MacroVoices #467 Jim Bianco: The Mar-a-Lago Accord
What this covers
Erik Townsend and Patrick Ceresna welcome Jim Bianco to MacroVoices. Erik and Jim discuss:
Trump’s National Debt Plan Tariffs and Sovereign Wealth Fund Global Trade & Security US Debt Crisis Role of Bitcoin in The Government
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Jim Bianco argues the Trump administration has a coordinated three-part plan (tariffs, a sovereign wealth fund, and debt restructuring via a security arrangement swap) to address the $36 trillion national debt through bold geopolitical and financial reordering analogous to Bretton Woods, rather than ad-hoc policy.
- Steven Mnuchin, Zoltan Pozsar, and Scott Bessent have coordinated on a multi-pronged strategy detailed in Mnuchin's November policy paper
- The plan involves revaluing US assets (gold, Bitcoin), establishing a sovereign wealth fund, and forcing NATO allies to swap interest-bearing treasuries for zero-coupon century bonds in exchange for security guarantees
- This represents a fundamental renegotiation of the 80-year post-WWII security arrangement, with potential deflationary or inflationary outcomes depending on whether nations accept the deal or fragment
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A sovereign wealth fund for a debtor nation (as opposed to creditor nations like Norway or Saudi Arabia with oil revenue streams) would necessarily function as a leveraged hedge fund, borrowing money to invest in assets expected to outperform the borrowing rate, which creates the problem of forcing citizens to absorb higher interest rates to fund speculative government investments.
“you know leaving aside whether or not the the the government running a leverage hedge fund borrowing to buy Tik Tok borrowing to buy this borrowing to buy that is a is necessarily a smart idea you know and leaving off this side idea of the fact that maybe they get it wrong and we just get a bad manager and they make bad decisions and they wind up losing money you're going to subject the public which is already complaining about high interest rates to don't worry we have to borrow more money Drive interest rates even higher but don't worry the government's going to make a lot of money off of this and they're thinking to themselves fine but I got a mortgage I got to pay at the end of the month”
A Bitcoin reserve (backing the dollar with Bitcoin like gold reserves backed the dollar pre-1971) would create excessive volatility because the Federal Reserve cannot control Bitcoin's price, making it economically inappropriate—unlike a sovereign wealth fund that simply holds Bitcoin as an asset.
“what a reserve means is that you're backing the US dollar which is a pure fiat currency by something like gold reserves or in this case Bitcoin reserves we don't back the Dollar by any reserves we back the Dollar by the full faith and credit of the United States government... if we were to start to back it by something the idea that the Federal Reserve or the treasury Department would buy Bitcoin and say that every dollar in your pocket has some percentage ownership of Bitcoin could make it extraordinarily volatile because as the price of Bitcoin gy rates around so would the value of that dollar in your pocket and the US Treasury of the Federal Reserve has no ability to control the price of that Bitcoin”
Government spending and economic activity, even if inefficient or fraudulent, correlates with and contributes to measured GDP growth; therefore, DOGE-style government waste elimination could reduce the deficit but also reduce measured growth, creating a trade-off between deficit reduction and growth.
“the good news is they'll bring down the deficit they'll bring down the borrowing costs as well the bad news news is hate to say it but you could say that there's a strong correlation between government spending and growth in the United States and even if that is spending that is being done fraudulently it is still economic activity and it might be inefficient economic activity and I agree that longer term it's not good but shorter term that could be you know have profound implications on the government as well”
There are legitimate ownership claims on some of the seized Bitcoin that the Justice Department holds, and transferring it to a sovereign wealth fund without resolving those claims would amount to extrajudicial seizure without due process of law
“I don't think that means they own it uh so far as I know there haven't been any uh judicial actions that that you know the government has successfully seized the ownership of those Bitcoins because the a court of law decided that whoever used to own them doesn't own them anymore I I thought those were just seized assets that were in evidence so to speak that uh we're not sure who owns them but it's not the US government wouldn't it amount Jim to essentially an extrajudicial uh seizure of of assets without due process of law”
The host argues that transferring seized Bitcoin from the Department of Justice to a sovereign wealth fund without resolving the ownership question would constitute extrajudicial seizure of assets without due process, potentially violating constitutional protections and creating liability if original owners later emerge with valid claims.
