The spectrum of dollar doomsday is still approaching

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In 2019 I wrote a column about the next “Dollar Doomsday’s stage” in which a fundamental change in globalization and towards a post-Bretton Woods system would lead to both the value of the US dollar assets and the dollar. This would increase the yields of bonds, as well as the price of gold and several foreign coins.

And here we are. The S&P can increase and fall into the daily changes of President Donald Trump, but the matrix for a new age has been launched.

Although I have never been excellent in predicting the calendar of the great changes in the market, of immigrant son, I usually risk too early, I have a strong worldview. I am quick to the idea that the whole paradigm to invest is changing and that the rebalancing away from the United States market is important. This will be the case with or without a trade war.

Although Kamala Harris was in charge today, we would be in a world of post-washington consensus (Biden’s White House said so much). We would also go, though slowly than we are now, to a multi-polar world in which dollar and dollar assets are no longer the only game in the city.

Few major investment stories have been maintained for more than a decade and the United States has long been on the top. The highly financial, concentrated and debt -based model that says it is used in ways that go beyond Trump and its old ones.

I would point out three fundamental issues, based on excessive confidence in asset -based economic growth. Almost all the main economic decisions of the United States last half a century sought to strengthen the prices of assets: from the deregulation of interest rate in the late 1970’s to the legalization of the actions rewards to the “performance remuneration” of the Tax on Shares, which created the richness of the massive paper of Silicon Valley.

Trump and his auxiliaries talk about how Main Street does not mind the prices of shares. But the fact that the growth in assets prices has exceeded the growth of such wild income means that we all trust the capital markets.

Exposure of American households to actions is nearly a maximum of all time (mutual actions and funds represent 26 percent of the total number of home assets), which involves much more vulnerability to any fall in the market, both for people and for the general economy.

He believes that since 1995, “actions have become the marginal driver of the United States federal fiscal receipts,” according to a January presentation by the analyst Luke Groma. “If stocks fall too far and remain, the expenditure of North -American consumers and GDP will come into recession, sending deficits,” he writes. This would come at a time when inflation is still a concern and risk premiums that investors demand for U.S. assets increase.

Or not rates, most analysts believe that there is a prices of prices for the largest actions in the United States. North -American stocks are still overrated in relation to their peers. And the latest FMI financial stability report labeled a great risk to world markets.

Another important concern I have on North -Americans are the strong increase in debt and the leverage of the private sector in recent years. Corporate loans for private credit markets have been booming, especially companies that would have been considered too risky for bank loans.

Many of the private credit funds made by loans have dates of maturity, that is, a period in which they can no longer drag loans, which will occur between now and 2027.

As Corey Frayer, a former Sec of the Sec of Financial Stability and now Director of Protection of the Investors of the Consumer Federation of America, he says: “If you had a fall in the business environment while there is a large number of private credits, you may be able to see several failures.”

This could end the bank bankruptcy, but the problems in the formal banking sector, which is much more exposed to non -banks than in 2008, when the world financial crisis broke out.

The last point to worry about the introduction of an additional risk to the United States financial system in the form of a cryptocurrency, at a time when the Trump administration has adopted a lax attitude towards the regulatory application, actively cut the staff of the Securities and Exchanges Commission and has erased the consumer’s financial protection office.

Republicans and Democrats have supported the law of the genius, which would open the floods to the use of crypt in the real economy, amplifying the risks previously established.

The Biden government was already forced to support the Crypto Platform Circle when Silicon Valley Bank failed. The new legislation, which recently approved the initial obstacles in both the Senate and the House of Representatives, would encourage the most formal and informal players to enter Crypt, which is, of course, an area that both President Trump and his consigliere Elon Musk are of interest.

It does not necessarily predict that a corporate debt or a crisis of liquidity fueled by Crypt will demolish the US economy, although I would not be surprised that the next financial crisis came from these areas. Rather, my point is that it is not necessary to believe that a trade war is imminent to see that the markets of North -American assets are increasingly risky and are still expensive. Added to this is the confidence deficit created by Trump, and I would say that the stage of Dollar Doomsday still has space to run.

RANA.FOROHAR@FT.com