Dollars and Zero Sense

By Jonah Goldberg

Wednesday, May 07, 2025

 

Donald Trump’s Meet the Press interview generated a lot of conversation about dolls and what the right number of dolls per American girl is.

 

I don’t have much to add to what’s already been said about that. Suffice it to say, I think the whole conversation is barmy. But it pales in barminess—and in importance—compared to what Trump said next.

 

MTP host Kristen Welker replied to Trump’s suggested doll quota: “I guess—you’re talking about this transition cost. How long should people expect that transition to last, Mr. President?”

 

Trump responded, “I can’t tell you that. I can tell you that we’re making a lot of money. We’re doing great. Again, we were losing more than $5 billion a day. $5 billion a day. You don’t talk about that. And right now, we’re going to be at a point very soon where we’re making money every day. Look … we were losing hundreds of billions of dollars with China. Now we’re essentially not doing business with China. Therefore, we’re saving hundreds of billions of dollars. Very simple.”

I assume the $5 billion a day we were losing is Trump’s description of our bilateral trade deficit with China. But the relevant nonsense is that last bit: “Now we’re essentially not doing business with China. Therefore, we’re saving hundreds of billions of dollars. Very simple.”

 

While this is an excellent opportunity to once again eat off Scott Lincicome’s plate and talk about how Trump doesn’t understand trade, it dawned on me that the reason he doesn’t understand trade is that he doesn’t understand money.

 

Before you come at me with the usual “Oh, come on! He’s a billionaire!” yada yada. I will concede he’s been successful at making money. But you can make money without understanding money in the same way you can be successful writing books on a computer without understanding how computers work. A good driver isn’t necessarily a good mechanic. A good cook doesn’t have to be a good farmer or rancher.

 

So let me explain what I mean when I say Trump doesn’t understand money. We don’t have to, but it’s easier for our purposes to just talk about paper money, even though only about 10 percent of U.S. dollars are physical banknotes. The intrinsic worth of a $100 bill is close to zero. Technically it costs the U.S. mint about 3 cents to make a $1 bill and 9 cents to make a Benjamin. But let’s just agree that the actual paper is, colloquially speaking, worthless.

 

Money is a social construct. Its value is derived entirely from what it can buy. And that’s the social construct part. Everyone agrees that dollars are an acceptable medium of exchange.  “The pieces of green paper have value because everyone thinks they have value,” explained Milton Friedman.

 

Goldbugs love to point out that money is a social construct with no inherent worth. Again, true enough. But the same holds for gold. Gold is only valuable because people value it. Things with intrinsic worth are more properly understood as “capital.” If you don’t have much cash on hand, but you have a slew of fancy cars, houses, boats, factories, and jewels, you have a lot of capital but not a lot of money. No one would say you’re not wealthy though.

 

(Where this gets a little messy is that we often refer to stockpiles of money as “capital reserves.” That’s fine when your money is worth something. But if you have a stockpile of, say, 19th century rubles, they may be valuable in the sense that they’re collectibles, but they’re not valuable as money. If you have a huge stash of Chuck E. Cheese tokens, that’s a kind of money and it has value redeemable at your nearest Chuck E. Cheese, at least it did before a switch to programmable cards. But if the chain goes out of business, you’ve got a big pile of worthless coins.)

 

My problem with (some) goldbugs is they miss the fact that the value of gold, just as with the value of money, depends on an economy and society that agree on their value. Think of it this way: If you knew—knew!—that the zombie apocalypse was going to start next Tuesday, you wouldn’t hoard cash. You’d hoard ammo—and gasoline, bottled water, antibiotics, etc. You also wouldn’t hoard gold. That stuff is heavy and pretty useless in your mountain compound. This is what I mean when I say that capital is the stuff with intrinsic value. The richest person in the zombie apocalypse is a guy with an ample supply of food and water, medicine, and ammo. The guy with nothing but a huge pile of cash is going to get eaten pretty early.

 

Adam Smith took dead aim at those who confuse money for wealth. The confusion is understandable because we use money as both a storehouse of capital and a measurement of it. But in practical terms, money is only valuable for what it can buy. Occasionally one hears stories of incredibly rich people who live frugally. They may feel rich because of what’s in their bank account, vault, or mattress, but from the vantage point of the outside observer, they’re no richer than the ditch digger next door. Smith’s point was that the wealth of a nation isn’t measured by how much cash (or gold or silver) it has, but on what that money can buy or has bought.