“wouldn't it amount Jim to essentially an extrajudicial uh seizure of of assets without due process of law for them to say hey those are ours now and we're going to make them part of our Sovereign wealth fund”
Bitcoin cannot function as a store of value or hedge against fiat devaluation while also seeking government backing and adoption, because its purpose is to be independent of governments, not captured by them
“if you think it's supposed to be something different a store of value protect you against Fiat currencies and all that other stuff it can't if you're at bended knee begging the very organizations that C the problem in the first place the treasury the fed the government to be the buyer to push it up for you in the first place you're supposed to be the alternative to them not be captured by them”
Backing the US dollar with Bitcoin (as a 'Bitcoin reserve') would make the dollar extraordinarily volatile because the Federal Reserve and Treasury cannot control Bitcoin's price, so fluctuations in Bitcoin's price would directly translate into fluctuations in the dollar's value, which is inappropriate for a reserve currency
“what a reserve means is that you're backing the US dollar which is a pure fiat currency by something like gold reserves or in this case Bitcoin reserves...if we were to start to back it by something the idea that the Federal Reserve or the treasury Department would buy Bitcoin and say that every dollar in your pocket has some percentage ownership of Bitcoin could make it extraordinarily volatile because as the price of Bitcoin gy rates around so would the value of that dollar in your pocket and the US Treasury of the Federal Reserve has no ability to control the price of that Bitcoin it's not a good idea for them to go that route”
If Trump's plan succeeds in lowering the dollar's value, the resulting currency devaluation would make US exports more competitive in global markets, which is presented as one intended outcome of the maralago Accord
“the dollar would fall in value it would become less valuable but that's what we want it would make our exports more competitive and so that is part of the B bigger hole of what they want out of this program”
The government's balance sheet omits approximately $200 trillion in unfunded liabilities from Social Security and Medicare, which means the true national debt is closer to $236 trillion rather than $36 trillion when accounting for these long-term obligations
“the government's balance sheet also does not uh realistically account for the entitlement obligations of about $200 trillion between Social Security and Medicare and so forth if you look at the unfunded obligations if you were to say let's do the honest thing and recognize that that is in fact a li ility and let's account for that liability on balance sheet that would take your $36 trillion national debt to about 236 trillion”
The historical decade of the 1970s featured stagflation with CPI averaging 7% over the decade (not 20% as commonly remembered, with 20% being the peak), and current restructuring could lead to similar 3-4% inflation (not 1970s-level inflation) due to improved international trade barriers and corporate communication compared to the 1970s
“remember in the 1970s the barriers to International Trade were huge you know as the the old joke used to be you know a six-hour drive throughout Europe you would have to change languages four times in five currencies and go through five different completely different sets of rules on how a company would operate that's not the case anymore in Europe...the entire decade of the 70s CPI averaged 7% I know we all think it was 20 it was 20 at its peak but it averaged seven”
The Doge initiative (government waste reduction/efficiency) could cut $1-2 trillion from the budget, which would reduce deficits and borrowing costs in the short term, but could also reduce economic growth because there is a strong correlation between government spending (even fraudulent/wasteful spending) and GDP growth
“does Doge actually deliver on the promise of cutting a trillion or two trillion dollars out of the budget because of fraud waste and abuse the good news is they'll bring down the deficit they'll bring down the borrowing costs as well the bad news news is hate to say it but you could say that there's a strong correlation between government spending and growth in the United States and even if that is spending that is being done fraudulently it is still economic activity”
A creditor nation with currency surpluses (like Norway, Abu Dhabi, Saudi Arabia) rationally creates a sovereign wealth fund to manage excess foreign currency reserves and make productive investments; the United States is a debtor nation running deficits, and there is no conceptual sense in which a debtor nation with no surplus wealth would create a sovereign wealth fund
“what a sovereign wealth fund is is for a creditor nation in other words a nation that is actually in possession of wealth the Arab Oil States for example the the Saudis have uh what they call the public investment fund... the idea is they've got a lot of wealth left over from selling their oil what are they going to do with it they have a fund to structure their Investments it it doesn't make any sense to me to say that the biggest detor nation in the history of the world would have any use whatsoever for a sovereign wealth fund”
The host argues that the US hasn't been providing free military protection to NATO—there has always been a 'massive quid pro quo' where other nations tolerate US geopolitical dominance and unilateral decision-making in exchange for security, so reducing that protection without reducing US global authority doesn't make sense.
“what I would say is there's always been a massive quid pro Pro the way this has worked is that we the United States of America act like Global dictators we tell the rest of the world what they are and are not allowed to do because we're the global police force and we're in charge of everything and we're going to tell everybody else what to do the rest of the world puts up with that and doesn't object to the fact that the United States has no legal jurisdiction or authority over anybody outside of its own borders why do they put up with that because they need that protection”
Populist and right-wing parties are gaining strength across Europe (Ellis Waigel/AfD in Germany, Nigel Farage/Reform in UK, Le Pen/National Rally in France) and could be receptive allies to Trump's geopolitical restructuring if it offers them anti-immigration cooperation and favorable terms for reducing their military spending burden.
“you've got it's Ellis wagel in afd in Germany it's Nigel Ferrar in the UK in the Reform Party it's Le Pen with national rally in France you've got a lot of the farri parties that are pushing along those same line in Europe they want it be anti-immigration that they might find an ally in a guy like Trump”
The US balance sheet is hiding massive unfunded liabilities in Social Security and Medicare (approximately $200 trillion) which are not carried as official debt but should be recognized, making the actual fiscal position much worse than $36 trillion headline debt.
“the government's balance sheet also does not uh realistically account for the entitlement obligations of about $200 trillion between Social Security and Medicare and so forth if you look at the unfunded obligations if you were to say let's do the honest thing and recognize that that is in fact a li ility and let's account for that liability on balance sheet that would take your $36 trillion national debt to about 236 trillion”
The sovereign wealth fund proposal involves taking unrealized accounting gains (such as the increase in gold value from $42 per ounce historical book value to current market prices) and creating the appearance of new assets without creating actual economic value or wealth
“if you say well look we didn't get any new gold we just took the gold that we already had we're going to Market to Market and uh all a sudden it seems like we've made some money well you didn't make any money you had an unrealized gain that you've now realized”
The interview's central claim about the Mar-a-Lago Accord is itself contested and speculative—the host raises concerns that even if it succeeded economically it would represent an erosion of US commitment to international rule-based order and create geopolitical instability
“I don't think that's true at all what I would say is there's always been a massive quid pro Pro the way this has worked is that we the United States of America act like Global dictators we tell the rest of the world what they are and are not allowed to do because we're the global police force and we're in charge of everything and we're going to tell everybody else what to do”
Justin Trudeau was caught on a hot microphone stating that Trump was serious about making Canada the 51st state, not trolling, indicating that Trump's geopolitical ambitions (Greenland, Canada, Gaza) are part of a coherent larger strategy, not mere showmanship.
