Excellent piece. I’ve been amazed by people here thinking that Trump will be deflationary because he has Elon and Scott Bessent. How can someone who cuts taxes and won’t reduce the growth of entitlements be called a fiscal hawk? Unbelievable to me. And to your point, take a look at this piece by Stephen Miran. He’s influential with the NatCons. He basically called for forcing allies to buy treasuries in return for protection: https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf. Mafia tactics but it’ll probably work!
At the end of WWI, United States became a creditor nation: now they have a massive negative net international investment position (probably a little less than what official statistics say due to the fiscal loopholes about which you wrote, but still massive). If Us need to balance this huge disequilibrium and to re-equitize their economy, US financial assets (bonds, as you say, but also equity) must plunge: you can't have a cake and eat it too. In US people are starting to do really stupid things with "borrowed" money: I believe foreign investors will start to liquidate their american assets.
"US government borrowing has definitively moved to a private equity ethos. In true private equity fashion, a “greed is everything” government will only stop borrowing when the markets stop lending."
Fascinsting comparison - I agree!
The Fed has been manuvering to keep a bid under Treasuries. Interesting times. I added to my TLT puts yesterday with the dip in long yields.
Excellent piece. I’ve been amazed by people here thinking that Trump will be deflationary because he has Elon and Scott Bessent. How can someone who cuts taxes and won’t reduce the growth of entitlements be called a fiscal hawk? Unbelievable to me. And to your point, take a look at this piece by Stephen Miran. He’s influential with the NatCons. He basically called for forcing allies to buy treasuries in return for protection: https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf. Mafia tactics but it’ll probably work!
Great article, enjoyed reading it.
At the end of WWI, United States became a creditor nation: now they have a massive negative net international investment position (probably a little less than what official statistics say due to the fiscal loopholes about which you wrote, but still massive). If Us need to balance this huge disequilibrium and to re-equitize their economy, US financial assets (bonds, as you say, but also equity) must plunge: you can't have a cake and eat it too. In US people are starting to do really stupid things with "borrowed" money: I believe foreign investors will start to liquidate their american assets.
What will they buy?
There's not enough Gold (or Bitcoin) to use as a substitute
Chinese assets are not accessible in large volume to non-residents
I have the same contempt for cryptocurrencies as Charlie Munger. I agree with Russell Napier and his "end of non-system" article published last week.
As I pointed out, buying US equities makes sense in this system. Foreign owners of treasuries are likely to suffer - one way or another
"US government borrowing has definitively moved to a private equity ethos. In true private equity fashion, a “greed is everything” government will only stop borrowing when the markets stop lending."
Fascinsting comparison - I agree!
The Fed has been manuvering to keep a bid under Treasuries. Interesting times. I added to my TLT puts yesterday with the dip in long yields.
I wonder what will be the next epithet
After the Iraq War "Neo-con" became used as an insult
Will "Nat-con" become one eventually as well?
Excellent podcast Russell