National Trade Council adviser Peter Navarro, right, and White House Chief of Staff Reince Priebus, center, await President Donald Trump's signing three executive orders, Monday, Jan. 23, 2017, in the Oval Office of the White House in Washington.Evan Vucci/The Associated Press
The title of that movie tipped to win all the Oscars isn't the nickname for the City of Angels. The real La La Land has moved from California to Washington, D.C., where the man chosen by President Donald Trump to run U.S. trade policy has produced a fantasy movie in which Germany is public enemy No.1.
Peter Navarro, head of the National Trade Council, is blaming Germany for destroying U.S. jobs. He accuses the Federal Republic of being a "currency manipulator," of artificially depressing the value of the euro in order to make German goods cheaper in the United States, thus undermining U.S. manufacturers. He calls the euro an "implicit deutsche mark," a device that gives German businesses an unfair advantage, and he says Germany is the main obstacle to a free-trade deal between the U.S. and the EU.
So, it's not just mad Muslims who are threatening America. All those Porsches and BMWs driven by Wall Street and Silicon Valley types are Trojan horses sent by an evil German Currency Manipulator to bring down Ford and General Motors.
The screenwriters at Trump Studios are not troubled by the real world. Outside of La La Land, we know that Germany has been part of the currency union that is the euro zone since it came into existence in 1999 and euro zone monetary policy is run by the European Central Bank, which is currently led not by Germans but by an Italian, Mario Draghi. It is as foolish to accuse Germany from profiting unfairly from the euro as it is to suggest that California benefits from using the same currency as West Virginia.
The ECB has an expansionary monetary policy, printing money to stimulate growth and investment in the weaker euro zone countries. According to Mr Navarro's movie script, Germany is profiting from the ECB's weak euro policy, making German exports look cheap. But, if that is currency manipulation, you need to have a talk with the U.S. Federal Reserve, which has increased the amount of dollars in circulation more than fourfold since the financial crisis. That compares with a threefold increase in euros.
The Fed's money-printing worked: The U.S. recovered, but until the recent change to a tighter Fed policy, it kept the U.S. dollar very weak. Between 2008 and 2014, the price of a euro fluctuated between $1.30 (U.S.) and $1.45 as the U.S. economy slowly recovered from financial devastation. Today, you can buy a euro for $1.08. Strangely, German car makers didn't complain when the weak dollar was hurting U.S. sales of Audis and Porsches; nor did Angela Merkel, the German Chancellor, accuse Barack Obama of being a currency manipulator.
Currency is a commodity and the markets set the price for dollars, euros, yen and pounds. But in La La Land, the President of the United States decides the fair value of all the world's currencies and woe betide anyone who disagrees. It is not unknown for governments to fix exchange rates: the Communist countries and the old banana republics in Asia and Latin America didn't allow their currencies to float freely. It is strange to hear a U.S. administration talk in such terms.
It all stems from another, more bizarre notion that inspires the screenwriters in Trump Studios: There is only so much trade and wealth in the world and it is America's job to capture more of it for Americans. This notion of global trade as a zero-sum game is called mercantilism and it thrived in the empire building of the 17th century when its leading practitioner was France under Louis XIV. The idea was to build a strong nation state with an industrial policy that protected favoured industries, promoted monopolies and restricted imports with tariffs.
Unfortunately, protectionism is no solution to the slump in U.S. manufacturing jobs. It was new technology that made the rust belt rusty. There is no real incremental demand for jobs in deep mine shafts or steel mills among young Americans; they would rather do lighter work in offices or shops. The hard, dirty and dangerous occupations have shifted to developing countries where poor people have no choice. If Apple or General Motors do bring factories home to America, most of the jobs will be taken by people who communicate in funny languages called Java or LISP.
Mr. Trump's strategy will kill the good jobs of the future while it creates artificial demand for redundant industries. Even more worrying is the underlying and sinister agenda – the unravelling of the apparatus of post-war international co-operation. The President reckons that divided and weak countries can be picked off and bullied in a brutal Darwinian contest. Everything must go, the United Nations, NATO, the World Trade Organization and every multilateral institution that stands in the way of President Trump's La La Land – the U.S. fortress (clad in new U.S. steel) high on a hill above the ruined and devastated land that lies beneath.
Carl Mortished is a Canadian financial journalist based in London.