Trump and gold

If Trump’s trade and fiscal policies are carried through, Federal finances will be utterly destroyed, and the dollar with it. This article explains why.

Following President-elect Trump’s successful election, the dollar has rallied, and US equities have registered new highs. Clearly, on first cut US investors are expecting a business-friendly environment under Trump. And his nomination of Scott Bessent as Treasury Secretary has also been well received by markets.

Bessent has been a successful hedge fund manager having worked with George Soros in forcing sterling off the ERM in the 1990s, and similarly profiting from shorting the yen in 2013. He is an experienced market man, rather than as an intellectual. But on the economics of trade and by his statements, he is ignorant.

Bessent is said to favour higher trade tariffs and lower income taxes, which rhymes with statements by Trump. As a matter of practicalities, we have yet to discover how he intends to evolve to the former from the latter. His position on the budget deficit is not clear. That matter is seen as a matter for a new office, the to-be-created Department of Government Efficiency (DOGE) headed by Elon Musk and Vivek Ramaswamy.

DOGE is intended to work with the Office of Management and Budget to cut government waste and unnecessary regulation. Musk has hinted that he wants to close whole departments, while Ramaswamy has said he wants to cut 75% of the Federal workforce.

This combination of hope, impracticality, and ignorance of the economics of US and global trade will determine the future of the dollar and its value in gold. How will that turn out?