Last October (LSS 26 10 24) we published a fanciful piece which purported to come from June 2025. In it, we suggested that US President Donald Trump had raised tariffs to 60% on China and 20% on the rest of the world. (nah, impossible-ed)The resulting disquiet in the bond markets general loss of confidence in US assets and a fall in the dollar, seriously affected its status as the world’s reserve currency. In such circumstances we couldn’t in all honesty see any alternative to gold as the de facto reserve, with all the obvious disadvantages that brings. You will forgive us a modest cough, gentle readers, if we suggest that our little blog, for all it got wrong, seems oddly prescient if you fast forward( or back) to April 2025, a full month ahead of our crystal ball gazing!
Because the recent IMF report [1] suggests the very dangers to which we so modestly adverted you. are now real. Of course, the IMF is not perfect; it too will have its biases and unconscious assumptions like everyone else. But it is compiled by some of the sharpest and most knowledgeable financial minds on the planet, which is why their arguments should be at least engaged with respect. Which is why one aspect highlighted by the Guardian among others [2] has caused us particular disquiet. The writer points out that in the panic after COVID 19 got going back in March 2020, and the famous “dash for cash” it was only the Fed rescuing the US Treasury that prevented a total rout. However:
The real concern here is not technical dysfunction in treasury markets or the mechanics of the Fed, which are the bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trumpian regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?
There are signs already that gloom can be overdone. As we write these words, Mr Trump and his acolytes appear to be signalling a weakening of their stand on China. While his latest stance on Ukraine suggests bets on his resolve on any issue may be misplaced. In which case the world may breathe a little more easily. Stocks rose yesterday: and gold has fallen back, a little. We are not economic experts nor financial advisors. But as humble citizens with an eye for History we have to at least ask: how long can the dollar, and US Treasuries stay on top of this sort of thing goes on?
[1]https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025
#donald trump #USA #china #IMF #world trade #gold #bonds #equities #economics
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