What is Trump's "cunning plan"
The markets would like to know
Love him or hate him - the world seems divided in equal measure - DJT47 is certainly keeping the market on its toes. One of my favourite characters in the Black Adder comedy series is Baldrick; his catch phrase being, “I have a cunning plan”. The "cunning plans" in question were dreamed up by Baldrick as a solution to a particular problem or crisis and were ridiculed scathingly by Blackadder for their implausibility, but Blackadder frequently resorted to using these plans when the situation became desperate.
Most of Trump’s “cunning plans” seem totally implausible to many - for many read Democrats and even some in the GOP - and the market with much vested interest in the status quo is unsure what to make of the Trumpian decrees which are many, varied and often contradictory. He would give Baldrick a good run for his money!
The Fed and the US Treasury are a constant reminder of Einstein’s dictum that the definition of madness is, “doing the same thing over and over and expecting different results.” Where has money printing got us other than deeper in debt? I am sure to answer that some of you have another comedy classic in mind, the scene from the Life of Brian where John Cleese asks, “What have the Romans ever done for us.” Yes, the printing has kept the banks alive and maintained the status quo, but the unintended consequences are legion and are now beginning to be understood.
The system will change. This has been happening for some time and yet another quote comes to mind. Ernest Hemmingway’s observation on bankruptcy (relevant given the parlous state of government finances) that, “it happens gradually, then suddenly.” Trump & Co don’t seem to do “gradually” so “suddenly”, all of a sudden, is on the agenda. The trust in our hitherto august institutions is on the wane, the government itself, the judiciary, the police and as for the fourth estate why are you still reading their propaganda?
There is much talk of a new monetary order, which is much needed. Ever since the US came off the gold standard (“Temporarily,” said tricky Dickie in 1971) the government has had a license to print money ad infinitum. In the beginning a dollar borrowed generated more than a dollar in growth; today we are close to a minus number. It is argued that reverting to gold as the monetary base would be too restrictive. Yes, at the current price it would be. Do your sums with gold at $5000 or $10000…
How many people have a relevant allocation to the barbarous relic? Since the beginning of 2024 gold is up 45% against a 16% rise for the NASDAQ 100. Who would have thought? And just this week we topped $3000 an ounce for the first time ever. Global South banks lead by China have been accumulating gold as fast as they can as more and more trade is being settled in local currencies with any surplus / deficit being settled in gold. Yes, I know the vast majority of global trade is dollar settled, but at the margin things are changing.
Trump threatens to penalise anyone seeking to undermine the dollar’s ubiquity. But that threat was neutered by the Biden government’s decision to confiscate Russian dollar reserves. You can argue forever over the rights and wrongs of that decision, but if you are a country not politically aligned with the US, and that’s a lot of countries, are you going to hold your reserves in dollars? How much more comfortable would you feel holding them in physical gold hat the US cannot touch?
As my good friend Tim Price is wont to say, “Got Gold?”
