Show Me the Money

Trump’s America First strategy, which fueled his unprecedented election victory, aimed to re-shore American businesses and boost export competitiveness. While this approach may create domestic jobs, there are a number of reasons to assume that aggressive protectionism is an inflationary strategy:

1. Weaker Dollar for Exports – A competitive export market relies on a weaker USD, typically achieved through liquidity injections, which drive prices higher.
2. Falling Demand for U.S. Treasuries – Tariffs reduce trade surpluses with the U.S., limiting foreign purchases of US debt. China, once the largest holder, slashed its Treasury holdings during the last trade war. With $10 trillion in maturing debt this year, the Fed will likely step in via quantitative easing (QE) to absorb the shortfall.
3. Massive Private Sector Subsidies – Despite promises of efficiency, Trump’s policies -tax cuts, deregulation, and subsidies for energy, defense, and agriculture - rely on aggressive spending. Trump is far from a free market advocate.

Yet, despite these inflationary signals, asset prices remain stagnant, and bearish sentiment lingers. Given Trump and Bessent’s strategy is dependent on expanding the money supply, the key question remains:

Where is all the money?

The Public-Private Pivot

The Trump administration is slashing bloated public-sector spending, which previously fueled liquidity flows into markets. With government expenditure at 25% of GDP, this tightening dampens short-term growth but may foster long-term efficiency. Unlike previous administrations that financed “activity” without true “growth,” this shift favors the private sector, where capital allocation is more productive. DOGE is the prime example of this pivot, with major spending cuts preventing money from entering circulation - on the basis that the projects the government were undertaking did not improve the countries growth.

While this transition could trigger a short-term recession, over time, reallocating resources from wasteful government spending to private enterprise should improve the debt-to-GDP ratio and drive sustainable growth. Debt-to-GDP is the measurement of how much of tomorrow has been stolen to try to increase growth today - so attempting to decrease it is a viable strategy for nurturing the countries capital stock.

How Long Will the Stagnation Last?

Though public-sector liquidity is drying up, private-sector spending will soon take over. As discussed last week, the government’s massive refinancing burden will likely force the Fed to resume money printing, with global M2 already creeping up. Expect asset prices to recover by April/May, given the typical lag between liquidity injections and inflation.

Jerome Powell speaks tonight - rate cuts aren’t expected, but any QE signals could shift the timeline.

In the meantime, live life in a surplus and keep stacking sats.