DOGE ball
Can the USD be saved? Given the trajectory in Federal debt and deficits and apparent reluctance of the Uniparty to extract their snouts from the public trough that seems unlikely. Indeed, the assumption that inflation and debt monetisation will continue to define US Treasury policy is the defacto consensus opinion within financial markets and as seemingly discounted by the record gold price and easing bond yields, notwithstanding the tsunami of new debt to finance.
That however, raises the question of why isn’t the USD collapsing in anticipation of this. Surely it can’t still be just relying on its safe haven status as a safety play from the wars invariably formented by the US itself. Can the currency markets really be taking a possible second term by Trump seriously as heralding a return to sound financing? This from the man who in his first term was partially responsible for the debt explosion and who also surrounded himself with some of the worst swamp creatures promoting big government programmes. While markets ought to be understandably cautious given this record and distrustful to believe promises by a candidate seeking election, the team surrounding Trump this time is very different and one that offers some realistic hope that some of these issues will be tackled, albeit conditional on majorities also being secured in both houses of Congress by non-RINO’s.
Yesterday in NY at the Economic Club, Trump included in his presentation the recognition of the stakes at play with
“If we lost the Dollar as the Worlds reserve currency, that’d be the equivalent of losing a War, we’d become a 3rd World Country”
Also relevant has been the decision to appoint Elon Musk to head up a new Department of Government Efficiency (DOGE), hopefully in the mold of Argentina’s Javier Milei and his own approach to pruning Twitters originally flabby cost structure. With RfK tasked with a long overdue reforming of the medical regulatory system, investors might be forgiven from sensing something more meaningful is in prospect to finally reign in the out of control deficit.
Donald Trump: “I will create a Government efficiency Commission tasked with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms. Elon Musk… has agreed to head that task force”
Elon Musk has confirmed his willingness on X, saying, “I look forward to serving America if the opportunity arises.”
Reminder: in 2023, Elon Musk reduced Twitter staff size by 80%.
While much of the current real GDP growth being experienced out of the US and much of Western Europe remains artificially supported by unfunded deficit spending. The longer term relationship between small government and big GDP growth is where these economies need to get to. Europe is clearly going to be well behind the curve on this, with the political establishment still wedded to WEF de-industrialisation policies of big and intrusive government interventions.
