Latest news with #Mar-a-LagoAccord
Business Times
7 days ago
- Business
- Business Times
Is the US dollar's era of exorbitant privilege ending?
THE US dollar's global standing is a mixed blessing. Its status as a safe haven and dominant reserve currency lowers the US cost of borrowing – the so-called 'exorbitant privilege' – which means more investment, more growth and higher incomes in the aggregate. But the dollar's strength also leans against the economy's competitiveness in international trade, which puts some of its producers at a disadvantage. What a shame that, on the face of it, you can't collect the benefits of a strong currency alongside the benefits of a weak one. On one interpretation, though, the Trump administration is aiming to do just that. According to a strategy mapped out by Stephen Miran, chairman of the president's Council of Economic Advisers, it's possible to nudge the dollar's value lower without causing long-term interest rates to rise – thus achieving greater competitiveness in trade without surrendering the exorbitant privilege. The key is to change the terms of international trade and finance by using all the instruments of US power. By itself, declaring a weak-dollar policy might spur a flight from dollar assets and, as a result, sharply higher interest rates. So it's better, as Miran explained, to start with tariffs. They wouldn't do much to reduce the trade deficit, because lower imports would mean a stronger dollar, reversing the gain in competitiveness and squeezing exports as well. But this is only the first stage. The threat of punitive tariffs would give the US leverage to use alongside other pressure (such as threats to withdraw security cooperation) to extract concessions on trading partners' tariffs and non-tariff barriers – and to impose new currency arrangements (including the management of dollar reserves) that would enable an orderly dollar depreciation. This new 'Mar-a-Lago Accord' would affirm the dollar's global standing, prevent dollar flight and restrain long-term interest rates. Get the sequencing right and the end result could be moderate tariffs (as opposed to the sky-high rates threatened at the outset) and less government borrowing (thanks to tariff revenues), causing a smaller inflow of capital, a smaller trade deficit, a judiciously depreciated currency and no spike in borrowing costs. Ambitious. I noted some of the difficulties with all this (many, to be sure, emphasised by Miran) in a previous article. But how is is it working out? So far, not quite as envisaged. The initial onslaught of actual and threatened tariffs caused the dollar to depreciate, not appreciate, and pushed long-term US bond yields higher. That's not good. The combination of a cheaper dollar and higher long-term interest rates is unusual. At the very least, it suggests an uptick in nervousness about holding dollar assets – intimations, you might say, of a 'Truss moment'. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Granted, it's early days. Trade flows and currency fluctuations will be hard to read until the smoke clears, if it ever does. (For instance, many importers have accelerated their purchases to build up stocks before most of the tariffs kick in, clouding the eventual effect on prices, trade volumes and exchange rates.) The administration is rewriting the rules of global trade even as it champions a huge expansion in government borrowing (tariff revenues notwithstanding) and threatens the independence of the Federal Reserve. Given all of the above, recent fluctuations in interest rates and the dollar, though notable, have been modest. Nonetheless, investors clearly have their doubts. One obvious reason for anxiety is confusion over how the strategy is meant to unfold. The endless back-and-forth on country-by-country tariffs, threats and retractions, ever-shifting deadlines and contradictory rationales make the thinking opaque to trading partners and investors alike. Yet defenders of this approach would say that's the whole idea. 'Strategic uncertainty', as Treasury Secretary Scott Bessent calls it, gives the US leverage in negotiations. On this view, you don't want the other side to know what you're thinking. Once you've struck the best possible deal, clarity will ensue. Maybe. Despite the risks, one can imagine investors coming to terms with disruption as long as it's yielding wins for US interests. Much more dangerous is the administration's failing to see where US interests really lie and, in particular, failing to see that trust in US leadership – and with that, the dollar's preeminence – is a vital US asset. Initial confusion over tariff policy is consistent with the Mar-a-Lago project; reconfiguring the international monetary and financial system is indispensable to it. Here is the core contradiction. The programme envisages new arrangements that spread the costs