).

Since 1861 the US treasurer’s signature has appeared on bank notes, along with the likeness of a deceased President.  In 1866, Congress passed what is commonly called the Thayer Amendment, which forbids the likeness of any living person from appearing on U.S. securities and currency. “Donald Trump is set to become the first sitting US president to have his signature on US banknotes, the treasury department has announced…. Trump’s signature will appear alongside Treasury Secretary Scott Bessent, an unprecedented move that the department said would mark America’s 250th anniversary…. The first $100 bills with the signatures of Trump and Bessent will be printed in June, with others to follow.  Notes currently being printed bear the signatures of former President Joe Biden’s Treasury Secretary, Janet Yellen, and Treasurer Lynn Malerba.” Just in case you didn’t know that we have a Treasurer in addition to the Secretary of the Treasury https://www.bbc.com/news/articles/cz0el909yp3o  

Trump is an egoist with the tastes and desires of a spoiled child. Unfortunately, as President of the United States his childish behavior is doing great damage to the U.S. and global order.

Not only Tariffs

Tariffs can serve the beneficial function of leveling the trading playing field when exports from, say China, have benefited from government subsidies. The world’s output and thus wealth is maximized when competitive trade (domestic and/or international) uses its labor and capital most efficiently. The rules of the World Trade Organization permit tariffs of this sort.

President Trump has taken a very different approach, which yesterday’s Supreme Court ruling against most of his tariffs has slowed. Trump, typical of his general bully approach to relationships, threatens or enacts tariffs totally unrelated to their proper purpose to make trade fairer. He uses them to gain concessions from other countries totally unrelated to economic efficiency. These, like his bullying more generally, are very damaging to American interests and well-being. As a private business man, his bullying approach resulted in six bankruptcies.

Rather the repeat the arguments I posted earlier I will direct you to some of my earlier comments and a few from others:

Tariffs
https://open.substack.com/pub/damonlinker/p/seven-observations-about-the-supreme?utm_campaign=post-expanded-share&utm_medium=web

Trump’s disregard of the law in the area of tariffs is not all we should be concerned with and push back against. In addition to his nasty treatment of our “Allias,” his corruption is shockingly extensive and very open as is his disregard for the law. Congress needs to wake up and do its job:

https://www.thefp.com/p/the-economy-can-survive-tariffs-not

https://open.substack.com/pub/persuasion1/p/a-blow-to-trumps-favorite-political?utm_campaign=post-expanded-share&utm_medium=web

P.S. I have not mentioned his childish ego expressed by adding his name and face all over the place. It is merely embarrassing, which we can survive.

P.S.S I have also not mentioned Trump’s serious damage to our national security from his war and threatened wars not authorized by congress as required by the constitution (in search for the Nobel Peace Prize??!!)

Bosnia

In my last blog I condemned the US’s illegal attack on Venezuela and worried about what might follow given the apparent lack of a broadly considered and agreed plan. In this blog I will contrast it with the approach taken at the end of the vicious civil war between the Croat, Serb and Bosnian populations of Bosnia and Herzegovina.

The fighting in Bosnia and Herzegovina ended with the signing of the Dayton accords. “Three decades ago, in November 1995, the U.S.-brokered Dayton accords ended the Bosnian war, a three-and-a-half-year ethnic conflict that killed roughly 100,000 people and displaced two million. The settlement imposed a complex power-sharing structure on a divided country, promising the state of Bosnia and Herzegovina a new start.” This quote is from an excellent assessment of that agreement and the new constitution for Bosnia and Herzegovina that it created by Elmira Bayrasli in Foreign Affairs: “Bosnia’s Unfinished Peace”

I drafted the monetary section of that constitution, which established a central bank bound by currency board rules (i.e. no monetary policy as the money supply is determined by the public’s demand for and willingness to purchase its currency). I also led the IMF teams that drafted the Central Bank Law that merged the existing three central banks (Croat, Serbian and Bosnian) into one national bank and currency. The negotiations with the three (obviously) future governors of the Central Bank of Bosnia and Herzegovina (CBBH) lasted for over a year of heated discussions of the CBBH’s powers and the details of its currency notes. For details see my account in “One Currency for Bosnia”  Surprisingly to many the CBBH’s currency board rules were accepted instantly by all three with no debate. The reason was that the three didn’t trust one another and currency board rules eliminate an monetary policy discresion.

