Trump administration is trying to square the circle: it's pursuing at the same time isolationist foreign policies and the interests of Us multinationals giants; it wants higher real wages and high assets prices. It will end in tears and in 40 years of (left-leaning) democratic administrations.
Very interesting (and plausible) thesis. But if the Trumpian goal is to force a US default to shrike the govt, then why would Trump (a) appoint Bessent as Treasury Secretary - someone who openly called for a smaller budget deficit (3%); and (b) why would he have folded in April when the bond market started dysfunctioning? Wouldn't that have been the opportune time to let rates go to 10% and achieve his goal?
In some ways you predict Russification of the US political economy. If this is the case then re-watch numerous Adam Curtis' documentaries covering the topic to complement your predictive framework. A question would then arise, why would anyone without direct management control of those (SP500) businesses trust to hold any US (financial) assets?
American corporates have incredible power outside of the US - I see Trump and his tariffs as a way to make sure that foreign governments with influence (like the EU) dont act against them. That is Trump puts corporate power above government power.
And yes - given that politically the move it to tax foreigners - owing American assets is tricky
A basic questions but how do you feel about the gold/TLT trade in carry terms? Its an 'expensive' trade to keep on but I think maybe my pro carry bias is showing
Its a good question. If you don't put in gold, you can hold cash, and the carry issue goes away as cash yield close to the same level. Somehow though I feel gold will outperform cash.
Thanks Russell. If Trump wants to "starve the beast", then why go with a (slightly) expansionary budget. This would have been a good opportunity to shrink the government and reduce the deficit.
Starve the Beast policy is to spend while in power, so that the democrats are forced to cut spending - as Obama was forced to do. So when Republicans are in power, they spend and cut taxes to leave a fiscal mess for Democrats. Biden refused to play along - and Trump is continuing the policy. Now its just a matter of waiting for the crunch....
"The initial move toward adopting CBDCs involves diminishing the global influence of the U.S. dollar, prompting economic alliances to organically pursue their own digital currencies in response."
That was what I always struggled with Trump - he is an American first - but many of his actions seem designed to destroy America power. Understanding he wants to destroy the power of American government, and have American corporates as the leading powers makes much more sense to me.
While this is a very interesting thesis, I find it hard to believe that Trump would be in favor of a debt default, at least one only by the US. that would be a legacy defining issue and I think we can all agree he is quite concerned with his legacy.
Now, given that the global debt/GDP ratio is somewhere around 300% (not just government debt) we can be pretty sure that it will never be repaid, just refinanced. unless there is a global agreement on a debt jubilee of some sort, which seems plausible given the dire straits of so many nations, I have a sense that we are simply going to see a steady erosion of value in fixed income around the world. I like the idea of owning gold (and other commodities) vs. financial assets, but this is going to be a relative game on a national basis so it's not clear to me who is hurt least.
I think he and the Republicans would have no problem causing a debt default once the Democrats are back in power. They are just laying the ground work today
by definition, if He is still president, it will be his fault and I do not see that happening. but that does not mean we won't get there, and truthfully on a global basis, at some point.
Ultimately I see Trump's goal is to trash the dollar but his approach has been 'Trial and Error', not 3D chess. His Plan A, Liberation Day tariffs were put on to 1) help the US being more competitive in the industrial space; 2) reduce the amount of capital flowing into the US capital markets. He rolled back much of the tariffs quickly probably not because of the mainstream narrative of the US populace not being able to tolerate pain but because the rich and powerful in the US could not tolerate them as the stock market was plummeting. So now his Plan B of trashing the dollar may be to trash the finances of the US Government so that the dollar continues to head lower despite rolling back some of the tariffs and the Fed not budging to lower interest rates which could lower the dollar further if these were done. He has mentioned in the past that the overvalued dollar is an impediment to building an industrial base in the US. The byproduct of this of course would be higher treasury yields and in turn higher mortgage rates and lower house prices. As a real estate guy Trump must be aware of this and may actually want this byproduct as a 'pro-labour' policy. His anti-immigration policy can be viewed as pro-labour as well and plays well to his supporters but he cannot tax the rich like his European counterparts without risking him and his family being assassinated which may seem crazy to Europeans but this almost happened to him last year. He probably knows that any further pro-labour policies like reducing taxes for lower income workers will push inflation higher which tariffs and anti-immigration policies are already doing so he probably wants to avoid fueling inflation in the run up to the mid elections.
The reliance on exports to the US by Japan, China and Europe make a weak dollar a tough sell. And the use of tariffs also make the weak dollar a tough sell... its why I prefer long gold, which has done very well despite the dollar not collapsing.
MAGA = a dominant America (post World War II), more religious, small government with corporate power dominant. I can see why this appeals to US voters. The only issue is dominant corporates means high inflation as they are passing costs on with little competition.
Do you think that the weak dollar trade is likely to go in reverse later this year? I think it is likely that the fiscal deficit under the final version of the BBB will not be as bad as in its current version and the USD will rebound.
Small typo: "And so far so food."
will fix
Trump administration is trying to square the circle: it's pursuing at the same time isolationist foreign policies and the interests of Us multinationals giants; it wants higher real wages and high assets prices. It will end in tears and in 40 years of (left-leaning) democratic administrations.
