Understand what Trump 2.0 is trying to engineer is a Financial RESET, and he has already announced it would involve Short Term Pain.
What does he want to achieve?
1. Reduce US interest rates
2. Reduce US debt and/or make it more sustainable
3. Reduce inflation
4. Reduced trade imbalances
5. Increase FDI (foreign direct investment) and onshoring
6. Lower the value of the US dollar
How is able to achieve them, through what means
1. To force the Fed's hand to reduce rates, engineer a slow down despite risking tipping US into a recession, by cutting jobs, tariffs would introduce deflationary forces (as prices rise, or consumers wind back), and causing the stock market to fall to remove animal spirits and weaken consumer confidence
2. An austerity programme combined with lower interest servicing when rates are cut will usher more US debt level sustenance, despite causing economic pain across all levels of the US economy. And via coercion to force creditor nations to swap their holdings of maturing US Treasuries with zero coupon gold backed US paper with longer tenure
3. The engineered deflation that tips the US into a recession would help push inflation down via demand destruction but any tariff wars that creeps into supply chain shocks could increase stagflationary risks
4. Via forced tariff hikes on other nations
5. A longer term prospect/hope if what Trump 2.0 does, does not alienate allies into FDI retreat
6. The next phase of the Reset is getting collective agreement for the US dollar to be much lower to improve US competitive position, some form of capital control could be instituted
Whatever your political inclination is, understand the agenda for what is it.
Trump 2.0 agenda of Reset will cause large economic and correspondingly market pain domestically in the US and across the board, that has just only begun. All designed to avoid the 'kick the can down the road' path that prior policy makers had undertaken. The reason why kick the can policies were adhered to was the fear of a massive economic crash that could follow any such reset. For America, it was always the case of 'dying' sooner or 'dying' big later, and no politician before Trump would be prepared to take on such political suicide.
You may well agree with this agenda as necessary, but even if Trump 2.0 could pull it off to try the unimaginable, some would call it patriotic, many lives, businesses, investors and countries would be upended in probably the biggest shock to come from an America falling into economic abyss.
The short term pain could be so great that the long term gain that people thought would come to offset it is not what they thought- the long term gain is merely to reposition America to a path of sustained economic well-being that is not dogged by an increasing debt problem. In its pursuit to avert an eventual financial Armageddon if it does nothing, Trump 2.0 risks a GFC 2.0 type recession that you won't thank him for.
