Interview: Talking "Peace Black Swans" & Fiscal Red Bull Redirection on Palisades Gold Radio
I am pleased to rejoin Tom Bodravics on Palisades Gold Radio to explain and evaluate the Trump 2.0 Playbook.
I am pleased to rejoin Tom Bodravics on Palisades Gold Radio to explain and evaluate the Trump 2.0 Playbook. Tom has been persistent in asking me to come on the show for several months, and I thank him for his persistence!
As always, please see below for a detailed Show Notes thread that roughly follows the flow of our conversation and contains information not covered in our talk.
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Show Notes
As always, please follow along here. I include references along with information not covered in the show in this section.
The Asteroid Field of the Trump 2.0 Playbook
I refer to this piece I wrote back in March:
I lay out the problems with the Current Trajectory and also chart out the intended New Trajectory:
Grading the Trump 2.0 Policy Initiatives
Here’s the piece I wrote recently where I grade the Administration’s efforts thus far:
Here are the 4 key Trump 2.0 Policy Initiatives that I grade:
China: Fake Globalization and China’s Runaway Assembly Line
I talk about the Fake Globalization that has resulted in China’s Runaway Assembly Line, which has essentially exported Hostile Industrial Policy:
China’s Demographic Problems can solve Production issues but not Consumption issues:
There is simply no getting around the importance of the US Consumer:
Fiscal Red Bull Redirection
Redirecting the Fiscal Red Bull is critical to weaning the US off of the Vodka Red Bull Economy, which exacerbates the Budget Deficit:
The age of Multilateral Trade Agreements is gone, and the era of Bespoke Bilateral Deals is here to combat China’s “Salami Slicing” ways:
The Reverse Marshall Plan
The Reverse Marshall Plan (a term I coined the recent Report Card piece) is a BIG deal and a potential game-changer for America:
But how should the Admin ensure that the commitments stick past the duration of these 4 years?
“GET THEM PREGNANT NOW”
Terming Out The Debt
Scott Bessent’s hands are still tied on this front, but there is a path out:
Holy Grail: Disinflationary Growth
The key to terming out the debt is creating natural conditions for Disinflationary Growth.
Deflationary Playbook + Inflationary Backdrop = Disinflationary Growth
I think the Trump 2.0 Playbook is NET DEFLATIONARY, and the hope is that this DEFLATIONARY PLAYBOOK meeting an INFLATIONARY BACKDROP results in DISINFLATIONARY GROWTH.
I explained in my February interview with Maggie Lake why I think the Trump 2.0 Playbook is Net Deflationary:
FISCAL RED BULL REDIRECTION IS A HUGE DEAL, BECAUSE MONEY SPENT BY OTHER COUNTRIES AND COMPANIES ON OUR BEHALF IS MONEY THAT THE US GOVERNMENT NO LONGER NEEDS TO SPEND.
ACHIEVING PRODUCTIVITY-LED DISINFLATIONARY GROWTH IS THE HOLY GRAIL:
Creating Demand for USTs
How big a deal is the Genius Act / Stablecoin Initiative?
Peace Black Swans
Beware the Peace Black Swans:
Peace Black Swan #1: Oil
While I am optimistic that defanging Iran can lead to a potential re-ignition of efforts to get the Saudis to re-engage on the Abraham Accords, not everyone shares my optimism.
In KAOS THEORY 10, Kim Ghattas explains the complexities of the region:
But meanwhile, because of Trump’s rapport with the Saudis, there is a wave of Oil coming:
Do not underestimate Trump’s ability to rug-pull the market when it comes to getting Oil prices lower. I talk about the Q4’18 Trump Rug-Pull here in detail:
Peace Black Swan #2: Gold
Now extrapolate this Trump Rug-Pull concern to other Geopolitical Safe-Havens like Gold.
We had a far worse Inflation problem in 2021, and Gold did nothing. We’ve had Fiat Debasement for decades, and Gold did nothing. What changed?
Gold’s blistering ascent began right after the US sanctions and seizures of Russia’s UST Reserves in response to Russia’s invasion of Ukraine.
What happens if peace breaks out and sanctions are relaxed across the board?
History Rhymes
This period of American history resembles Rome’s Crisis of the Third Century:
For an interesting discussion of what happened to the Roman Empire in the Crisis of the Third Century, listen to KAOS THEORY 8:
China Has Substituted Away From Oil
Back to Oil, Saudi Arabia may have screwed themselves in the long-term with these Unilateral Cuts because:
High Oil Prices fed the US Shale machine
High Oil Prices fought the Fed’s Inflation Mandate while causing Demand Destruction at the same time
High Oil Prices encouraged China to substitute away and hedge its “Malacca Dilemma”
I explored in detail the push-pull between the forces of Permian Peaking vs. China’s Substitution away from Oil in this piece from 2 years ago:
The End of American Exceptionalism?
The post-Liberation Day litany of the “End of American Exceptionalism” continues to this day, but actions speak much louder than words:
I forgot to mention this in the interview, but Global Yields are also saying something about the “Reverse Marshall Plan” already:
I am optimistic that America is turning the corner in its Crisis of the 21st Century, and I would not bet against America.
As I said in my Report Card piece:
The US Balance Sheet
I’ve said it over and over:
Debt/GDP alone is not adequate to evaluate Creditworthiness, because it is a Stock:Flow metric, and it only focuses on the right side of the US Balance Sheet.
From my Asteroid piece:
What about the left / asset-side of the US Balance Sheet?
Conclusion
Keep your eye on the Holy Grail of DISINFLATIONARY GROWTH, which can be achieved with a DEFLATIONARY PLAYBOOK that neutralizes a pre-existing INFLATIONARY BACKDROP.
I would not bet against American Exceptionalism, and I am optimistic that the current playbook can break us out of the old trajectory.