of global governance more equitably. It doesn't just want to smash the existing multilateral norms and institutions, a process now well under way; it wants new ones, not least to underwrite the dollar's exorbitant privilege. If confidence in the dollar subsides, other governments might question their reliance on dollar reserves for liquidity purposes and wonder whether their financial systems should be so closely integrated with America's – potentially, a vicious circle. The administration understands this threat. It has told the expanded Brics group of developing and emerging-market economies to expect higher tariffs on goods they sell to the US if they move forward with plans to rely less on the dollar in their trade with each other. Another way to defend the exorbitant privilege, discussed by Miran, would be to demand that other governments change the composition of their dollar reserves by adjusting the duration of their holdings to avoid upward pressure on long-term yields. But all such deals depend on mutual advantage and trust – and the administration's goals and methods unsettle both. In the era now ending, the US was mostly perceived as a beneficent hegemon providing global public goods and enjoying the exorbitant privilege (and other benefits besides) in return. In the new era, it promises to exert power more selfishly – to be less exploited by other countries, as the administration would say. Yet it still wants a kind of multilateralism (a durable system of arrangements and understandings) and it still wants to be in charge. The dilemma for other countries is acute. It isn't just that they're to be denied some of the benefits of pre-Trump US hegemony – in Europe's case, for instance, the protection of US military power at relatively little cost. It's also that the new order, once such concessions have been banked, will be far less stable. Favouring US imports and terming out dollar reserves might do for now, but what comes next? Even if financial markets, against the odds, take the trifecta of tariffs, fiscal incontinence and Fed intimidation in stride, one question will surely erode global confidence in the dollar system: How far can you trust a more selfish, impatient and erratic hegemon? If Trump cares about the dollar, he needs a clearer endgame and a better answer. BLOOMBERG
New Indian Express
11-07-2025
- Business
- New Indian Express
A simple way to look at Trump's complex agenda
Occam's razor, a problem-solving principle, suggests that given the choice between multiple explanations, the simpler, obvious one is to be preferred. Applying this approach, US President Donald Trump's agenda does not require complex economic or political theorising. They involve three simple objectives. The first is power. The president wants to increase his own authority, forcing others to supplicate themselves. The reciprocal tariffs require countries to make 'phenomenal offers' to buy favourable treatment. NATO chief Mark Rutte's craven flattery, including allegedly referring to Trump as 'daddy', is the behaviour expected. The second objective flows from the president's association of intelligence with wealth—the attitude summed up by the line, 'If you're so smart, how come you're not rich.' Many of his policies are designed to enrich the president and his funders. Examples include the first family's own investments and trading, BlackRock's pending acquisition of two Panamanian ports and the administration-aligned firms' interest in TikTok's US business. The parallel is 1990s' Russia, where a small group of oligarchs became wealthy by looting state assets as the Soviet empire disintegrated. The third involves Thomas Carlyle's 'great man of history' theory. Trump sees himself as an extraordinary leader, possessing superior intellect and heroic courage, whose manifest destiny is to change and rule over America and the world. This is allied to nostalgia and a worldview firmly rooted in the 1980s. A reordering of the international trading and monetary system is central to this strategy. Prior to joining the administration as chair of the Council of Economic Advisers, Stephen Miran published a proposal to lower the dollar's value and reduce current account and fiscal deficits. Popularly known as the 'Mar-a-Lago Accord'—a nod to the Plaza and Louvre accords of the 1980s—it includes a series of steps, including tariffs and currency adjustments to force economic concessions favourable to the US from other nations. One controversial component is a restructuring of US public debt entailing a forced exchange of some US treasuries for long-dated (100-year or perpetual), low- or zero-interest securities to lengthen maturities and provide secure funding. Alternatively foreign holders of US government bonds can place them in escrow or pay an 'user fee'. Controls over capital movements into and out of the US are possible.
