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Yahoo
28-07-2025
- Business
- Yahoo
Donald Trump will birth a ‘golden age' for Bitcoin at the expense of the dollar
Wolfgang Münchau is a columnist for DL News. He is co-founder and director of Eurointelligence, and writes a column on European affairs for UnHerd. Opinions are his own. Probably the most under-reported economic story of our time is the strong appreciation of the euro against the dollar. While the Bitcoin prices rose 26% in dollar terms this year, it was up only 13% in euros. People fret about Donald Trump's tariffs, but the exchange-rate supercharges the tariffs. If a US buyer imported a product from the EU at a cost of $1.03 at the beginning of the year, it now costs $1.16 net of tariffs. Add a 10% tariff, and you are at $1.28. If the tariff were 30%, the rate determined by Trump to take effect August 1, the price goes up to $1.47. That's almost 50% up on the year. And for the Europeans it gets worse. Because China has soft-pegged the renminbi to the dollar, the EU is hit by a double-whammy exchange rate shock from its two most important trading partners. After Trump imposed his tariff on China, Chinese goods started flooding the European markets in April and May. Because of Chinese dominance of rare earths, there is only so much the Europeans can do about this. If they hit the Chinese too hard, Beijing will cut them off from essential supplies for their industries. 'Seismic shift' What's happening is a seismic shift in US economic policy similar to what happened in 1971. President Richard Nixon's 'new economic policy' included a 10% unilateral tariff on imports, a 10% cut in US foreign aid, and the dollar's withdrawal from the Bretton Woods system of semi-fixed exchange rate. The parallels are almost one-to-one. After the US extricated itself from Bretton Woods, the dollar depreciated. The Europeans, and the Germans in particular, protested, but there was nothing they could do about it. Again, it looks like history repeating itself. The brain behind the 1971 operation was not Nixon himself, but his treasury secretary, John Connally. And this is the main difference to today where the driving force is the president. What is also different is that the trading partners, and especially Europe, are in a more vulnerable position. Germany is more reliant on exports for economic growth than it was back then. It has a higher trade surplus against the rest of the world, and especially against the US. Trump's policies pose an existential threat for them. And for the EU as well, since their economic model critically depends on Germany. Recalibrating the world economy The Europeans could have put themselves in a more advantageous position, had they created a fiscal and capital markets union alongside the euro. That would have the euro on a trajectory where it could one day take over from the dollar as the world's leading global currency. But instead, EU member states chose to prioritise national fiscal sovereignty. The Europeans did not prepare themselves for a financial world without the support of the US. As was the case in the early 1970s, the fall in the dollar, and the rise in tariffs together form part of a programme that will end up recalibrating global trade and financial flows beyond what anyone would imagine. While all eyes are focused on the tariffs, the dollar devaluation is the far more consequential part of the policy. My expectation is that we are only at the beginning of this change as the US is losing the safe-haven status for global investors. All the evidence so far points that Trump pursues dollar devaluation on purpose. Section 899 of his One Big Beautiful Bill would have been a revenge wealth tax on global investors. It has now been removed. But ask yourself: why did they put this clause into the bill in the first place? Why is Trump taking every opportunity to insult Jerome Powell, the chair of the Federal Reserve? Why does he keep calling on the Fed to cut rates by hundreds of basis points? You would not do that if you wanted a strong dollar. And you would certainly not draw up the One Big Beautiful Bill with its unfunded tax cuts. The independent Congressional Budget Office estimated that the budget plan would increase the debt-to-GDP ratio of the US to 124% from 100% by 2034. In that period, the annual interest costs would double to 4.2%. The annual deficit would be running at 7%. If you truly cared about the dollar, you would not pass a budget like this, talk about firing the central bank chief, or try to sneak in a wealth tax on global investors. 