“Justin Trudeau was caught on a hot mic talking to Business Leaders in Canada saying no Trump is not just trolling when he says he wants Canada to be the 51st state he's serious that he wants Canada to be the 51st state”
Trump has signed over 200 executive orders in his first three weeks in office, but these were not improvised after winning the election; they were planned over the four years he was out of office, indicating a coherent long-term strategy rather than reactive improvisation
“Trump has signed over 200 executive orders in his first three weeks he didn't think those up after he won the election he thought those up over the last four years so this is all part of the bigger plan that he's got going right now”
Core CPI has been above 3% for 45 consecutive months, despite the Fed's claims of commitment to a 2% target, indicating that an era of elevated inflation has already arrived and may persist
“core CPI has spent over 45 months above 3% 45 consecutive months above 3% and they still keep talking about it going to 2% they can't get below three right now let alone it going below two over four almost four years now that it's been that way that we are in an era of higher inflation”
Trump has mentioned that the Fed's current chair Jay Powell and other officials may need to be replaced, with Kevin Warsh being floated as a potential next Fed chairman who would be more receptive to the debt restructuring idea and lending facility concept
“will the Federal Reserve go for it that's why Trump has been bashing or one of the reasons why he's been bashing uh J Paul and the name Kevin warsh keeps popping up that that you know could be the next fed chairman and he's very open to this kind of idea”
Trump is not just trolling about acquiring Greenland, Canada as the 51st state, Panama, or Gaza; he is serious about using the power of the United States to extract concessions and he has explicitly stated he believes other nations cannot refuse him (when asked about Palestinians refusing US takeover of Gaza, he said 'they won't say no to me')
“there's been this idea that maybe those assets could go part you know they already they're already in the Justice Department right now moving them to The Sovereign wealth fund is just literally handing them the thumb drive nothing changes um in that regard but that needs to be worked out what happens if a credible owner of those assets shows up how do they how do they make a claim on that that needs to be um resolved”
The Department of Justice holds approximately 207,000 Bitcoin (worth about $12 billion) acquired through fraud investigations, which are unclaimed because owners cannot be identified on the blockchain; these assets could be transferred directly to a sovereign wealth fund without any government purchase of new Bitcoin.
“over the many years the justice department has had fraud investigations that has led to them owning 207,000 Bitcoin or about 12 billion wor a Bitcoin they haven't been able to really figure out who the owners of these are because they've acquired them through fraud investig and you know if you're on the blockchain and you know you don't know who the owner is so they could take that thumb drive hand it to The Sovereign wealth fund there's another1 billion worth of Assets”
If the US moves to a purely transactional security model where military protection depends on direct payment rather than alignment with American geopolitical interests, European and other nations would have incentives to develop independent defense capabilities and potentially realign with other powers, particularly China and Russia, rather than remain subordinate to American interests without compensation.
“if you had this massive change of policy...a lot of other countries that have for many decades felt frustrated by the United States telling everyone else what to do is going to say wait a minute we're not getting any free military protection we don't have to uh be subordinate to them anymore we'll just give them the middle finger and say you know Mr Trump take it and stick it where the sun doesn't shine we're going to ignore you we're not going to do what you want and yeah we if we're going to be forced to spend 5% of our GDP on defense then we'll build our own defense industry”
There is no scenario where the debt problem will 'magically go away' without someone absorbing losses; therefore, the only question is who bears the burden: Americans (via benefit cuts, higher taxes, or retirement age increases) or foreign nations (via security arrangement renegotiation)
“there isn't a scenario where I will fix it and no one will notice it will magically go away and hurt nobody that's not an option if it was that would have been done years ago so in some kind of restructuring somebody's got to lose and he's arguing not Americans anymore”
The cryptocurrency community has shifted from building Bitcoin as an alternative financial system to treating it as a speculative casino focused on price appreciation ('fun staying poor' rhetoric, Lambo aspirations), undermining its original purpose as financial protection
“when they lose focus and they all start to say no we're building the world's biggest casino a number go up and Tom Lee says it's going to be 250,000 at the end of the year and Michael sailor says it's gonna be 13 million in 20 years uh and you all have to get in now have fun staying poor if you don't buy it I'm G to buy a Lambo when I make all of this money when you've reduced the idea of an alternative Financial system to just rank speculation”
Core CPI has spent 45 consecutive months above 3% and remains above 3% despite Fed's stated commitment to 2% inflation target, indicating the economy has structurally shifted to higher inflation regime rather than temporary inflation that would revert to 2%.
“core CPI has spent over 45 months above 3% 45 consecutive months above 3% and they still keep talking about it going to 2% they can't get below three right now let alone it going below two over four almost four years now that it's been that way that we are in an era of higher inflation uh right now”
Bonds are bearish under the restructuring plan because the plan is designed to bring down bond prices and raise yields by reducing Treasury supply and making the dollar weaker, shifting the risk-reward away from fixed-income assets.
“I think it's it's bearish for bonds I mean it means higher interest rates uh for bonds but again this is a four-year plan this is not Bonds are going to be higher you know by you know the eyes of March”
The third and most controversial part of Trump's plan is to end the post-World War II security arrangement where the US Navy patrolled global seas and allowed free trade for 80 years without charging nations directly, instead now demanding NATO countries spend 5% of GDP on defense and participate in a debt swap exchanging their treasury holdings for zero-coupon, non-marketable century bonds.
