Tariffs, currencies and crypto: speculation or escape?

plus, currency turmoil, Asian self-reliance, tariff talks, rising tension and more

“If I seem unduly clear to you, you must have misunderstood what I said.” – Alan Greenspan ||

Hi everyone, and happy Fed Day! Us econ nerds still get excited about FOMC press conferences even though we pretty much know what Chair Powell is going to say. Still, there is an enjoyable touch of theatre about the occasion.

Today I’m sharing an essay I wrote a while ago that I never got around to publishing, on how the talk of a Mar-a-Lago Accord matters for crypto. That makes this a long newsletter, but since you won’t hear from me until Monday, I figure it averages out!

Production note: I’m pottering around London the rest of the week, so will have to skip publication Thursday-Saturday inclusive. Back on Monday!

IN THIS NEWSLETTER:

• Tariffs, currencies and crypto: speculation or escape?

• Currency turmoil gathers steam

• Asian self-reliance

• Macro-Crypto Bits: rising tensions, tariff talks

If you’re not a premium subscriber, I hope you’ll consider becoming one! You get ~daily commentary on markets, tokenization, regulation and other signs that crypto IS impacting the macro landscape. As well as relevant links and music recommendations ‘cos why not.

WHAT I’M WATCHING:

Tariffs, currencies and crypto: speculation or escape?

Big problems need big solutions. And big solutions can lead to big problems.

Since the turn of the century, US government debt has grown by more than measured economic activity, rising from around 50% of GDP to over 120%. Interest payments are increasingly drowning out productive uses of public funds; should this trajectory be maintained, investor confidence in the US government’s ability to honour debt obligations will weaken.

This would make it more expensive to borrow, leading to an even heavier interest burden and a vicious hollowing out of a global economic lynchpin that would hurt everyone, everywhere.

The approaching fiscal reckoning is one of the big problems global leaders have to contend with.

Another is the populist swell in the US that has been interpreted by the current Administration as a demand for “real” manufacturing jobs that enhance US exports and, more importantly, lead to the return of national pride and ambition. The economy of the Midwest US has grown more slowly than those of the east and west coasts, despite having ample natural resources. So has its median wage. And it has been a devastating paradox that the US, the wealthiest nation in the world, is also one of the unhealthiest, with an average life expectancy more than four years lower than the that of other developed countries.

There are many other big global problems besides – the risk to jobs from artificial intelligence, the retreat of democracy, the disaffection of the younger generation and climate change are but a few.

Yet the pressing need to bring down the US budget deficit while shoring up manufacturing and restoring economic balance has been a key pillar of the Trump Administration’s platform since well before the inauguration – and his electoral victory has moved these issues and their consequences to the top of the list of global concerns. The quiver of “big solutions” put together by Trump’s economic advisers has already roiled markets, strained relationships and damaged supply chains – and the arrows have only started to be deployed.

Below, I’ll briefly outline what those arrows look like. I’ll sketch out the likely impact on key currencies. And I’ll address what all this means for nascent crypto asset markets – it’s not so much about extending US influence as it is about counteracting it.