'Undermining the dollar' The Trump administration's undermining of the dollar is not a bug. It's a feature. Trump is a Mercantilist — just as the Chinese and the Germans were before them. He wants a manufacturing-based economy. You would be mistaken to think, as virtually all macroeconomists do, that this attempt is bound to fail. We can debate whether this is a good idea or not. But it will happen. If you create the right incentives, anything can happen. Trump is winning. He is not chickening out. And that's hard for his opponents to admit. He needs the tariffs because he needs the money to fund his deficit. It's as simple as that. There is no higher purpose behind the tariffs. Trump is not concerned about global imbalances. This is the stuff people like me talk about, perhaps too much. For Trump, it's just the money. When I recently predicted in a DL News column that crypto and gold would enter a golden age, this is the scenario that is behind it — a White House that is dead serious about weakening the dollar. China has capital controls. It is aeons away from offering similar services. So is the euro. A world in which the dollar is simultaneously debased and without competition is the most fertile environment for cryptocurrencies. They can thrive through two independent channels: directly, as a store of value and indirectly through stablecoins. Dollar stablecoins appear to be the only ones with a chance to prevail in online payments systems. You can describe a stablecoins in many ways. I look at them as financial derivatives whose underlying security are US treasury bonds. If and when the dollar debases, so will stablecoins by definition. As a store of value, they will be as useless as the dollar. I would not touch them as an investment, but they are a potentially important transaction currency. During a meeting of international finance ministers in 1971, Treasury Secretary John Connally told his colleagues: 'The dollar is our currency, but your problem'. That was 54 years ago. It is still true today. Errore nel recupero dei dati Effettua l'accesso per consultare il tuo portafoglio Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati
Yahoo
03-03-2025
- Politics
- Yahoo
UK, France scramble to draft peace plan for Ukraine as US support falters
French President Emmanuel Macron and British Prime Minister Keir Starmer have taken the lead on developing a peace plan for Ukraine as both leaders seek to act as intermediaries between Kyiv and Washington after Friday's Oval Office meltdown between US President Donald Trump and Ukraine's Volodymyr Zelenskyy left future American support in doubt. How much progress has been made is unclear: Macron has suggested an initial month-long ceasefire, but a British official appeared to rebuff the idea. The scramble follows a pledge from Kyiv's European allies to ramp up defense spending as the continent confronts the security implications of the Trump administration's embrace of Russia: The US has ceased all cyber offensives targeting Moscow, as a Kremlin spokesperson said that Washington's shift 'largely aligns with our vision.' The pre-planned Sunday meeting between European leaders took on urgency after Friday's White House debacle, but it ultimately delivered 'plenty of promises but few concrete answers,' Politico wrote. British Prime Minister Keir Starmer urged Kyiv's allies to create a 'coalition of the willing' to support Ukraine and bolster Europe's collective security, but promised increases in defense spending will take time to have any measurable effect. If the US pulls back now, 'there is no road to victory for Ukraine,' Wolfgang Münchau, director of Eurointelligence, wrote in Unherd, arguing that the European Union and the UK are both structurally and economically incapable of funding a fight against Russia that ends with any measure of success. To signal otherwise, Münchau added, was as 'dangerous' as it was 'laughable.' US President Donald Trump and Ukrainian President Volodymyr Zelenskyy's disastrous exchange on Friday could prove the 'hinge point of history' for US-European relations, The Washington Post's global affairs columnist Ishaan Tharoor wrote. The argument 'laid bare the deepening rift' between Europe and Trump. Under the Biden administration, the 2022 invasion of Ukraine had been a 'galvanizing moment' for the West, with the US surging support for Kyiv, enabling Ukraine to fight back for longer than Moscow had imagined possible. Now, the Trump administration seems poised to suspend military and other aid to Kyiv, even as Europe scrambles to belatedly bolster its defenses and Russia continues its bombardment of Ukraine. As the Trump administration seems poised to further embrace Moscow, some Republicans remain wary of potentially undoing decades of foreign policy hegemony and security measures against Russia. After the US sided with Russia in a United Nations vote on Ukraine, Senate Armed Services Chair Roger Wicker, R-Miss., told Axios that 'clearly, Putin's Russia is the aggressor,' while Sen. Susan Collins, R-Maine, condemned the vote as 'shameful.' Others, however, are supportive of a quick end to the Ukraine war so that the US can better challenge China. That 'logic is deeply flawed,' a Russia expert wrote for Foreign Policy: China and Russia are so close that to convince one to abandon the other, 'the price would have to be exceedingly high.'
