(Bloomberg) – It sounds too radical to justify even a second thought. That President Donald Trump could force some foreign creditors of the US to exchange their treasury in ultra -long -running bonds to alleviate the country’s debt tax.
Most of them read from Bloomberg
And yet, that is what Jim Bianco has contacted his customers to discuss on Thursday after rumors about a so-called ‘Mar-A-Lago Accord’ started making the rounds.
To be clear, Bianco does not see it happening quickly or never. But in some respects that is next to the point. Trump, he said in non -secure terms, could take on the entire worldwide financial order in the coming four years, and Wall Street must be prepared.
The idea of drastically restructuring the debt tax of America is part of the agenda of the Trump team to renew global trade through rates, to weaken the dollar and ultimately lower the loan costs, all with the aim of the American industry on to set more uniform feet with the rest of the world, said Bianco, a veteran of more than three decades and founder of Bianco Research.
Other elements of the plan are the establishment of a sovereign wealth fund – which has already initiated Trump – and forces the American allies to bear a larger part of the safety expenses.
“You have to start thinking that you have to think big about what is going on here,” Bianco told listeners during about an hour -long webinar. “The Accord of Mar-A-Lago is actually not a thing, it is a concept. In principle, it is a plan to re -make part of the financial system. “
The term ‘Mar-A-Lago Accord’ is a riff on the 1985 Plaza Accord and the Bretton Woods Agreement of 1944, both important milestones in the establishment of the modern global economic system. Each was named after the resorts that they were negotiated about.
Many of the ideas behind the agenda come from a paper of November 2024 by Stephen Miran, the nominee of Trump to lead the White House Council of Economic Advisers. In it, the former Treasury official has laid down a route map for the reform of the global trading system and the removal of economic imbalances driven by ‘persistent dollar robbery’. It also states that “the desire to reform the global trading system and to put the American industry on an earlier land compared to the rest of the world has been a consistent theme for President Trump for decades.”
Bianco said that such views are not necessarily contrary to that of Minister of Finance Scott Bessent, who on Thursday at Bloomberg television said that “the US still has a strong dollar policy.”
What the strategists of Bloomberg say …
“It is time to take the risk that the Trump administration is more seriously orchestrated a weaker dollar. The Trump government has a tendency for daring maneuvers with high deployment. “
– Simon Flint, Macro strategist
Click here for his full comments
That is because although the US can seek a weaker trade weight dollar-a measure of the US currency versus its trading partners-and a way to limit the trade deficit, financial measures of the Greenback, such as the Bloomberg Dollar Spot Index, can strengthen at the same time. That meter has risen 2.3% since Trump’s election profit in November.
“Stephen Miran and Scott Bessent seem to sing a bit from the same hymn magazine,” said Bianco. “The whole idea is hopefully lower the value of the dollar, lowers the value of the interest rates, which reduces the debt tax in the country. And that’s what they are trying to do. “
Bianco, just like Miran’s newspaper, referred to the work of the former Credit Suisse Group AG -Strategist Zoltan Pozsar, who has been calling for a “Bretton Woods III” renewal for several years as part of his theory that the dollar a much less Dominant role in Global will play financing in the coming decades.
An important idea of Pozsar is that other countries have to pay more for the security and stability of the US. A way to do this would be by exchanging some of their treasury in 100-year-old, non-trading zulcoupon bonds. If these countries needed cash quickly, the Federal Reserve could make it temporarily available through a credit facility.
Bianco emphasized that this type of debt change may not actually take place, and if the US would pursue it, it would require considerable international cooperation and possibly influence global financial stability. Federal investors have so far not showed little signs of concern, with the trade in the Treasury market, particularly calm in recent days.
Yet the point is to discuss these ideas with customers to emphasize the size of the potential changes in the store, said Bianco.
“Take them seriously, don’t take it literally,” he said referring to the idea of the change of debt and some of Trump’s radical proposals in general. “If Trump is willing to blow up NATO, why not be willing to blow up the financial system?”
(Adds information from Miran’s Paper in eight paragraph.)