The Market Online
02-07-2025
- Business
- The Market Online
Currency Shifts, Gold Lifts, and the CSE Goes Global
INTERVIEW TRANSCRIPT: ANNA Hi, my name's Anna Serin, and I'm Director of Listings Development with the Canadian Securities Exchange. You're joining us for episode five of The Market This Month . We're in a very interesting moment for global markets, and at the center of it all is the U.S. dollar. Over the past few months, we've seen a notable decline in the currency against other global currencies, particularly against the Canadian dollar. Behind that move is not just monetary policy or economic data, but something more philosophical—something being quietly referred to as the Mar-a-Lago Accord. The Mar-a-Lago Accord is the framework guiding the Trump administration's second-term trade and currency agenda. It aims to reduce U.S. trade deficits by addressing what it views as structural imbalances in the global economy, particularly the overvaluation of the dollar. It combines broad tariffs, potential currency interventions, and rethinking of international economic relationships, including proposals to link trade access with national security cooperation. This proposal is a conceptual revival of the 1985 Plaza Accord, but with a very different tone. Rather than a coordinated global effort to stabilize currencies, this new proposal suggests the U.S. should take deliberate steps to weaken the dollar to boost exports and reduce trade deficits. The idea is rooted in the belief that the dollar's role as a reserve currency makes it structurally overvalued. While this isn't official policy yet, it's already having real-world effects. Investors are watching closely as the market starts to react—from commodities to small caps to capital flows in and out of North America, we're seeing early signs of structural shifts. Today, we'll break down what this all means for Canadian markets, for investors, and for public companies. We'll talk about who stands to benefit from a weaker dollar, whether the rally of gold is sustainable, and what recent moves in the market might signal about the future of small caps. I'm joined by my wonderful co-host, Bruce Campbell with Stonecastle Investments. Thank you for joining me, Bruce. BRUCE Hey, Anna. Good to be here. ANNA We're joining each other virtually this month. I'm sad not to have you live in the studio, but hopefully you're enjoying sunshine in Kelowna while we get a little bit of January in Vancouver. BRUCE Yeah, it's been good here, for sure. ANNA Good. Let's jump right into it. Obviously, our big focus today is the U.S. dollar. We know the U.S. dollar affects global markets and currencies. My question is: the dollar has dropped—is it weak, or are other global currencies strong right now? BRUCE To answer your question: both. The dollar is relative to other currencies, and we've seen it decline versus others, so it has been weak. The rapid drop and the percentage move has been significant. As the market ran into volatility at the beginning of the year, the dollar strengthened, which is normal. We tend to see the U.S. dollar as a flight to safety. Then, as things started to stabilize and more about the Mar-a-Lago Accord came out, with both Bessant and Trump talking down the dollar, it declined. We've seen a fairly significant move so far. ANNA This will have a lot of ripple effects. Can you talk about how this might affect the Canadian markets? BRUCE The biggest thing is the inverse correlation between commodities and the U.S. dollar. Typically, when the dollar declines, commodity prices go up. Last year, we saw a strong move in gold even as the dollar was stable. Now, gold is hitting new highs as the dollar sells off. Other metals like platinum, palladium, and silver have started to move. Oil has recently started to move too. Many point to political issues like tensions in the Strait of Hormuz, but oil was trending up before that. It could be a function of investors reacting to the dollar's decline or anticipating geopolitical heat. Commodities moving typically creates inflationary pressure, which we haven't talked about in a few months. Canada is so dominated by commodities that our market has outperformed the U.S. so far this year. ANNA This creates opportunity for us. It feels so counterintuitive to purposefully create a weaker dollar, doesn't it? BRUCE They certainly want to make strategic moves they feel will help their economy both short and long term. ANNA Just to clarify, they're doing this to strengthen export abilities? If the dollar is expensive, it makes it harder to do business with other jurisdictions. Plus, they're trying to bolster their economy? BRUCE Exactly. In Canadian dollar terms, a few months ago we bottomed out around 68 cents. Now it's in the 73 cent range. That's a significant move. It has an impact—goods priced in U.S. dollars are now a bit cheaper than they were three or four months ago. ANNA It'll be interesting to see how that plays out. Let's talk about gold. These are pretty unreal prices, but we're also seeing some misalignment. Are we in a gold rush or a bubble? BRUCE I wouldn't say we're in a bubble. If you look at inflation and gold, it makes a lot of sense. Gold typically tracks inflation. One long-held metric is that the price of a good quality men's suit should be about the same as an ounce of gold. That seems to hold true. However, some indicators show it's potentially extended. Bank of America does a weekly fund manager survey. Right now, they say gold is fairly overvalued and the U.S. dollar