Has a capital escape from the USA? The effect of the Trump-Powell war and the signals of the distrust of the markets

It is possible that America, the largest and most advanced economy of the world, the broadcaster of the dominant coin in the international system, is hit by a capital escape?

Until yesterday, up to attacks and threats of dismissal by Donald Trump against The president of the Federal Reserve Jerome Powelleven just to look out such a hypothesis seemed unrealistic. But with gold at the record of $ 3,500 the ouncea 39.55% evaluation of evaluations between the American bag (S&P500) and the yellow metal since Trump returned to the White House and a fall of the dollar in full acceleration, The question begins to become inevitable.

It was difficult to foresee it, at least until some time ago. International capital leaks are a typical phenomenon of globalization of the last 40 yearssince financial flows circulate freely through national borders from one market to another and from one coin to another. But they seemed limited to the second and third band countries. For decades these phenomena have only been seen in emerging countries such as Asian tigers in 1997 (the crisis of Thailand, South Korea, Philippines and Indonesia), Russia in 1998 and in various countries of Latin America for all 90s. In reality also Italy and Great Britain had shown phases of great vulnerability During the crisis of the European Monetary System in 1992 and, in different form, in the 70s. Then, after Lehman Brother’s crashinternational capital have come out with growing violence from Greece, Portugal, Ireland, Spain and Italy itself.

Today they are not moving, even remotely, in an equally impetuous way. But The outflow of capital from the United States is quickcontinuous and visible. From the beginning of the second presidency of Donald Trump, The dollar lost 10.16% on the group of the other main currencies of the international system and its Low movement shows an acceleration this month: since the White House has announced its duties and Trump himself has started to attack the Fed, trying to blame the economic slowdown coming to its president Jay Powell. He said the other day, At the time of Giorgia Meloni’s visit: «I’m not satisfied with his work and let him know. And if I want it to go, it will be really quickly out. « 

Market response: The dollar accelerated its descent and gold has always reached new records. Its price has grown by 13% only in the last week, reporting that Investors are on the hunt for new alternative refuge assets to the green ticket and American government bonds (whose price in fact tends to drop in these weeks). After all, the new attacks by Trump in Powell yesterday aroused the same reactions.

Why don’t the markets trust? The Trump administration has no credible to the return and debt return plan, indeed it promises to enlarge both with its program of new tax cuts. But The United States treasure only in 2025 must issue new titles for two thousand billion dollarsin addition to having to renew for eight thousand billions of dollars among those expiring. The central banks of some of the countries affected by duties (China, but also Japan) could be reluctant to renew part of their American debt investmentsat the expiry of the titles that today hold hundreds of billions of dollars.

In this context, in the attacks and threats to the Fed The market sees the risk of a political bank control by Trump by Trump and forced monetization of the debt (i.e. purchases of securities by the central bank). It would be more inflation and a further devaluation of the dollar. Therefore investors do not wait: they sell and seek alternative refuge assets in Europe or gold.

Because of this, The current creeping capitals that affect America and its bag will not stop. Not until Trump stops his assaults on the Federal Reserve and gives more rationality to his economic policy. For now his promise that commercial wars « are easy to win » seems very far from the truth: The cards he has in his hand – to put it in its language – they become weaker every day that passes.