Trump 2.0, Gold and the Reset Path

The Way Out of This Mess

Housekeeping: good afternoon.

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Contents ( 800 words)

1. The Death of Globalism and the Weaker Dollar

2. Credit, Trust, and the Bond Conundrum

3. The Imperative to Make and Sell

4. Protectionism, Tariffs, and Inflation

5. The Dollar Dilemma and the Fed’s Role

6. Gold, Mercantilism, and the Path Forward

7. Sacrifices of Recalibration

8. Risks of Inaction

The Death of Globalism and the Weaker Dollar

Yesterday, a report from T.S. Lombard aboutThe Death of Globalism outlined the anticipated economic recalibration under a potential Trump 2.0 administration. At its core, the analysis predicts a shift in monetary policy to prioritize production and trade over financial dominance. A key takeaway is Trump’s expected push for a weaker dollar, reversing decades of strong-dollar advocacy dating back to the Reagan era.

Quoting the report’s authors, Stephen Blitz and Grace Fan, “The Hamiltonian era of global banking dominance is over… and the Fed will adjust to the new reality of economic priorities.”

This alignment with the administration’s goals implies an era of easing monetary policy. In short, the dollar must decline for Trump’s economic objectives to succeed.

Credit, Trust, and the Bond Conundrum

In this new reality, trust is a dwindling commodity. Internationally, fewer nations are willing to lend the U.S. money or buy its bonds at current rates. The result? Rising borrowing costs and a diminished standard of living. If credit dries up, international business must revert to cash-based transactions or strict 30-day settlements.

This paradigm shift extends to U.S. Treasury bonds. Historically, these bonds served as collateral for global trade, their yields generating dollars to fuel economic activity. Without a trusted bond market, global participants will seek a neutral store of value—a void gold is increasingly poised to fill.

The Imperative to Make and Sell

A critical point: to address the debt crisis, the U.S. must pivot from financialization to manufacturing. Like a teenager burdened with debt and forced to take a part-time job, the nation must “make and sell actual stuff” to restore fiscal balance. This necessitates a revival of domestic manufacturing and an aggressive export strategy.

This shift aligns with mercantilist principles, prioritizing economic self-sufficiency and trade surpluses. However, achieving this goal involves several challenges, including fostering domestic industries, building global trust, and adopting protectionist measures.

Protectionism, Tariffs, and Inflation

Protectionism, long viewed as a dirty word in free-market orthodoxy, becomes a necessary strategy in a mercantilist framework. Tariffs are the primary tool to protect domestic industries, fostering a manufacturing revival while limiting the disruptive impact of imports. However, tariffs come with unintended consequences, particularly for the dollar and inflation.

Tariffs inherently strengthen the dollar by increasing global demand for it in trade. While this bolsters the U.S. currency, it also creates inflationary pressures domestically and deflationary impacts abroad. U.S. businesses, shielded by tariffs, often raise prices, eroding consumer purchasing power. The challenge is managing these dynamics to avoid destabilizing economic effects.

The Dollar Dilemma and the Fed’s Role

A strong dollar conflicts with the broader goal of boosting exports. For Trump 2.0’s plan to succeed, fiscal policies like tariffs must be paired with monetary policies aimed at weakening the dollar. This requires Federal Reserve intervention to curb the dollar’s strength, balancing inflationary pressures at home with deflationary pressures abroad.

If executed effectively, this recalibration could spark a manufacturing resurgence, creating a pathway for the U.S. to address its trade imbalances and debt obligations. However, this strategy necessitates a temporary period of elevated inflation as the economy retools itself for production dominance.

Gold, Mercantilism, and the Path Forward

In this evolving landscape, gold emerges as a critical player. As trust in bonds erodes, gold serves as a neutral store of value, facilitating international trade. Simultaneously, a protectionist, export-driven economy necessitates a focus on producing goods that the global market demands.

The return to mercantilism implies more than just tariffs—it signals a broader strategic pivot. Protectionism and domestic manufacturing must be supported by monetary policies that ensure the dollar’s competitiveness in global markets. This symbiotic relationship between fiscal and monetary strategies echoes the inflationary cycles of the 1960s and 1970s, suggesting that today’s challenges are not without historical precedent.

Sacrifices of Recalibration

This shift will not come without sacrifices. Inflation represents the cost of retooling the U.S. economy into a manufacturing powerhouse. As affluence and wealth are reallocated toward long-term economic sustainability, the nation must embrace short-term hardships.

If citizens were approached honestly and asked to endure these sacrifices for the greater good, many might accept the challenge. However, political realities often preclude such transparency, complicating efforts to garner public support.

Risks of Inaction

The stakes are high. Failure to recalibrate risks reducing the U.S. to a resource-dependent economy, reliant on exporting raw materials and producing low-value goods. Conversely, a successful shift could restore the U.S. to its former economic dominance, fostering a new era of affluence for future generations.

In the interim, protect your assets. Echoing the strategies of BRICS nations, investing in gold and silver provides a hedge against the economic uncertainty of this transitional period.

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