IlluMyFi

Trump's Treasury Pick Sees A "Global Economic Reordering" Authored by James Rickards via DailyReckoning.com,President Trump’s pick for Treasury Secretary, Scott Bessent, has stated that he believes the world is on the cusp of a “global economic reordering”. And he would “like to be a part of it”.He has hinted at the need for a new international agreement on the level of the famous Bretton Woods Agreement of 1944. Bretton Woods, of course, established the world monetary order over 8 decades ago.It sounds like Bessent is thinking big. He will certainly need to, given the challenges the Trump administration will face over the next four years. Trump will come into office at a key moment in American history, and his administration’s decisions will echo over the coming decades.The world order is indeed shifting, and if America is to thrive going forward, major changes will be required. “Economic surgery”, as Bessent refers to it.Bessent has a deep understanding of international trade and finance. Along with George Soros, he famously profited from “breaking” the Bank of England while betting against the pound in 1992.He also worked closely with Stanley Druckenmiller, one of the greatest investors of all time. Bessent eventually ran his own hedge fund and is a self-made multi-billionaire. He represents a substantial upgrade from the more academic Janet Yellen.This man has a deep Rolodex and a wealth of knowledge when it comes to trade and finance.Interestingly, Bessent is a major gold bull:“I think we’re in a long-term bull market in Gold. We’re seeing reserve accumulation by central banks. I follow it closely. It’s my biggest position.”A gold enthusiast as U.S. Treasury Secretary? Interesting. Ironically, gold fell more than 3% when Trump announced his appointment, apparently due to Bessent’s hawkish budgetary credentials.Trump’s pick for Treasury is an advocate of cutting government spending and deficits. During the Biden administration he offered fierce denunciation of economic policies. And he was a strong critic of the Green New Scam, stating that the Biden administration has “repeatedly stretched its legal authorities to direct resources towards favored areas of the economy, often in direct contravention of statute.”3-3-3 and ChinaBessent has proposed the 3-3-3 economic plan for America, consisting of:3% annual real growth3% deficit-to-GDP max3 million additional barrels of oil per dayThese goals offer a nice start. If Trump can pull off all three, we’ll be well on our way to long-term sustainability.Internationally, Bessent sees China as America’s prime competition. He believes the yuan is undervalued and that this is distorting the world economy by favoring Chinese exports. He says Chinese citizens save too much, and don’t consume enough, which is true.A cornerstone of Bessent’s approach will be aggressive trade policies. Tariffs, and perhaps more importantly, the threat of tariffs. Threats can go a long way, as long as they’re prepared to back them up.Tough trade policy will be key to dealing with growing worldwide economic imbalances.Trump’s economic team believes strongly that higher tax rates are not the way forward. Bessent has stated that lower tax rates can actually create higher tax revenue through increased growth. Overall, his views on growth are encouraging:“I decided to come out from behind my desk because I do believe in this election, there’s a big choice and we are going to decide whether we are going to grow our way out of this debt burden.I think we can through deregulation, energy, independence and dominance in the US and a growth mindset. We can get back to growth. I feel very strongly that this is the last chance to grow our way out of this.”This is correct. It is our last chance to change course on the economic Titanic. We’re headed for an iceberg and strong international trade policy and faster growth are the only ways to avoid it.Of course, as Treasury Secretary there’s only so much Bessent can do. But he should act as a positive influence on Trump in terms of policy. It’s a prestigious position, and even with limited policy tools, he should be able to make his influence felt.So far Trump’s economic team is shaping up to be a disruptive and powerful force. We’ll be monitoring this situation closely. Stay tuned. Tyler DurdenFri, 12/13/2024 - 19:15

Sentiment

0.29

Bearish/Bullish

21.12.24 08:10

by zerohedge.com

Santa Claus Rally Or Did The Fed Steal Christmas?

Santa Claus Rally Or Did The Fed Steal Christmas? Authored by Lance Roberts via RealInvestmentAdvice.com,Powell & A Government Shutdown Hits StocksLast week, we noted the ongoing market churn that could last into this week’s Fed meeting. To wit:“That certainly seemed the case this past week, with the market trading being fairly sloppy. Attempts to push the market higher were repeatedly met with sellers, and we saw a rotation from over-owned to under-owned assets. Notably, that selling pressure arrived as expected, and while such could persist until early next week, we should be getting close to the end of the distribution and rebalancing process. The good news is that the recent consolidation paves the way for ‘Santa Claus to visit Broad and Wall.”That process continued as expected this past week but became violent on Wednesday following the Federal Reserve meeting. While the Fed cut rates as expected, the market shock came from the lift in its outlook for interest rates in 2025 by a half percentage point. The market is assuming that the Fed is giving up on the idea that inflation will return to the 2% target next year, an idea that they had confidence in as recently as September. That more hawkish outlook undermined the view that elevated valuations were justified by easier monetary conditions, which now seems to be reversing. We suspect that this view is rather short-sighted, and given the economic dynamics both abroad and in the U.S., slower economic growth will lead to a “dovish” pivot by the Fed in the first half of 2025.The markets also struggled with concerns about a Government shutdown. As we discussed in October 2023, shutdowns are NOT a threat to the market in the long term. To wit:“What is critical to understand about Government shutdowns is that mandatory spending (social security, welfare, interest on the debt) continues as needed. Shutdowns are primarily about discretionary spending. Such is why it mainly involves Government employment and the shuttering of national parks and monuments. According to Goldman Sachs, the shutdown would have only impacted about 2% of Federal spending overall. Notice that the vast majority of Government spending is directly a function of the social welfare system and interest on the debt.”Please note that during a Government shutdown, all MANDATORY spending continues. In other words, the government WILL NOT default on its debt, and social security payments will continue, despite rhetoric to the contrary.Furthermore, market reactions to government shutdowns have become increasingly muted. The reason is that the markets have learned that funding typically arrives at the 11th hour via a ‘continuing resolution’ to provide temporary funding through the next political event, such as midterm elections, inauguration, etc. While these short-term spending bills eventually translate into longer-term spending bills, the real problem is that continuing resolutions (CRs) increase spending by 8% annually. Such is why debt has exploded since Congress stopped...