The Dayton accord was the product of intense negotiations between the Presidents of Croatian, Serbian and Bosnian provinces of B&H and diplomates from the US, UK, EU and Russia culminating with the agreement at the Wright-Patterson Air Force Base in Dayton Ohio—the Dayton Accord. To lay out the sharp contrast between these negations and the lack of them in the current “take over” of Venezuela, I will quote extensively from Wikipedia:

“During September and October 1995, world powers (especially the United States and Russia), gathered in the Contact Group, pressured the leaders of the three sides to attend settlement negotiations; Dayton, Ohio was eventually chosen as the venue.

“Talks began with an outline of key points presented by the US in a team led by National Security Adviser Anthony Lake in visits to London, Bonn, Paris and other European stops 10 – 14 August 1995. These included Sochi, to consult Russian Foreign Minister Andrei Kozyrev. Lake’s team handed off to a separate US inter-agency group led by Assistant Secretary of State Richard Holbrooke, who went on to negotiate with Balkan leaders in their capitals. The Holbrooke crew conducted five rounds of intense shuttle diplomacy from August to October, including short conferences in Geneva and New York that resulted in the parties’ adoption of principles for a settlement on 8 and 26 September respectively.

“The Dayton conference took place from 1–21 November 1995. The main participants from the region were the President of the Republic of Serbia Slobodan Milošević (whom the Bosnian Serbs had previously empowered to represent their interests), President of Croatia Franjo Tuđman, and President of Bosnia and Herzegovina Alija Izetbegović with his Foreign Minister Muhamed Šaćirbeg.

“The peace conference was led by US Secretary of State Warren Christopher, and negotiator Richard Holbrooke with two co-chairmen in the form of EU Special Representative Carl Bildt and the First Deputy Foreign Minister of Russia Igor Ivanov. A key participant in the US delegation was General Wesley Clark. The head of the UK’s team was Pauline Neville-Jones, political director of the Foreign and Commonwealth Office. The UK military representative was Col Arundell David Leakey. Paul Williams, through the Public International Law & Policy Group (PILPG) served as legal counsel to the Bosnian Government delegation during the negotiations.”

The history and situation of Bosnia and Herzegovina was dramatically different than Venezuela. Ending its civil war required extensive negotiations and considerable international oversight of compliance to the agreed arrangements. As noted in the Foreign Affairs article sighted above, a serious mistake was holding national elections far too earlier. The intense hatreds of the three national groups were not given enough time to soften resulting in the election of hardliners and the continuation of the war by other means. The second mistake was the failure of international oversight (the UN High Representative) to fully exorcise its powers. None the less the three nation country has held together peaceably for three decades following its civil war.

While the political situation in Bosnia remains fragile (see the excellent article sited above in Foreign Affairs) the central bank itself has been a great success, widely trusted and respected by most citizens from the three provinces. I attribute this to its enlightened leadership and the central bank law with its currency board rules. Tragically the DOGE chain saw seems to have eliminated US capacity for effective diplomacy. “At the breaking point”

Econ 101: Bank Deposits and Stable Coins

I have always been fascinated by the details of money and payments and written a lot about it. “Econ-101: Money”  With the introduction in the US of dollar Stable Coins and potentially the retail (bank operated) version that might be established by our central bank (Central Bank Digital Currency) I find it interesting to compare how a payment with a dollar stable coin is executed relative to a payment with a dollar bank deposit.

The totally safe foundation of the dollar are the liabilities of the Federal Reserve Banks (we have twelve of them). These liabilities are currency (Federal Reserve Notes) and deposits banks have with their district Federal Reserve Bank, so called reserve deposits. Here in Washington DC our Fed is the Federal Reserve of Richmond. These two Fed liabilities (C+R) together are referred to as High Powered or Base Money.

