2018 suggests that Trump will interfere with Bessent's inflation hawkishness if it does too much harm to the economy. It is perplexing that Trump is fighting with Powell when they are fairly aligned in their dovishness.
I took away from Green/ Bessent interview that TreasSec has little time for Yellen and Powell. His Jan 'Key Square' investor letter saw them in cahoots to get Biden back. Both surely must be toast? Bessent has plenty of debt to sell near-term but is boxed in until DOGE can fulfil hopes. Hence I figure they act tough on inflation ie get MBS to cut oil prices and keep USD up. Keep printing money, but with fewer or no more rate cuts. He gets it that rate cuts are anyway a weak policy tool.
Your research is excellent. What will happen to Gold in these new conditions “strong dollar”, in your opinion? Lastly, if you think there is a chance of financial crashes occurring before the middle of 2025, do let us know. Thanks
Gold depends upon monetary inflation. Monetary inflation still looks highly likely given fiscal problems. If Trump2.0 are inflation hawks gold may fall back over next few months before a strong rally. But much will depend on how Bessent chooses to fund US debt
There is not alot of debt to be paid anyway, compared to liquidity, much higher since COVID?
Despite what Bessant wants or needs to do, they are not obligated to paid the debt created from last governance? Or are you saying that they will pay, but in a much smoother way?
Since 2000 to now, Gold Matches perfectly the ratio Liquidity/Debt divided by money supply, or the real debt to be paied divided by money in the system, and correlation with DXY: https://ibb.co/xzR83xF
The peak in Gold in 2011, matched perfectly with the bottom and initial growth run in DXY, wich matched perfectly with (USDebt-USM2)/USM2. It seems the same pattern as now.
In your previows analysis, we talked about the "lost decade" of 2000-2010, when Debt grew much more than liquidity. This also ocurred in 1970, and is ocurring now because of COVID stimulus and High Rates that needs to be paid.
We can see this pattern in this image, and the correlation with DXY and Gold: https://ibb.co/3rk5Z7h
You also said, and this essence of liquidity cycles and ISM cycles, that the average maturity of all debt payment/roled over is 4-5 years. Since the maturity in this fase is even shorter, the debt needs to be paid even sooner.
The Ratio Liqiduity/Debt reached its peak in 1970, 1984, 2001 and 2021-2022, wich historicaly was exactly the peak in DXY strength.
This said, i have 2 points and 1 question:
Point 1) All de Debt needs to be paid in next or nexts years, and this time there is Much More debt than normal to be paid (image). And this was exactly what created recessions and DXY to fall of a clif. And this is mandatory because Debt maturity/obligations of refinance every 4 years.
Point 2) DXY can´t grow much more from here, despite the inflows in USD, because there are a top limit to how much inflows can come to the US.
Question: Because of said, my question is that in next year or 2 years the DXY will fall to 90 or even lower? And BTC and Gold will have a performance like 2000-2010. Even despite everything that Trump, Musk and Bessent can do? Because Trump and Musk only can reduce the Government Expenditures, bringing them closer to Govnerment Recipies. But they cannot not pay debt, right?
Thank you very much. I think dis discussion is very important! Thank you for your amazing work!
The US$ is currently key to everything. Trump fooled us all by talking of 'weak $'. Too many are focused on whether BTC will hit $100k and missing the bigger picture. Capital flows are shifting to US. Bessent is starting from a bad place, but he both needs to maintain liquidity and keep inflation down. I think he might pull that off by funding at short end like Yellen, so monetizing, while keeping $ high (and oil low). To do that he needs a hawkish Fed Chair...bye bye Powell?
The DXY can rally as a result of USD falling at a lesser pace than the constituents. Whilst the logic is understood, if there is persistent monetary inflation in the US (and rates do not react to it), is it likely the USD will still be depreciating against Gold (and possibly BTC)?
Absolutely. Long term still favours gold and BTC. Monetary inflation isn't going away and Bessent may have to double-down on Yellen's use of short end funding, but will need to ditch Powell if he does. Markets may realise that Bessent is an inflation hawk and needs Fed to get ahead of the curve. This may cause gold and BTC to sell off near term but that would be great buying opportunity.
Thanks Michael. Sounds like Bessent has to walk a very fine line. On the one hand I read there is $10 trillion of US govt debt to rollover in 2025 and, on the other, 10-year USTs @ 5% or more leaves a massive hole in US banks' capital. What chance he needs the Fed (under Powell or someone else) soaking up some of this?
Listen to the Bessent interview with Mike Green from September. He sounds to me an inflation hawk. The best way to sell US debt is bis a hard money Fed Chair. This would not preclude more 'notQE, QE' or 'notYCC, YCC'
2018 suggests that Trump will interfere with Bessent's inflation hawkishness if it does too much harm to the economy. It is perplexing that Trump is fighting with Powell when they are fairly aligned in their dovishness.
I took away from Green/ Bessent interview that TreasSec has little time for Yellen and Powell. His Jan 'Key Square' investor letter saw them in cahoots to get Biden back. Both surely must be toast? Bessent has plenty of debt to sell near-term but is boxed in until DOGE can fulfil hopes. Hence I figure they act tough on inflation ie get MBS to cut oil prices and keep USD up. Keep printing money, but with fewer or no more rate cuts. He gets it that rate cuts are anyway a weak policy tool.