“the 80 years since post World War II security Arrangement that the US has with the rest of the world the US Navy has patrolled the high seas has allowed for free trade around the world for like I said nearly a century hasn't charged anybody for it... Trump has been railing against the security Arrangement on January 23rd he gave a video speech to the price crowd in Davos and what he said in that speech was he said we're basically done being the py that he is going to demand that the NATO countries now spend 5% of their GDP on defense”
The Trump administration has a coordinated three-part plan to address the national debt involving tariffs (for leverage and revenue), a sovereign wealth fund (by revaluing and monetizing US assets like gold), and a debt restructuring arrangement with NATO allies (swapping existing treasuries for zero-coupon century bonds)
“so there is a plan and it starts with...Steven mirin he was uh in the treasury Department under Steve minan right at the end of trump 1.0...he wrote a piece about global trade and...the fingerprints all over that report where zon poar fingerprints as you pointed out he's moved on to his own and he used to be at the fed...Scott bessent has been giving policy type speeches going back a year now that sound very similar to what they're saying”
The US holds approximately 8 million tonnes of gold between Fort Knox and the basement of the Federal Reserve, which at a price of $2,900 per ounce (as of the recording) represents approximately $800–900 billion in assets that could be revalued on the government balance sheet and used as collateral for a sovereign wealth fund
“the US has a lot of assets that are not being fully appreciated the big one that has been pointed to is gold between Fort Knox and the basement of the New York fed the US owns about eight tons of gold it is value to $42 price of gold the day we're recording went over $22,900 if you to take that eight tons of gold and revalu it for $42 to $2,900 that's about eight or $900 billion of assets”
Trump announced on January 23rd at Davos that the US will no longer provide security arrangement benefits without payment, and is demanding NATO countries spend 5% of their GDP on defense, with the implication that some US defense contractors will benefit from this increased spending
“Trump has been railing against the security Arrangement on January 23rd he gave a video speech to the price crowd in Davos and what he said in that speech was he said we're basically done being the py that he is going to demand that the NATO countries now spend 5% of their GDP on defense and presumably some of that will flow back to defense contractors in the United States”
Trump's approval rating is currently at 53% according to the latest CBS poll, the highest it has ever been (higher than Trump 1.0 ratings), which gives him political capital to sustain these bold policy changes even if foreign nations push back
“he's got according to the latest CBS poll a 53% approval rating among the American public the highest it's ever ever been much higher than anything we saw in Trump 1.0”
Gold is currently experiencing price appreciation driven by market recognition that the Bretton Woods era of fiat currencies is reaching a tipping point, and gold's strength reflects anticipation of major geopolitical and monetary restructuring
“I think that you know the whole Breton Woods era of Fiat currencies and might have gotten to either their Tipping Point or close to their Tipping Point right now and that's what you've seen with gold and I think that you're continuing to see with gold and that the markets are recognizing gold being the leader in that”
Trump signed an executive order to establish a United States Sovereign Wealth Fund, with Treasury Secretary Scott Bessent stating it will 'monetize the assets of the United States,' which likely means revaluing underutilized government assets like gold reserves to increase their stated balance sheet value.
“Trump last week signed an executive order to establish United States Sovereign wealth fund Scott bessent was asked how's it going to work he said we're going to monetize the assets of the United States no one quite knew what that meant but it was in the report what that could possibly mean the US has a lot of assets that are not being fully appreciated”
Trump has signed over 200 executive orders in his first three weeks of his second term, and these were not designed after winning the election but rather developed over four years out of office—indicating a comprehensive, planned strategy rather than reactive governance.
“Trump was out of office for four years and he's had a long time to think about what he wants to do he has signed over 200 executive orders in his first three weeks he didn't think those up after he won the election he thought those up over the last four years so this is all part of the bigger plan that he's got going right now”
Bitcoin's proper role is as a financial system alternative for the 2+ billion people in developing countries with unstable currencies and failing financial systems, not as a speculation tool or government reserve; when crypto culture focuses on price appreciation rather than building alternative financial infrastructure, it loses legitimacy.
“what I have argued about Bitcoin is the majority of the planet lives in southern Asia Africa Latin America in the Middle East they live in countries with shaky currencies that get devalued all the time and with unstable Financial systems they put their money in Bank the bank fails they don't get anything out of it they could use a better alternative a global digital alternative like Bitcoin maybe a defi system around it with borrowing and lending and trading can be can be that alternative and when the digital crowd or the crypto crowd is working towards that goal I'm all in”
If a future left-of-center government inherited government ownership stakes in tech companies (from Trump's deal structure), they could use that ownership to impose regulations and censorship policies that would be impossible without ownership leverage, creating a dangerous precedent for government control of private companies.
“when they do buy those companies and when they do buy that and a left of7 or government comes in the future and there will be one in the future they might look very much like what the Biden administ ation was doing and they're going to impose rules and regulations and censorships on a lot of these things and they will have the power to do it because of their ownership role so I don't think that that's a very good idea”
Tariffs serve two distinct purposes in Trump's strategy: as leverage or a club to extract concessions (demonstrated by the 25% tariff threat on Mexico and Canada to force border security action), and as a revenue-raising mechanism where Trump intends to establish an External Revenue Service to collect tariff revenue instead of relying on income taxes.
“tariffs have two potential meanings number one is they're used as leverage or a club to get something the great example of that is what recently happened with Mexico and with Canada you know I'm going to put tariffs of 25% on all your products unless you put 10,000 troops on the border”
Trump's argument for this restructuring is that for the last 80 years, the 'guy in Peoria' (ordinary American workers) has been the one paying the costs of globalization through hollowed-out industries and worsened living standards, while other nations got a free security ride; now it's time for those nations to pay, not for Americans to accept further burdens like raising the retirement age to 75 or cutting Social Security
“Trump's argument is for the last 80 years that loser has been the guy in Poria we've gone into the global trade organizations we've hollowed out his Industries because we've sent them overseas we've worsened his standard of living now people are saying no the fix is we have to raise the retirement age to 75 or 80 so that we could get rid of the unfunded liability of Social Security and Trump's argument is no that guy in Poria always loses those people that have had the free security ride for 80 years it's time that they pay for it”
Trump received 53-55% approval rating in CBS polling (the highest approval rating he has ever received, exceeding Trump 1.0 levels) for his current policy initiatives including DOGE, immigration enforcement, and tariffs, providing political capital to implement the broader restructuring plan.