As explained in my “Econ 101: Money” blog linked above, when you pay someone for a purchase with a check (or electronic payment order) drawn on your bank, the recipient does not accept an increase in their account at your back because they will almost certainly have their deposits in their own bank and deposits in banks do face the small risk of the bank failing and not being able to honor its deposits. Your payment from your bank deposit will be transferred to your payee’s bank and their deposit account via the debit of your bank’s deposits with the Fed and credit of the payee’s bank’s Fed deposit. When your payment is thus “settled” your obligation has been fulfilled and the seller has no further claim on you. Your bank deposits are ultimately claims on the Fed.

Payment of dollar Central Bank Digital Currency (if the Fed ever creates it) is a different story. Your transfer of your CBDC dollars to the seller is the whole story. Your CBDC (whether issued by your bank or directly by the Fed) is a direct claim on the Fed. Transferring it directly to the seller gives the seller a direct claim on the Fed. Thus, no other transactions are needed to provide the seller will the full certainty of such a claim.

Dollar stable coins issued by different banks or other financial enterprises are more like our VISA cards which are issued by around 15,000 different institutions. Mine is issued by United Airlines. Merchants who accept payment via any of these VISA issuers do so because of their confidence in the VISA network’s commitment to reliably delivering payment to the merchants bank account. It remains to be seen whether all or most stable coin issues achieve the same confidence and thus universal acceptance that the accepting party can redeem them for a dollar deposit to its bank account. Regulations that establish virtual certainty that dollar stable coins are fully and safely banked by liquid dollar assets will be essential. Such backing will enable any recipient of such a stable coin payment to redeem it for a deposit to the recipients own bank account.

A similar issue existed back in the days of currency notes issued by commercial banks. When they were accepted far from the issuing bank, they generally were given a lower (discounted) value. The issuance of National bank notes ended in 1935 when the newly established Federal Reserve System acquired a monopoly on bank note (currency) issue.

How to be Safe

Much can be said about how and why almost everyone on earth has risen from poverty to affluence. Two of the most important are free markets that allow entrepreneurs to invent and build, and peace and security that allow our work to build consumer goods and services rather than weapons of war.

Taking the second of these, the safety of our persons and our property allows us to specialize and trade – an absolutely critical condition for flourishing. The more broadly we can trade the greater is the wealth producing potential of our efforts. So a key question and the focus of this blog is how we maximize our safety in order to maximize trade the production of consumer goods and services rather than weapons of war.

Since 9/11 almost one million people have been killed in wars and when including indirect deaths from wars the number rises to around 4.5 million. The U.S. alone has spent over $21 trillion dollars on defense since 9/11.  This is 5.25% of the U.S.’s cumulative GDP over that period of $400 trillion.

If we could trust every country in the world, we could get rid of our military complex and add that amount to our incomes. Obviously that would be unrealistic thus some defense spending will always be necessary. However, with the deployment of skillful diplomacy it can be greatly reduced and the losses from actual wars could potentially be eliminated.

We must live among other people. If we are good neighbors, we will be safer from attacks (verbal or worse) by those around us. Being a good neighbor requires being trustworthy (honest) and behaving in ways that take into account and respect the interests of our neighbors. What is true on the block and village is true globally as well. The adoption of mutually agreed rules/norms for our interactions with others is an important aspect of our safety and productivity.

Within each country, at least, agreement has been reached on which side of the road to drive, what frequency we can broadcast on, and what voltage our electricity will be. Across boarders we have agreed on setting dates and time (the calendar), airline overflight rules, and the orbits our satellites will occupy. After WWII, in addition to the UN and its many agencies, NATO, the World Bank, the IMF, and World Trade Organization, countries established the International Organization for Standardization (ISO), International Telecommunication Union (ITU), and the International Electrotechnical Commission (IEC). Moreover, the US and most every other country have established embassies in each other’s countries in order to serve the needs of their own citizens abroad and to maintain dialog and informed relations with each other’s governments.