 

This is why inflation doesn’t make a nation richer. If money was intrinsically valuable, you’d be crazy not to print as much as possible 24/7. In Weimar Germany, inflation was so bad that the price of a cup of coffee could double between the time you ordered it and the time you drank it.  In other words, the amount of money you owned stayed constant, but what you could buy with it plummeted. After all, the intrinsic value of a cup of coffee didn’t change. This is how inflation makes people literally poorer.

 

Money is one of the greatest inventions in all of human history because it makes the trading of capital easier and more efficient. You grow apples, I make croissants. Figuring out how many croissants are worth a bushel of apples is doable, but crazily inefficient. We’d have to haggle. We’d have to do weird calculations about how much my time and effort is worth in apples. And, heck, maybe you don’t even like croissants. But with money, I can sell my croissants to people who like croissants, and you can sell apples to people who want apples, and then I can use money to buy apples from you. In reality we’re still trading apples for croissants, but we’re doing it much more efficiently and productively.

 

Of course, I now have a trade deficit with you, just as the people who bought my croissants have a trade deficit with me. But you know what? Trade deficits are mostly a meaningless accounting construct.

 

Which brings me back to Donald Trump. He seems to sincerely believe that the money we are not spending on trade with China is making us richer. Forget the insipid conversation about dolls. A lot of people—rich, poor, and middle class—buy stuff they need from China. A lot of businesses buy stuff made in China in order to make stuff here. The idea that a person or business is richer because they cannot buy the thing they want or need is preposterous. It’s even more preposterous than the idea that they’re richer when the thing they want or need is more expensive.

 

That may seem counterintuitive, but the inability to buy a necessity is the highest price of all. If your kid needs a drug that would save her life, you’d probably pay anything to get it. If you didn’t have the money, you might beg, borrow, or steal to get it. But no amount of money is enough when the company says, “This drug is not for sale”—or the drug doesn’t exist. That’s the amazing thing about technology and productivity generally. Innovation—the engine of productivity—makes things cheaper by reducing the amount of capital required to make things. And innovation literally makes things that didn’t exist start, you know, existing. A century ago, antibiotics didn’t exist. The price for a drug that could cure a fatal infection started to come down from “all the money in the world if only such a drug existed” to the price of a lunch.

 

I am entirely open to tariffs on China for national security purposes, because the only really good arguments for protectionism and other mercantilist economic policies aren’t economic. If China was a thriving, stable democracy that respected the borders and sovereignty of its neighbors and the rights of its citizens, there would be no particularly powerful or persuasive arguments for protectionism. Sure, sure, for purposes of domestic economic and political stability and the like, we might have some meager protections for this industry or that one. But those arguments aren’t economic arguments either. Japan has all sorts of barriers to foreign rice, in part because rice production is culturally important to the Japanese. I think those barriers are stupid economically, because they make rice more expensive for Japanese and reward a handful of Big Rice concerns. But I get it. Yet Japanese people would be richer if they could buy cheaper rice, and American rice growers would be richer if we could sell them American rice.

 

Because, again, the value of money resides entirely in what you can buy with it. I think Trump’s failure to understand this is what drives his batty trade ideas. He thinks money leaving America is synonymous with wealth (or capital) leaving America. I have this vague suspicion that Trump’s bizarre view of trade and money is related to his famous obsession with those lists of the richest Americans. For example, say you’re some kind of Midas-type dude. You want to be known as the owner of the biggest stockpile of gold in the world. Trading any of your gold for a nicer castle or softer bed isn’t worth it if it threatens your status as the No. 1 Gold Guy. That status is more important than material comfort or security. So you’d rather live poorer so you can claim to be richer.

 

Trump has said numerous times that he sees a trade deficit as a loss. But who is losing? What is lost? No one is forced to buy things they don’t want or need to buy. Voluntary exchange is just that: voluntary. He thinks we’re subsidizing Canada “to the tune of $200 billion a year” because we buy oil, timber, minerals, syrup, and whatever else from Canada. It’s a totally made-up number, but don’t be distracted by that. The idea is that we lose money when we buy stuff we want or need. But we don’t—we trade worthless scraps of paper for things that have real value.