We should expect to see Kevin Warsh back on the FOMC soon?!
Thanks for this analysis Michael
The upcoming cage match between Chairman Powell and Treasury Secretary Bessant may create enormous volatility
Supposedly Bessant is an old European money plant and Chairman Powell is old money Puritan strain
USA lost that battle in 1913
Just my opinions
Powell trying to restore pre 1913 financial freeing it from the European old money banking families hence death of LIBOR
Trump was a debtor to European banks
It’s interesting
Will be an interesting cage match
Hi Michael,
Your research is excellent. What will happen to Gold in these new conditions “strong dollar”, in your opinion? Lastly, if you think there is a chance of financial crashes occurring before the middle of 2025, do let us know. Thanks
Gold depends upon monetary inflation. Monetary inflation still looks highly likely given fiscal problems. If Trump2.0 are inflation hawks gold may fall back over next few months before a strong rally. But much will depend on how Bessent chooses to fund US debt
There is not alot of debt to be paid anyway, compared to liquidity, much higher since COVID?
Despite what Bessant wants or needs to do, they are not obligated to paid the debt created from last governance? Or are you saying that they will pay, but in a much smoother way?
Since 2000 to now, Gold Matches perfectly the ratio Liquidity/Debt divided by money supply, or the real debt to be paied divided by money in the system, and correlation with DXY: https://ibb.co/xzR83xF
The peak in Gold in 2011, matched perfectly with the bottom and initial growth run in DXY, wich matched perfectly with (USDebt-USM2)/USM2. It seems the same pattern as now.
What do you think Michael?
Hello, Michael. Thanks for the analysis.
In your previows analysis, we talked about the "lost decade" of 2000-2010, when Debt grew much more than liquidity. This also ocurred in 1970, and is ocurring now because of COVID stimulus and High Rates that needs to be paid.
We can see this pattern in this image, and the correlation with DXY and Gold: https://ibb.co/3rk5Z7h
You also said, and this essence of liquidity cycles and ISM cycles, that the average maturity of all debt payment/roled over is 4-5 years. Since the maturity in this fase is even shorter, the debt needs to be paid even sooner.
The Ratio Liqiduity/Debt reached its peak in 1970, 1984, 2001 and 2021-2022, wich historicaly was exactly the peak in DXY strength.
This said, i have 2 points and 1 question:
Point 1) All de Debt needs to be paid in next or nexts years, and this time there is Much More debt than normal to be paid (image). And this was exactly what created recessions and DXY to fall of a clif. And this is mandatory because Debt maturity/obligations of refinance every 4 years.
Point 2) DXY can´t grow much more from here, despite the inflows in USD, because there are a top limit to how much inflows can come to the US.
Question: Because of said, my question is that in next year or 2 years the DXY will fall to 90 or even lower? And BTC and Gold will have a performance like 2000-2010. Even despite everything that Trump, Musk and Bessent can do? Because Trump and Musk only can reduce the Government Expenditures, bringing them closer to Govnerment Recipies. But they cannot not pay debt, right?
Thank you very much. I think dis discussion is very important! Thank you for your amazing work!
The US$ is currently key to everything. Trump fooled us all by talking of 'weak $'. Too many are focused on whether BTC will hit $100k and missing the bigger picture. Capital flows are shifting to US. Bessent is starting from a bad place, but he both needs to maintain liquidity and keep inflation down. I think he might pull that off by funding at short end like Yellen, so monetizing, while keeping $ high (and oil low). To do that he needs a hawkish Fed Chair...bye bye Powell?
But Powell cannot be fired
Has till Jan 2026 I read
So let the fight begin
Hi Michael
US needs to renovate the whole infrastructure. Therefore needs lower rates for funding.
Also check out Bessent’s fund latest outlook https://www.scribd.com/document/703023305/Key-Square-January-2024-Letter?utm_source=substack&utm_medium=email
They expect USD to strenghten at the end of Trump term.
Best Regards
Michael, where is the latest U.S. debt monetization chart you published (% of 12m change in U.S. M2 from U.S. Treasury Securities)?
The DXY can rally as a result of USD falling at a lesser pace than the constituents. Whilst the logic is understood, if there is persistent monetary inflation in the US (and rates do not react to it), is it likely the USD will still be depreciating against Gold (and possibly BTC)?
Absolutely. Long term still favours gold and BTC. Monetary inflation isn't going away and Bessent may have to double-down on Yellen's use of short end funding, but will need to ditch Powell if he does. Markets may realise that Bessent is an inflation hawk and needs Fed to get ahead of the curve. This may cause gold and BTC to sell off near term but that would be great buying opportunity.
Thanks Michael. Sounds like Bessent has to walk a very fine line. On the one hand I read there is $10 trillion of US govt debt to rollover in 2025 and, on the other, 10-year USTs @ 5% or more leaves a massive hole in US banks' capital. What chance he needs the Fed (under Powell or someone else) soaking up some of this?
Amazing! correlated with my question!
Listen to the Bessent interview with Mike Green from September. He sounds to me an inflation hawk. The best way to sell US debt is bis a hard money Fed Chair. This would not preclude more 'notQE, QE' or 'notYCC, YCC'