Macro

In our view, Trump 2.0 wants a strong US dollar because it helps on-going tariff negotiations and the President’s demand that more firms produce in the US homeland. The Fed/ Treasury may be party to these ploys, and this may explain both the Fed’s reticence about future QE and the Treasury’s reluctance to use the TGA, which in the past has been emp... See more

As long as this exists, and the tech infrastructure is priced and sold in USD, the USD remains supreme worldwide. This is what is actually still underpinning western global dominance and enabling American power. Not any other reason most people espouse.

The dollar is different. It’s the main currency that entities around the world do hold for long periods of time. Since the dollar is used for those four previously-described purposes internationally, it means there is excess demand for the dollar by entities around the world above and beyond simply interacting with the American economy or financial... See more

I thought I should comment on these developments and the outlook, and the result was a memo called Nobody Knows, published four days later. I affirmed my ignorance of the future as usual, but to an even greater degree given that all prior expectations had been upended. Nobody knew – especially me – whether the spiral could be arrested. Nevertheless... See more

Let me be clear: the US can print more money without hyperinflation than China can. Trump and Bessent have made it very clear that this is what they intend to do. Therefore, Xi will allow the yuan-dollar exchange rate to float, which in the near term means the yuan will depreciate.

Global liquidity levels have stabilized following the Q4 dip. Four factors are underpinning them: (1) Improving Central Bank liquidity, due to the PBoC and ECB. Fed liquidity remains a cause for concern. (2) Collateral values (bonds) which are picking up, in part helped by (3) the loss of momentum in the US dollar. And finally (4), bond market vola... See more

Put another way, the liquidity of the private sector is determined by the size of its asset holdings divided by their average duration . Thus, any change in average duration must result in a change in ‘liquidity’. These actions are not limited to the US Federal Reserve, because the US Treasury is also a major debt issuer. If the Treasury changes th... See more

We believe that growth will hold up while inflation stays tame (if not drift to the target of the next year or more). In that scenario, real rates can easily come down to 1.5% (or lower), which enables another 100bps of cuts without too much imagination. As this comes to fruition, money will again flow from wealth preservation assets to wealth crea... See more