“he's got according to the latest CBS poll a 53% approval rating among the American public the highest it's ever ever been much higher than anything we saw in Trump 1.0”
When Trump was asked why the US would take Gaza if Palestinians need refuge, he responded by saying countries won't say no to him, indicating his view that the US should use its power to override the objections of other nations
“he was asked at the press conference he said but all of the countries that would take the Palestinian refugees have already said no they don't want the they won't take them and Trump matter of factly said to the reporter yeah well they won't say no to me is basically what he said”
Approximately 60,000 people have resigned from their positions in Washington in response to Trump's DOGE initiative and government reorganization efforts
“what is it 60 uh thousand of them or something have uh already resigned how do you think this plays out Jim”
If Trump maintains approval ratings above 48-49%, Republicans in Congress will remain unified behind him and prevent Democratic or internal fracturing; to break this coalition and weaken Trump's position, his approval rating would need to crash into the low 30s
“if he's 53 to 55% where he is right now continues to stay even if he's 48 or 49 continues to stay in that range the Republicans who are the majority will stay United behind him on this program if you want to fracture Congress you got to get his approval rating down”
Trump's policy positions on taxes suggest he is not purely pro-billionaire but willing to target wealthy interests when politically advantageous, including proposals to eliminate carried interest deductions for private equity and sports team owners and to permanently extend (make permanent) tax cuts that were scheduled to expire
“witness what he even talked about last week with his new tax deal that he wants to permanently make the temporary uh Trump 1.0 tax increase tax cuts permanent excuse me he also talked about getting rid of carried interest and resuming and getting rid of the exemption for sports teams so you know Trump is a very populous kind of guy”
Scott Bessent stated that Trump administration officials 'don't care what the Fed does'—they want to reduce the 10-year Treasury yield by reducing the supply of new 10-year notes in the Treasury market, which is a different path to lowering borrowing costs than Fed rate cuts.
“Besson said yesterday we don't care what the FED does we want to get the 10e yield down well how you going to get the 10e yield down we got to get less of it less 10year notes out there in the world”
If European nations reject the security arrangement and choose to pay protection money to Putin/China instead, Trump will impose 50% tariffs on their products, potentially creating a destructive trade war that paradoxically strengthens far-right parties like National Rally in France because citizens will blame establishment leadership for mishandling the crisis.
“I see way one is a fracturing the French you know would say no we're not going to pay Fu I'll pay Putin protection money Trump will say fine then I'm gonna put a 50% tariff on every French product that comes into the United States and this could end very very badly then you know the he would remind the French and you do that and you mess it all up you're in power that way do you see how popular you know National rally in Le Pen gets if you attempt to play that game you know cozy up and pay Putin but won't pay the United States and then be subject to those kind of pot tariffs that could be a very ugly scenario”
The outcome of this period could represent a 'fourth turning' moment (using Neil Howe generational theory) where the status quo finally breaks and a transition occurs from one generation-long cycle to the next, with debt crisis as the triggering catalyst.
“if I want to do a Neil Hall and say we're at a fourth turning moment and maybe this is the moment where the fourth turning ends and that we're maybe going into our this is the Catalyst to get us out of the fourth turn into the first turn”
The Trump administration has appointed Steven Mnuchin as Council of Economic Advisors chairman, and Zoltan Poszar has influence on policy through his work on global trade and debt issues, with both having support from Treasury Secretary Scott Bessent who has been giving policy speeches consistent with their approach.
“Steven mirin he was uh in the treasury Department under Steve minan right at the end of trump 1.0 and he moved on to you know Wall Street he work for Hudson Bay capital and now he's been appointed the Council of economic advisor chairman for uh Trump 2.0 in November he wrote a piece about global trade and he wrote a piece about dealing with all of these issues uh the fingerprints all over that report where zon poar fingerprints as you pointed out he's moved on to his own”
The 1970s is an imperfect analog for the coming period because 1970s had massive trade barriers between European nations and 6-hour drives requiring language and currency changes; today's Europe has much more integration, so inflation might be 3-4% rather than 7% average, and stock market returns could be middling (5-6% annually) rather than disastrous.
“I would caution though against the idea that when you say the 70s that means 20% inflation it might not mean 20% inflation because remember in the 1970s the barriers to International Trade were huge you know as the the old joke used to be you know a six-hour drive throughout Europe you would have to change languages four times in five currencies and go through five different completely different sets of rules on how a company would operate that's not the case anymore in Europe”
The upside scenario is that Europe accepts restructuring and the lower dollar makes US exports more competitive, forcing Europe to finally deregulate and innovate (the Mario Draghi thesis), resulting in new innovative companies on European exchanges and potentially strong equity returns for European markets.
