My former colleague and co-author
is getting a lot of attention - and criticism as in a WSJ oped today - for a paper he wrote last November where he discussed - among many other topics - a possible tax on US capital inflows into US Treasuries as a way to possibly weaken the US dollar, effectively capital controls on inflows. I worked as an advisor at Hudson Bay Capital (HBC) with Steve when he was there. I read the piece, and though I disagreed with a lot of it, I gave him many comments and feedback that made it better. The piece was written for HBC portfolio managers and clients and as such was an attempt to help investors understand the universe of potential tools a Trump Administration might use to achieve some of the aims the President has expressed in his four decades in political life. It’s a catalog of a variety of tools, not a proposal for or advocacy for any specific of them, and Steve stated plainly and repeatedly that it’s not advocacy. Steve dwells at length on the potential downsides and risks from several of the tools, which would be a really weird form of advocacy. It’s an attempt to help investors think through some possibilities and is a piece of hedge fund research, not a think tank research or policy advocacy paper. That’s what economists do all the time – they analyze policies. Just because one might write about the pros and cons of, say, fiscal austerity or fiscal stimulus, doesn’t mean you’re advocating for either policy. I know Steve well and I know he wasn’t then and is not now advocating for something like capital controls. I disagree with many of the views in that paper like his advocacy for optimal tariffs or the view that the inflationary risks of protectionism are low. But any economist (and Steve has a Harvard Econ PhD) may have a broad intelligent discussion of the pros and cons of changing the current international trade, monetary and financial regime in different ways without necessarily advocating specific tools. So there is no “proposal” for a “Miran fee” on capital inflows. The views of the Trump administration on trade go from a spectrum of sensible doves who want to escalate to de-escalate (Bessent, Miran) to protectionist hawks (such as Navarro and Greer). On matter of currency policy and reforming the international monetary system and the role of the US dollar in it the Trump administration has barely started to discuss such matters and all the talk about a possible Mar a Lago accord to change currency values and how to do it is only chatter and no policy yet. Bessent has spoken that the US dollar may remain strong if US fundamentals remain strong and he has replied with perplexity when asked about a Mar a Lago deal. Even Trump - who has in the last spoken of the alleged costs of a strong dollar - has threatened with sanctions countries in the Global South who may think about de-dollarizing. So if there is a hint of any policy about the US dollar - and there is no clear Trump administration policy so far - it is the opposite of capital controls on inflows; rather a veiled threat of capital controls on outflows out of the use of US dollars in trade, payments and finance. But again the Trump administration has so far no coherent or fleshed out policies towards the US dollar and it will take a while until it figures them out. For now they are struggling to find some coherence on trade/tariffs and taxes/spending/deficits. So a clear dollar policy will emerge only much later …