The left leaning politicians need to work out a winning formula first - which they have not.
Very interesting (and plausible) thesis. But if the Trumpian goal is to force a US default to shrike the govt, then why would Trump (a) appoint Bessent as Treasury Secretary - someone who openly called for a smaller budget deficit (3%); and (b) why would he have folded in April when the bond market started dysfunctioning? Wouldn't that have been the opportune time to let rates go to 10% and achieve his goal?
Ideally debt dynamics would spin out of control under the next administration or at least the midterms
interesting. the thesis would also imply they would want to undermine govt issued fiat money. would be supportive for hard monies - gold & bitcoin
correct
In some ways you predict Russification of the US political economy. If this is the case then re-watch numerous Adam Curtis' documentaries covering the topic to complement your predictive framework. A question would then arise, why would anyone without direct management control of those (SP500) businesses trust to hold any US (financial) assets?
American corporates have incredible power outside of the US - I see Trump and his tariffs as a way to make sure that foreign governments with influence (like the EU) dont act against them. That is Trump puts corporate power above government power.
And yes - given that politically the move it to tax foreigners - owing American assets is tricky
A basic questions but how do you feel about the gold/TLT trade in carry terms? Its an 'expensive' trade to keep on but I think maybe my pro carry bias is showing
Its a good question. If you don't put in gold, you can hold cash, and the carry issue goes away as cash yield close to the same level. Somehow though I feel gold will outperform cash.
Thanks Russell. If Trump wants to "starve the beast", then why go with a (slightly) expansionary budget. This would have been a good opportunity to shrink the government and reduce the deficit.
Starve the Beast policy is to spend while in power, so that the democrats are forced to cut spending - as Obama was forced to do. So when Republicans are in power, they spend and cut taxes to leave a fiscal mess for Democrats. Biden refused to play along - and Trump is continuing the policy. Now its just a matter of waiting for the crunch....
"The initial move toward adopting CBDCs involves diminishing the global influence of the U.S. dollar, prompting economic alliances to organically pursue their own digital currencies in response."
That was what I always struggled with Trump - he is an American first - but many of his actions seem designed to destroy America power. Understanding he wants to destroy the power of American government, and have American corporates as the leading powers makes much more sense to me.
While this is a very interesting thesis, I find it hard to believe that Trump would be in favor of a debt default, at least one only by the US. that would be a legacy defining issue and I think we can all agree he is quite concerned with his legacy.
Now, given that the global debt/GDP ratio is somewhere around 300% (not just government debt) we can be pretty sure that it will never be repaid, just refinanced. unless there is a global agreement on a debt jubilee of some sort, which seems plausible given the dire straits of so many nations, I have a sense that we are simply going to see a steady erosion of value in fixed income around the world. I like the idea of owning gold (and other commodities) vs. financial assets, but this is going to be a relative game on a national basis so it's not clear to me who is hurt least.
I think he and the Republicans would have no problem causing a debt default once the Democrats are back in power. They are just laying the ground work today
by definition, if He is still president, it will be his fault and I do not see that happening. but that does not mean we won't get there, and truthfully on a global basis, at some point.
Ultimately I see Trump's goal is to trash the dollar but his approach has been 'Trial and Error', not 3D chess. His Plan A, Liberation Day tariffs were put on to 1) help the US being more competitive in the industrial space; 2) reduce the amount of capital flowing into the US capital markets. He rolled back much of the tariffs quickly probably not because of the mainstream narrative of the US populace not being able to tolerate pain but because the rich and powerful in the US could not tolerate them as the stock market was plummeting. So now his Plan B of trashing the dollar may be to trash the finances of the US Government so that the dollar continues to head lower despite rolling back some of the tariffs and the Fed not budging to lower interest rates which could lower the dollar further if these were done. He has mentioned in the past that the overvalued dollar is an impediment to building an industrial base in the US. The byproduct of this of course would be higher treasury yields and in turn higher mortgage rates and lower house prices. As a real estate guy Trump must be aware of this and may actually want this byproduct as a 'pro-labour' policy. His anti-immigration policy can be viewed as pro-labour as well and plays well to his supporters but he cannot tax the rich like his European counterparts without risking him and his family being assassinated which may seem crazy to Europeans but this almost happened to him last year. He probably knows that any further pro-labour policies like reducing taxes for lower income workers will push inflation higher which tariffs and anti-immigration policies are already doing so he probably wants to avoid fueling inflation in the run up to the mid elections.
The reliance on exports to the US by Japan, China and Europe make a weak dollar a tough sell. And the use of tariffs also make the weak dollar a tough sell... its why I prefer long gold, which has done very well despite the dollar not collapsing.
MAGA = a dominant America (post World War II), more religious, small government with corporate power dominant. I can see why this appeals to US voters. The only issue is dominant corporates means high inflation as they are passing costs on with little competition.
Do you think that the weak dollar trade is likely to go in reverse later this year? I think it is likely that the fiscal deficit under the final version of the BBB will not be as bad as in its current version and the USD will rebound.
Not sure - but I do think yields go higher
So the Maga electors are glad to be taxed by the wealthiest, in order to finance the consumption of the latter.
Yes - as corporates and value creators are better at doing things than the government