“Road number two is that they do kind of you know wind up paying they give a little bit they wind up seeing the dollars value fall seeing the US become even more dominant and then what do they do what what do they do in the process then they do what the mario dragi report talked about with the competitiveness of the of Europe Europe is you know the old line is the US innovates and Europe regulates and that is really in an era of AI really showing up that Europe is really struggling there are no I shouldn't say no most of the Innovative companies are in the United States there's only a couple of them in Europe but not enough to move the needle on their economy”
The plan to give companies tax breaks in exchange for equity ownership (e.g., tax breaks for AI companies in exchange for 10-15% ownership stakes) is problematic because future left-leaning administrations could weaponize that ownership to impose operational policies and regulations on those companies, effectively allowing government to control private companies
“I have real problems with because Trump won't always be president and maybe even a republican won't always be president and we might have a left of center president in the future that might say great now that I've got all of these ownership pieces of these companies I can now dictate policies Within These companies I could tell them how to run their companies to a degree that you can't do right now because the government doesn't own pieces of those those companies”
The US government should not borrow money to buy Bitcoin as a speculative bet, even if analysts like Michael Saylor predict it will reach $13 million or Tom Lee predicts $250,000, because government fiscal policy should not engage in financial speculation—that is the private sector's role, and such spending would increase treasury note supply and interest rates at a time when citizens are already complaining about mortgage costs
“but the problem there is they would have to borrow billions of dollars in the treasury market to do it at a time when interest rates are up and people are complaining about mortgages costing more because of the higher interest rates you're going to increase the supply of 10-year notes or fiveyear notes so you could buy a speculative asset on the the idea that maybe it'll 2X or 10x or something and then be able to pay off that debt and and turn a profit for the government one I don't think that's the purpose of what government is is to speculate that's the private sector's job is to speculate on the price of assets not the government's job to speculate on the on those assets”
The host argues that the post-WWII arrangement was never truly one-sided; there has always been a 'massive quid pro quo' where the US exercises unilateral geopolitical authority over the world (telling other nations what they can and cannot do), and in exchange, other nations tolerate US military and political dominance; therefore, requiring explicit payment for the same arrangement appears contradictory
“what I would say is there's always been a massive quid pro Pro the way this has worked is that we the United States of America act like Global dictators we tell the rest of the world what they are and are not allowed to do because we're the global police force and we're in charge of everything and we're going to tell everybody else what to do the rest of the world puts up with that and doesn't object to the fact that the United States has no legal jurisdiction or authority over anybody outside of its own borders why do they put up with that because they need that protection”
The Trump administration's approach is fundamentally different from prior administrations (Bush, Clinton, Obama) in that those presidents wanted to make major changes but the status quo could hold; now the status quo cannot hold anymore, making transformative change inevitable
“maybe what's different now than other presidents have come in even under Trump one he tried big changes you know Bush tried big changes Clinton tried big changes Obama tried big changes now we've got a president maybe we're at if I want to do a Neil Hall and say we're at a fourth turning moment and maybe this is the moment where the fourth turning ends...the status quo could hold but maybe now the status quo cannot hold so big changes have to come”
The host and Bianco both acknowledge that the $36 trillion national debt situation is unsustainable and a crisis that requires action, though they disagree on the appropriate solutions
“most people I listen to your podcast a lot and people that are on your podcast and there's a widespread agreement that the debt situation is unsustainable I agree with that J Paul has even said in December he gave a speech and he said it's unsustainable we got to do something about it”
The proposed debt swap with NATO countries would involve swapping $1 billion of treasuries for $1 billion in zero-coupon, non-marketable century bonds (maturing in 100 years with no interest), which puts those countries in a worse financial position unless the Federal Reserve offers a lending facility where it will provide a par-value repo loan against those bonds to maintain liquidity
“well doesn't this that these countries have1 billion of treasuries now they got1 billion in this non-marketable thing doesn't that put them at a worse financial position the Federal Reserve comes in they can offer a lending facility you give me a billion dollars par amount of those bonds I will give you a loan a repo loan for a billion dollars if you need liquidity it will be at par there will be no unrealized or realized loss it will be available anytime”
If NATO countries refuse the debt swap deal and instead seek 'protection money' agreements with adversaries like Russia or China, Trump would retaliate with tariffs (e.g., 50% tariffs on French products), which could in turn boost support for far-right parties like Le Pen's National Rally in France
“if the French say something like you know what we'll just pay protection money to Putin to leave us alone rather than pay you then Trump's got tariffs and it and he'll come back and he'll punish them with tariffs”
Europe's stock valuations are much cheaper than US valuations (trading at low multiples), and if Europe accepts Trump's restructuring deal and is forced to deregulate and innovate, European equities could benefit significantly from new innovative companies listing on European exchanges instead of just the NASDAQ
“you might want to look at Europe maybe this forces in the positive Europe to accept the security arrangement to accept that they have to change to accept that they have to start to deregulate and innovate and maybe we start to see new Innovative companies listed on the German Stock Exchange and on the French Stock Exchange and on the London Stock Exchange and not all on the NASDAQ like we see right now and then those cheap companies in Europe might very well benefit from that kind of thinking”
Previous major international monetary/trade agreements (Bretton Woods, Plaza Accord, closing the gold window in 1971) occurred when status quo arrangements could no longer be sustained, setting precedent for the current restructuring attempt to succeed if the underlying fiscal pressures are indeed unsustainable.
“that's what happened with brenon Woods that's what happened closing the gold window it's kind of what happened with the Plaza Court in 85 the status quo just couldn't couldn't maintain anymore and something had to give and maybe we're at that point right now”
The biggest concern with the restructuring plan is inflation, as multiple pathways (tariffs, currency devaluation, geopolitical fracturing) would likely result in higher inflation, which would in turn drive up interest rates, ending the era of 'cheap money' that has characterized economic policy since the 2000s
“my biggest concern is inflation and my biggest concern is what that does for interest rates...I tend to think more towards the inflationary side on this than anything else because even in the downside scenario they'll pay pu Putin to leave them alone or they'll pay she and China to leave them alone and we put tariffs that could also be some kind of an inflationary story”
Trump's argument for this restructuring is that the costs of globalization have been disproportionately borne by American workers ('the guy in Peoria') through lost jobs and hollowed-out industries, while wealthy nations received free security benefits; therefore, the burden of solving the debt crisis should fall on those nations, not on American workers through entitlement cuts.
