In this video, some rich bros from the All-In Podcast are waxing philosophical about the likely positive impact a Trump presidency will have on markets including the equity and crypto markets. There is the usual narrative about how a lighter touch, deregulatory scheme will create growth in the markets as well as in economic output.
As a former regulator I can tell you that no regulator in general wants to reduce a firm’s or industry’s revenues or profits. In order for the State to maintain itself, the State needs taxes and in order to extract those taxes, the State needs functioning and highly active markets.
The State created the concept of markets in order to incentivize profit-making activity. Visit any developing nation and listen to their political leaders and you will hear their willingness to attract capital or liquidity into their economies. Liquidity will not come knocking on the door if there are no markets within which to trade. Government does the State’s day-to-day dirty work of implementing laws and approving physical infrastructure that meets the State’s public convenience and necessity. Restriction is not a part of the State’s philosophy. An ordered world is.
Former president Trump, if he is to enjoy any longevity or success in his role as president next year needs to understand this and understand it quickly. Deregulated markets will weaken demand for the currency. To me, the strength of the currency is the litmus test of a strong political economy, hence a strong State.
So far, the United States, because of its resources, productive capacity, and potential for continued macro income growth is the cleanest shirt in the global laundry. Constraining the government will result in a contraction in the political economy. Deregulation brings uncertainty not more revenues and profits. Sure, you may reduce barriers to market entry, but should that mean reducing consumer protections or capital requirements? Reducing consumer protections or capital requirements means that those on the buyside of any trade, in securities, commodities, services, or goods may hesitate to engage markets. Why risk running off investors to Asia who may be willing to wait out an improvement in Asia’s deployment of infrastructure?
I do not think the currency will be severely impacted during the initial one or two years of Mr. Trump’s administration. I do see a deregulatory scheme adversely impacting the United State’s political economy during the last two years of the Trump administration and bleeding over into the next administration that takes over in January 2029. The deregulation narrative sounds more and more like low hanging fruit soundbites.
Mr. Trump need not take the left-wing, neo-con approach to expanding the United States. He can maintain and expand the State by ensuring a sound regulatory structure that sustains markets and sustains the currency.
Alton Drew
16 November 2024
Foreign exchange rates per x-rates.com. (10:45 am EST, 16 November 2024)
EUR/USD=1.0541
USD/JPY=154.3461
AUD/USD=0.6461
Administered rates per the Board of Governors-Federal Reserve System.
Effective Federal Funds Rate: 4.58%
Interest on Reserve Balances: 4.65%
Discount Window: 4.75%
Treasury rates per the Board of Governors-Federal Reserve System.
2-yr Treasuries: 4.34%
10-yr Treasuries: 4.43%
Lawyers Write the Bets. Bankers Sell the Bets. 