US: Donald Trump’s brilliant plan? - Natixis

Patrick Artus, Research Analyst at Natixis, points out that Donald Trump’s brilliant plan is as follows: the United States implements an expansionary fiscal policy (corporate tax cuts, increase in public spending on the military and on infrastructure).

Key Quotes

“The United States’ "twin deficits" (fiscal and external) that will result from these measures will be financed at low interest rates by the savings surplus from the euro zone, Japan, China and other emerging countries. It is therefore savings from the rest of the world that will finance the increase in US corporate earnings and public investment, thanks to the ability of the United States (and the Treasury market) to attract global savings. Instead of these savings financing growth in countries where they appear, they will therefore finance growth in the United States.”

“For this brilliant plan to fail, investors (public, such as central banks, or private) would have to refuse to invest more in dollars, and the dollar would therefore have to lose its reserve currency status.”

“If this happened - and we cannot see this happening at present - the policy conducted in the United States would lead to a drastic depreciation of the dollar.”