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The latest iteration of the Trump administration’s supercharged “sch*t flood the zone” strategy will become a global macroeconomic megadeal.
This is a contract between the United States and its major trading partners, at the Plaza Hotel (Home Alone 2: Lost New York’s fame). In the age of the wet Skib International Agreement, it was a remarkable success.
Donald Trump (Home Alone 2: Lost in New York fame) had already shown an affinity for economic history by purchasing the Plaza Hotel in 1988 (the deal went bankrupt). He really wants weaker dollars. Conveniently, he also owns the Mar-A-Lago resort in Florida.
Therefore, a version of the idea for “Mar-a-Lago Accord” has been floating ever since the first Trump presidency. His victory in November naturally resurfaced them. Alphaville mentioned the possibility of our how-to dollar guide the day after the 2024 election.
The chatter then collapsed, but now he’s back on the news agenda. Most of the basic outlines of the expected plan appear to be derived from this November’s paper by Stephen Milan in November 2024.
Milan is currently a senior strategist at Hudson Bay Capital, but he worked for the US Treasury during his first Trump administration and is currently a candidate for Trump’s Economic Advisory Council. And you cannot blame his ambitions:
The following Trump terminology describes the potential for changes in the international economic system and the volatility that follows. It is important for investors to understand the tools that may be adopted for such purposes and the measures that governments may try to avoid unwelcome consequences. This essay attempts to provide a guide to the user. It is a study of several tools, their economic and market outcomes, and procedures that can be taken to alleviate unwanted side effects.
The Wall Street consensus is wrong if you want to do so that the administration has no means of affecting the forex value of the dollar. The government has many ways to do so. However, no matter what approach is required, you should pay attention to the steps to minimize volatility. Support from trading partners or the Federal Reserve helps to do so.
In any case, it is highly likely that tariffs will be used before currency tools as President Trump has shown that tariffs are a means of successfully eliciting leverage and revenue negotiations from trading partners. Because tariffs are positive for USD, it is important for investors to understand the sequence of reforms into the international trade system. With that, the dollar could be strengthened before it gets reversed.
There is a pathway that allows the Trump administration to reconfigure the global trade and financial system for the benefit of the US, but it is narrow and requires careful planning, accurate execution, and attention to steps to minimize negative impacts is.
This is a cough-freewheel management with numerous hanger online policy suggestions like confetti, so we want to discount everything. Some aspects, such as forcing the Treasury to be exchanged for the country’s bonds, seem a little fantastical. It is essentially a glorious protective racket scheme with lipstick.
Even Milan said restructuring the global financial system would require “careful planning, accurate execution, and attention to steps to minimize adverse effects.” And let’s face it, these are not qualities that the first or second Trump administration demonstrated much.
Furthermore, the world is a fundamentally different place from when the original Plaza Accord was attacked in 1985. Former US Treasury Magnificent Mark Sobel said in December that Mar-a-lago Adcop was “far, far away, incredible.”
However, chatter cannot be completely ignored. The Trump administration clearly shows a prominent willingness to slap a customs duties on friends and drain its security blanket. China now has its own struggle.
Therefore, some countries may be willing to engulf some sort of Mar-a-Lago agreement to avoid drama. As Stephen Jen of Eurizon SLJ wrote last month:
We agree that the terms are now not ripe for Mar-a-Lago’s agreement, but the situation can change in two to three quarters of time. Our sense also is that Beijing’s dislike for participating in such a coordinated effort to chase the dollar may not be as strong as before, especially when threatened by punitive tariffs. is.
John Connally – the US Treasury Secretary in 1971 – famously said, “The dollar is our currency, but it’s your problem.” While this quote remains valid, the 1985 Plaza Accord was an episode in which other stakeholders joined in to get the wrong thing about the dollar’s value. The intervention to buy the 2000 euro was a similar agreement, which also addressed a severe imbalance in the currency market.
Given how incorrect the dollar price is, I believe the odds for Mar-a-Lago Accord will rise in the coming quarter.
