Randall Forsyth writing in Barron’s this week -
Forsyth mocks a recent government accounting gimmick designed to hide the full extent of the U.S. budget deficit, recalling a famous but ill-fated British effort to cope with a financial problem a century ago: “The 1925 decision to restore the pound’s parity was favored by the City of London establishment, with economist John Maynard Keynes providing a rare dissent because of the damage he correctly anticipated to the British economy. Sterling would be restored as a major international reserve currency, but its global importance, and that of Great Britain, would never regain their former greatness.”
The article examines how the trade wars may affect U.S. investors - in stocks and bonds alike. Forsyth cites T.S. Lombard’s global head of macro trading who thinks firing Powell would pave the way for a loss of faith in the Dollar as the world’s reserve currency. He also delves into global ship building, relative naval power - and much more.
In all of this Forsyth finds parallels to Scott Fitzgerald’s 100-year old classic The Great Gatsby …
Opening : ”This April marks the centennials of the publication of F Scott Fitzgerald's masterpiece, The Great Gatsby. On Long Island, the setting for the novel, much has changed. The fictional West Egg, the putatively less prestigious village just over the border from Queens, today is filled with mansions rivaling Gatsby's own along Manhasset Bay. On the bay's other side, in East Egg, where the green light shone at the end of Daisy Buchanan's dock, the few remaining legendary Gold Coast estates now are public museums or village facilities. The former old-money families, including the Guggenheims, Harrimans, and Vanderbilts, have been supplanted by entrepreneur billionaires who founded companies such as Home Depot and Arizona Iced Tea.”
Closing: ”For now, the parties continue … To paraphrase Fitzgerald, we are careless people, willing to smash things up, including the status of the dollar”.
Sourced From: “U.S. Spending Threatens the Dollar’s Status. Wake Up, America”
By Randall W. Forsyth - Barron’s April 18, 2025
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