“Trump's argument is for the last 80 years that loser has been the guy in Poria we've gone into the global trade organizations we've hollowed out his Industries because we've sent them overseas we've worsened his standard of living now people are saying no the fix is we have to raise the retirement age to 75 or 80 so that we could get rid of the unfunded liability of Social Security and Trump's argument is no that guy in Poria always loses those people that have had the free security ride for 80 years it's time that they pay for it”
Economists' models predicting inflationary outcomes of tariffs often capture only 10% of the broader economic story because they isolate tariff effects without considering the full restructuring plan and its interaction effects, leading to incomplete predictions.
“I just think that a lot of economists that say well when we raise tariffs the inflation goes up and this is what happened during smooth Holly you're only think about one tenth of the story here you got to think about the broader concept of what's going on here”
The stock market is unlikely to deliver strong returns in the next 5-10 years despite strong earnings growth because the Cyclically Adjusted Schiller PE ratio is at 37 (one of highest in 150 years) and with rising interest rates, multiple contraction will offset earnings gains, resulting in 5-6% annual returns instead of double-digit returns.
“now with the cape the cyclically adjusted Schiller PE ratio at 37 one of the highest levels in 150 years it's going to be hard for the stock market to continue to move higher with that level of valuation if interest rates are going to continue to go up it doesn't necessarily mean that the stock market has to fall 50% and stay down like it did in the 70s Maybe it winds up returning you five or six% for the next decade and bonds return you five or six% for the next decade”
The majority of the planet's population lives in countries with unstable currencies and financial systems; these populations would benefit from access to a global digital alternative (like Bitcoin or DeFi systems) for borrowing, lending, and trading, rather than depending on their own failing domestic institutions
“the majority of the planet lives in southern Asia Africa Latin America in the Middle East they live in countries with shaky currencies that get devalued all the time and with unstable Financial systems they put their money in Bank the bank fails they don't get anything out of it they could use a better alternative a global digital alternative like Bitcoin maybe a defi system around it with borrowing and lending and trading can be can be that alternative”
The debt crisis is acute and immediate enough that it requires transformative rather than incremental solutions; previous efforts (Grace Commission in 1980s, Gore Commission in 1990s) that produced hundreds of recommendations but saw only a few implemented prove that 'tinkering around the edges' is no longer viable.
“in a crisis we expect bold and Brash thinking this is bold and Brash thinking... no more tinkering around the edges no more Blue Ribbon committees giving reports you know like the grace Commission in the 80s to fix the debt problem or the gore Commission in the 90s and put us out a big report about 8831 steps that we need to do to help make the government more efficient bring down the deficit and three of them get done and everything else gets forgotten he's not thinking along those lines he's thinking about doing something big right now”
Scott Bessent has publicly stated 'we don't care what the Fed does, we want to get the 10-year yield down,' signaling that the administration's primary focus is reducing long-term interest rates, which the restructuring plan is intended to accomplish by reducing the supply of 10-year treasuries in the market
“at the centerpiece of it is what you know Besson said yesterday we don't care what the FED does we want to get the 10e yield down well how you going to get the 10e yield down we got to get less of it less 10year notes out there in the world and this is a potential plan that they have to do this”
The Federal Reserve could facilitate the debt swap by offering a lending facility where NATO countries could post the newly-issued century bonds as collateral and receive par-value loans, allowing them to meet liquidity needs without taking realized losses, and Trump has been critical of Jerome Powell partly because he expects the next Fed chairman (possibly Kevin Warsh) to be more open to such arrangements.
“the Federal Reserve comes in they can offer a lending facility you give me a billion dollars par amount of those bonds I will give you a loan a repo loan for a billion dollars if you need liquidity it will be at par there will be no unrealized or realized loss it will be available anytime will the Federal Reserve go for it that's why Trump has been bashing or one of the reasons why he's been bashing uh J Paul and the name Kevin warsh keeps popping up that that you know could be the next fed chairman and he's very open to this kind of idea”
The Cyclically Adjusted Shiller P/E ratio (CAPE) is at 37, one of the highest levels in 150 years, which means the stock market is starting this era with very high valuations; unless corporate earnings growth is extraordinarily strong, the stock market is likely to experience multiple contraction and middling returns rather than significant price appreciation
“the cape the cyclically adjusted Schiller PE ratio at 37 one of the highest levels in 150 years it's going to be hard for the stock market to continue to move higher with that level of valuation if interest rates are going to continue to go up it doesn't necessarily mean that the stock market has to fall 50% and stay down like it did in the 70s Maybe it winds up returning you five or six% for the next decade”
Conversely, if European nations refuse the restructuring and instead pay protection money to Putin or China, then European equities will underperform because growth will remain constrained and companies will not invest in innovation
“if they want to go down the road of you know Fu to Trump we'll pay protection money to Shi and Putin we won't do this uh and we'll we'll fend off we'll have to fend off the right the farri movements in the Europe well then they're cheap for a reason those companies and they're going to stay that way”
Bianco acknowledges that the restructuring plan has significant downside risk if it fractures the world order, leading to tariff wars, defensive trade policies, and economic deterioration, but argues this is still preferable to the status quo which cannot hold
“I see one of two ways of this playing out I see way one is a fracturing the French you know would say no we're not going to pay...Trump will say fine then I'm gonna put a 50% tariff on every French product...this could end very very badly”
The winning scenario would produce higher growth and higher inflation, requiring higher interest rates, making cheap capital and cheap money (which was necessary through the 2000s-2010s due to stagnation and deflation fears) unavailable—mortgages could reach 7-10% and high-yield borrowing could approach 10%.