is the least favored asset—it hasn't been this out of favor since 2005. Gold is the most over-owned asset class in the survey. Most of last year, that label belonged to the Mag 7. While some of those stocks have shifted, they haven't fallen apart. Same could be said for gold—it's moved sideways over the last month. Even though the dollar is declining, gold hits new highs, then pulls back. So I wouldn't say it's in a bubble, but we shouldn't be surprised if it stabilizes or drops $200–300 over a short period. ANNA: So, good for them. They've obviously done a really great job to have that much support in the markets. I also wanted to mention Dragonfly. They're a drone technology firm. They just raised 3.6 million US under their NASDAQ listing. I thought this was interesting because we're starting to see more and more drone companies coming to the market, which I thought was interesting. That technology really is starting to get implemented in many different ways. We have some other companies coming to us that have some neat drone technology. But also, I wanted to ask you — they are raising money in the US, and I was curious with what's been going on in our political framework. Some of our issuers wonder how US investors feel about investing in Canadian securities right now. What are your thoughts on that? BRUCE: It's definitely a vote of confidence. The fact that these US investors stepped in and invested — and they also did in US dollars — which is great to see as well. ANNA: Absolutely. Well, congratulations to Dragonfly. And then finally, just wanted to mention King Global Ventures. They closed an oversubscribed private placement of $5.5 million. The proceeds will fund ongoing exploration and drilling at their Black Canyon Project in Arizona, which includes 213 contiguous concessions and 15 former operating mines within that asset, including the past-producing Howard Copper Mine. The company is focused on precious and base metals exploration across North America. We continue to see, month by month, these nice little exploration capital raises. I know the markets have been tough in the junior and growth side, but we are seeing these nice little chunks getting raised. What are your thoughts on that? Is this specialized money? Where is this coming from? BRUCE: Well, the taps haven't been fully turned on, but in a case like this, where they have old past mines that became uneconomic at some point due to what it cost to mine and metal prices, and now you've seen metal prices rising — it becomes economic again. Turn those lights back on. This is kind of the story of the last couple years — not so much the pure exploration like 'we're going to dig a hole and try to find something,' but more like, 'Hey, we know there's something there, and we just want to restart it and get it producing cash flow.' It's going to take a little money to get there, and then they'll have the cash. ANNA: That's amazing. Well, congratulations to all of those CSE issuers on doing so well. Okay, Bruce, before we talk again in a month from now, what should we be thinking about in the markets? BRUCE: Lots to watch. We've talked a bit about the bigger picture markets — are we in a bull or a bear? Hopefully we get some clarity on that direction. With that comes sector leadership — what sectors are going to be leading, and where the opportunities lie for the next 6, 12, 24 months. ANNA: Alright, well I look forward to chatting with you again in a month. Thank you all for joining us for episode four of The Market This Month. We will be back in June for episode five. We have the Summit on Responsible Investment coming up — we'll be in your hometown of Kelowna. For anyone locally, please come and join us. All the information can be found on our website. We will be releasing content all summer long highlighting our issuers in the space, so stay tuned. If you go to our YouTube page, feel free to hit subscribe and we'll let you know when new content comes to our CSE TV. Thank you again for joining us, Bruce, and look forward to chatting next month. BRUCE: Yeah, exactly. Join the discussion: Find out what everybody's saying about this junior gold and silver mining stock on the Outcrop Silver and Gold Corp. Bullboard and check out Stockhouse's stock forums and message boards. The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
New York Post
01-07-2025
- Business
- New York Post
US dollar suffers worst start to a year since 1973 over Trump tariff concerns
The US dollar suffered its worst first-half decline in more than 50 years as fears over President Trump's tariff policies have driven down the world's principal reserve currency. The greenback weakened 10.7% in the first six months of the year compared to a basket of currencies from major trading partners – the worst drop since 1973 when President Nixon stopped tying the dollar to the price of gold. 3 President Trump unveiled harsh tariffs during a 'Liberation Day' press conference in April. AFP via Getty Images But its decline could be part of Trump's broader vision to devalue the dollar — an idea floated by Stephen Miran, recently appointed Chairman of the US Council of Economic Advisers in what has been dubbed the Mar-a-Lago Accord. A weaker dollar makes US exports much cheaper, and could aid Trump's oft-stated goal of boosting manufacturing at home, as well as reducing the nation's trade deficit, the thinking goes. When he was campaigning for a second term, an official in the first Trump administration told Politico that 'currency revaluation is likely to be a priority' because of 'the viewpoint that [an overvalued dollar] contributes to the trade deficit.' Trump has not weighed in on the speculation about devaluing the dollar. 