The dollar remains the world’s reserve currency due to the strength, stability, and security of the US economy, creating constant pressure for its appreciation as global investors seek the most reliable asset. However, a strong dollar harms US industry by reducing export competitiveness, necessitating a mechanism to weaken the dollar and bring manufacturing back to America. This is where the "Mar-a-Lago Accord" may come into play.
Key Points of the Accord:
- The US offers G7 countries, the Middle East, and Latin America military security and access to American markets.
- In return, these countries agree to weaken the dollar and support the growth of US industry.
- Additionally, the accord addresses the national debt issue by exchanging old bonds for new "centennial" US bonds (100-year bonds).
How Does the US Plan to Weaken the Dollar?
1. Tariffs – These will increase budget revenues and protect domestic production.
2. US Sovereign Fund – Purchasing foreign currencies (euro, yen, yuan) for interventions in the forex market.
Key Market Questions:
- How will production change? Restructuring the entire supply chain, excluding - Canada and Mexico from the US auto industry, will take years. Is the US prepared for such a long-term challenge?
- What about inflation? Globalization has kept US price growth in check for decades. But if production returns to America, costs and wages will rise—how much will this fuel inflation?
- Why would the world agree? If the US imposes tariffs and other countries reduce reliance on American markets while increasing defense budgets, what will compel them to support the Mar-a-Lago Accord?