Bretton Woods, New Hampshire
Here is an interesting passage from a letter from Scott Bessent via his hedge fund in January of this year:
Another differentiated view that we have is that Trump will pursue a weak dollar policy rather than implementing tariffs. Tariffs are inflationary and would strengthen the dollar--hardly a good starting point for a US industrial renaissance. Weakening the dollar early in his second administration would make U.S manufacturing competitive. A weak dollar and plentiful, cheap energy could power a boom. The current Wall Street consensus is for a strong dollar based on the deeply flawed logic. We strongly disagree. A strong dollar should emerge by the end of his term if the US reshoring effort is successful.
With tariffs, corporate tax cuts and deficits there are tradeoffs that work against his aims for GDP growth, fiscal improvement and stock market gains. One way he could have it all -- at least in dollar-denominated terms -- is by working to weaken the currency.
Broad dollar weakness would be useful but so would something more-targeted against the yuan and the yen, if possible. That sort of outcome might also allow China to claim a 'win' in avoiding US tariffs.
Given these are comments from the incoming Treasury Secretary, I wouldn't be so quick to dismiss them.
Bretton Woods III isn't anyone's base case but the conditions are right.