“if Europe does that and everything works out positively we really ramp up growth and with that we ramp up inflation and with that we ramp up interest rates and so the good news is you could get a decent paying job anywhere you want and the economy is booming and assets are going up in price but the problem is mortgages are eight percent mortgages are seven and a half percent you know that you know high yield borrowing is approaching nine and 10 percent there's you're not going to be able to get cheap money anymore cheap money is what we needed through the 2000s and the 2010s because of stagnant growth and fear of deflation but if this is going to unleash an era of stronger growth and higher inflation higher nominal growth it will unleash an era of higher money more expensive money”
Gold is bullish given the geopolitical tensions and potential for dollar weakness, and the market is recognizing through gold's strength that more is happening than just Trump trolling about tariffs—the market is pricing in large structural changes.
“it is bullish for gold and that's what you've seen with gold and I think that you know do you think this is what's driving the the last couple of weeks of strength in gold or the last year or so in Gold that you know I think that you know the whole Breton Woods era of Fiat currencies and might have gotten to either their Tipping Point or close to their Tipping Point right now and that's what you've seen with gold”
Jim's primary concern with the plan is not geopolitical but inflationary: the restructuring could unleash an era of higher inflation and higher interest rates, which would be economically disruptive regardless of whether the geopolitical goals succeed.
“my biggest concern is inflation and my biggest concern is what that does for interest rates and my other bigger issue is as I look at what I've been watching with the Trump Administration and with these plans and the way that they've been talking they've got huge plans under under WS these are plans these are not policies”
Trump's approach to taxes indicates he is not exclusively protecting billionaire interests—he has proposed making Trump 1.0 tax cuts permanent for everyone, eliminating the carried interest exemption for investment managers, and ending tax exemptions for sports teams, suggesting a more populist than plutocratic orientation.
“he even talked about last week with his new tax deal that he wants to permanently make the temporary uh Trump 1.0 tax increase tax cuts permanent excuse me he also talked about getting rid of carried interest and resuming and getting rid of the exemption for sports teams”
The US has approximately 8 million tons of gold held between Fort Knox and the basement of the New York Federal Reserve
“the US owns about eight tons of gold it is value to $42 price of gold the day we're recording went over $22,900”
There may be a potential 'fourth turning' moment where the current era (the fourth turning) is ending and a new era is beginning, with Trump's restructuring plan serving as the catalyst to move beyond the fourth turning into a new cycle of history
“maybe we're at if I want to do a Neil Hall and say we're at a fourth turning moment and maybe this is the moment where the fourth turning ends and that we're maybe going into our this is the Catalyst to get us out of the fourth turn into the first turn or something like that and that this is the type of action because now it has to be done”
Bitcoin is currently trading and exists as a real asset; the justice department holds seized Bitcoin on thumb drives from fraud investigations; the price of Bitcoin exceeded $2,290 per ounce at the time of recording
“literally sitting on a thumb drive at the justice department right now”
Steven Merin's November paper on global trade laid out the framework for using tariffs, a sovereign wealth fund, and a renegotiated security arrangement to address the debt crisis, with fingerprints from Zoltan Pozsar throughout
“In November he wrote a piece about global trade and he wrote a piece about dealing with all of these issues uh the fingerprints all over that report where zon poar fingerprints as you pointed out”
Bianco runs Bianco Research, a boutique institutional macro research firm with a fixed income bent, and manages a total return fixed income ETF under the Wisdom Tree partnership with ticker symbol WTBN
“the day job is not quite as big picture thinking as this but this podcast is the perfect place to kind of you know lay out some of these ideas we do macro research uh with a fixed income bent at bianor research.com it is an Institutional product... we also run a total return fixed income ETF uh we had a very good year in the first year you can find out more about that it's symbol wtbn Wisdom Tree biano”
Bianco is very active on social media at @biancoresearch on X, YouTube, and LinkedIn, and encourages listeners to follow his analysis
“I am very active on social media at biano research both on X YouTube and my name Jim biano on LinkedIn”
The host expresses concern that multiple recent policy successes (DOGE, US Aid cuts, government reorganization) and Trump's public popularity create momentum that could result in very bold further moves; simultaneously, there is existential risk that 'the Deep State fights back and eliminates him somehow'
“clearly his other policy actions are really big and it seems clear to me that there's one of two outcomes here he either continues to get the momentum and the support of the people behind him as has been happening so far... or you know the Deep State fights back and uh and eliminates him somehow so it seems to me like the stakes are incredibly high”
The proposed debt restructuring would be named the 'Maralago Accord' after the location where negotiations occur, following the pattern of historical accords (Bretton Woods, Plaza Accord) being named after the resorts where they were finalized.
“speaking of maril Lago by the way this whole security Arrangement Deb swap deal to the other idea is that this would help lower the Dollar's value to make the us more competitive and such agreements have always been named after the resorts that they have been CED at like Breton woods and Plaza this is being referred to as the maralago Accord”
The plan relies on 'informed speculation' about how the details will work out—the full policy structure hasn't been fully published and Bessent/Mnuchin/Poszar will release more detailed papers explaining the mechanisms later.
“this is informed speculation and what they're going to do we're still waiting for the ultimate plan as to uh where the icies potentially could go from here”
Jim Bianco is founder of Bianco Research, a boutique institutional research firm focused on macro research with a fixed income emphasis, and runs a total return fixed income ETF under the symbol WTBN (Wisdom Tree Bianco) through partnership with Wisdom Tree
“the day job is not quite as big picture thinking as this but this podcast is the perfect place to kind of you know lay out some of these ideas we do macro research uh with a fixed income bent at bianor research.com it is an Institutional product uh so you know that's kind of hints to what the price is but I am very active on social media at biano research both on X YouTube and my name Jim biano on LinkedIn we also run a total return fixed income ETF uh we had a very good year in the first year you can find out more about that it's symbol wtbn Wisdom Tree biano”