'President Trump has repeatedly affirmed his commitment to the dominance of the dollar as the world's reserve currency,' White House press spokesman Kush Desai told The Post on Tuesday. 'Ten-year Treasury yields rallying down nearly 40 basis points since Inauguration Day, four consecutive expectation-beating inflation reports, and the trillions in historic investment commitments that have poured into the United States since Election Day are all indicative of the confidence that investors and markets continue to have in our economy and currency.' But many experts claim Trump's hefty tariffs are putting pressure on the dollar and forcing global investors to rethink their ties to the currency. 'Trump is definitely playing with fire,' Stephen Miller, a consultant for GSFM, a unit of Canada's CI Financial Corp. in Australia, told Bloomberg. While a weaker dollar should theoretically help US exporters, there's still a lot of uncertainty when it comes to global trade because of the Trump administration's ongoing negotiations with key nations, which are staring down a fast-approaching July 9 deadline. The dollar's fall comes after it soared on Trump's re-election win and peaked in mid-January on hopes he would bring a pro-growth mindset to the White House. 3 The US dollar has weakened 10.7% in the first six months of the year when compared to a basket of currencies. SOPA Images/LightRocket via Getty Images But in April, Trump's 'Liberation Day' announcement revealed tariffs that were much stiffer than analysts and economists had predicted, spurring a broad shift away from US investments. 'Full-scale de-dollarization, if it ever comes, is still a long way away,' Rick Rieder, chief investment officer of global fixed income at BlackRock, said in the company's most recent forecast. But the drop in confidence in the US dollar, which is typically seen as a safe haven asset, is concerning – and could worsen with a rise in government debt, according to Rieder. Trump's massive budget bill, which is projected to add $3 trillion in national debt, narrowly squeaked through the Senate on Tuesday. It awaits final approval in the House. 3 Investors are fearful that President Trump's tariffs could keep inflation and interest rates higher for longer. Getty Images The concerns over higher inflation and debt have have pushed long-term Treasury yields lower. The 10-year yield started near 5% this year and has steadily fallen, reaching 4.267% on Tuesday. 'I think we're going to continue to have this higher pressure on the low end of the yield curve because we haven't really dealt anything away with the deficit or inflation for that matter. In fact, there's more risk now than anything,' Ben Emons, founder of FedWatch Advisors, said on CNBC's 'Fast Money' Tuesday. 'I do think it's related to Treasuries, that if Treasuries get more under pressure, the dollar will get weaker.'
Yahoo
24-06-2025
- Business
- Yahoo
Forget the 'Mar-a-Lago Accord', Deutsche Bank outlines 'Pennsylvania Plan' for US
-- Deutsche Bank's Head of FX Research George Saravelos has introduced a new concept called the "Pennsylvania Plan" to address America's twin deficit problem. The plan aims to find new buyers for US debt as America faces what Saravelos describes as "existential macroeconomic constraints" due to large fiscal deficits combined with a large external deficit and negative net foreign asset position. According to Saravelos, the US recently "experienced a sudden stop in capital inflow" which forced a policy reversal on trade. While tightening fiscal policy would be the clearest solution, he notes there is no political willingness to do so. The proposed Pennsylvania Plan has two main components. First, it acknowledges the need to reduce reliance on foreign buyers of Treasuries, who currently hold record-high exposure to US sovereign duration risk. This includes promoting dollar stablecoins backed by short-dated Treasury bills to accommodate shifting demand preferences. Second, the plan calls for increasing domestic absorption of US duration risk through financial incentives and potential financial repression. This includes regulatory carve-outs of US Treasuries from banks' supplementary leverage ratio requirements, tax advantages for owning long-dated treasuries, and possibly mandating greater Treasury buying by retirement plans. Saravelos explains the core aim is "to engineer a historic rotation of US duration risk from external investors to the domestic sector." While this won't solve the underlying twin deficit problem, it could buy time by deploying domestic US savings. The plan would likely put upward pressure on US term premia and increase fiscal dominance threats through heightened financial stability risks. It would also make foreign capital more sensitive to Federal Reserve policy, potentially leading to dollar weakness. Saravelos concludes that without willingness to improve the US fiscal position, the path of least resistance is for the administration to seek greater domestic funding, resulting in "a weaker dollar, upward pressure on term premium and a persistent pressure on the Fed to stay easy." Related articles Forget the 'Mar-a-Lago Accord', Deutsche Bank outlines 'Pennsylvania Plan' for US NY Fed's Williams says modestly restrictive policy stance 'appropriate' Cleveland Fed's Hammack sees no need for imminent rate cuts 登入存取你的投資組合