An important part of soft power diplomacy are the supportive relationships with “allies” who contribute to mutual defense, thus lowering its cost. But good (cooperative) relationships in general are an important contributor to our safety and commercial interaction with other countries. To a large extent formal rules of war and treatment of others have promoted peace in the world.

Violating these rules (e.g. Russia’s invasion of Ukraine and U.S. invasion of Venezuela) raises the cost of our security. It makes us less safe and less wealthy. https://wcoats.blog/2026/01/03/war-2/

President Trump has angered our friends and allies with his tariff and other threats and a generally bullying approach to our relations with other countries. He has created enemies where we didn’t have them before. After bombing Venezuela and kidnaping its President, he is now threatening the same for Cuba, Panama, Columbia, Iran, and Greenland. Denmark’s government, which controls Greenland’s foreign affairs and defense, has told the White House to “stop the threats.”

Protests of US lawlessness is growing. As but one example:

JOINT DECLARATION BY THE GOVENMENTS OF

BRAZIL, CHILE, COLOMBIA, MEXICO, SPAIN, AND URUGUAY

“The governments of Brazil, Chile, Colombia, Mexico, Spain, and Uruguay, in light of the gravity of the events that have occurred in Venezuela and reaffirming their commitment to the principles enshrined in the United Nations Charter, make the following joint declaration:

“We are deeply concerned and reject the military actions unilaterally carried out on Venezuelan territory, which infringe fundamental principles of international law, in particular the prohibition of the use and threat of force, and respect for the sovereignty and territorial integrity of States, as enshrined in the United Nations Charter. These actions set an extremely dangerous precedent for peace and security in the region and endanger civilian populations.”

Trump has isolated the U.S. by breaking the rules and angering our friends and alias. We are much less secure than in the past.  WP: “Venezuela-Trump-Global Law and Order”

Econ 101: Insurance

Insurance pools the costs of unpredictable events (illness, car accidents, etc.) so that the members of the pool share the costs of the events that fall on individual members of the group. Insurance that covers the costs of medical expenses incurred by a few members of the group (the insurance pool) is share among the group. Thus, most members of the group pay a “modest” amount for medical costs they do not incur in order to help pay the costs of care actually incurred by a few.

Your medical costs depend on many things. If you are paying for it, what you receive (and its cost) is agreed between you and your care giver (doctor). If someone else is paying for it, such as your insurance company, they will determine what is provided and its cost. An insurer can specify the doctors you must use with whom they will have agreements on cost and extent of treatment. Or you might choose your own doctor outside the insurers network, but the insurer will set the cost they will pay and potentially the extent of treatment they will pay for.

The fact that medical care is insured does not mean that the cost of providing it does not exist. The details of what the insurance covers can significantly influence the care given and its cost. As insurance is the sharing of the actual or covered costs with a group, the determination of who is in the group (pool) that will share whatever insured costs are incurred is critical.

When health insurance is provided by companies to their employees, the pool consists of those employees.  This has some advantages and disadvantages. It avoids packing the pool with sick people (e.g. those with preexisting health conditions) and thus increasing the cost to be shared (covered by the insurance). But it will generally result in the loss of insurance coverage if you want to change jobs. Forming insurance pools other than via an employer is an interesting challenge. An insurance pool of bird watchers might expect different premiums than a pool of mountain climbers.

Insurance providers attempt to keep the overall cost to be shared, and hence the cost of the insurance premiums, as low as possible by requiring the members of the pool to pay some amount (copay) of the medical bill thus providing them with some incentive to only get care that they really need. Price transparency is also important in this regard. A medical doctor friend complained to me that he doesn’t even know what his patients are being changed for his services. The approach that maximizes your incentive to economize on your medical expenses is to limit insurance to major medical expenses. Once again, the insurance company rather than the patient will negotiate the charges involved (hospital stay, medications, procedures, etc.).

Clearly what medical services are provided, and how that service is organized and its cost, will be significantly influenced by who pays for them. The policy challenge is to enable everyone to receive the essential medical care they need, while keeping its cost as low as possible overall and to each of us individually.