Donald Trump returns to the White House and the legendary Arthur Hayes calls it: it’s the end of the road for the US dollar.
In his latest essay, Arthur says Trump’s return will turn the American economy into a state machine, stripping capitalism to its core. “It’s American capitalism with Chinese characteristics,” he says, humorously drawing a vivid comparison with China’s blend of socialism and free-market controls.
Arthur sees this not just as another shift in policy, but as a full-fledged turn towards what he calls a “command economy.” He compares Trump’s approach to that of the late Chinese leader Deng Xiaoping, who famously said: “It doesn’t matter whether a cat is black or white, as long as it catches mice.”
From Free Market Dreams to a State-Controlled Machine
According to Arthur, Trump is here to wield power by any means necessary to make the machine move. He thinks America left capitalism in the rearview mirror a long time ago. Capitalism, he said, was supposed to mean taking risks and, yes, facing the consequences of bad decisions. But that’s not what’s happening.
“America ceased to be purely capitalist in the early 19th century,” says Arthur. And he has the dates to prove it. By 1913, the creation of the Federal Reserve System had outlawed real capitalism. Since then, the game has become privatized profits and socialized losses.
Now Trump is here to take this game to new heights. Arthur notes that Trump has no problem printing money like there’s no tomorrow. It reminds us of Trump’s 2020-2021 stimulus madness, when the US printed a staggering 40% of all existing dollars in just two years. This is a considerable amount.
And the effect? The economy is awash with money while structural problems, Arthur insists, remain ignored. “Trump hosted a party to test stimulants,” Arthur reminds us. Biden may have continued the idea, but this trend of easy money giving was Trump’s brainchild.
Arthur explains that these stimulus checks were just the beginning. Arthur expects that with Trump back in power, we’ll see another round of “quantitative easing for poor people on steroids.”
Trickle-down economics takes its last breath
At one time, Arthur says, American politics was a mixture of capitalism, socialism and everything in between. But the elites? They didn’t care. They just wanted to stay on top. It didn’t matter to them what “ism” they were technically under, as long as their power remained intact. Arthur makes it clear: the rich never truly lose.
When they failed, the government assisted them and the bill was brought to public attention. “Capitalism means the rich lose money when they make bad decisions,” says Arthur, adding: “This was outlawed back in 1913.”
Fast forward to the 2020 COVID pandemic, and Trump’s handling of the crisis was, in Arthur’s opinion, the final nail in the coffin of capitalism. Forget trickle-down economics; Trump threw it all out and immediately began distributing the materials directly to the public.
Irony? It sort of worked… well, at least for a while. Arthur describes how, between 2020 and 2022, the Trump and Biden Treasury departments issued debt to the Federal Reserve, which then used the dollars it printed to buy that debt.
But instead of going straight to the rich, this money ended up in regular bank accounts. Result? People spent. The economy has picked up. Arthur says, “Economic growth accelerated when the velocity of money rose well above one.”
But there’s always a catch. Inflation soon set in and supply could not meet demand. “The supply of goods and services did not grow as fast as the purchasing power of the population, financed by public debt,” explains Arthur.
Inflation soared, and wealthy people who held most government bonds saw their income wiped out. Then Fed Chairman Jay Powell stepped in, raising interest rates in 2022 to curb inflation. Powell may have been aiming for inflation, but Arthur sees it differently: “The rich fought back by sending out their white knight,” he writes.
Enter “quantitative easing for the poor,” courtesy of Trump.
Arthur paints a picture of a Treasury Department willing to go all-in on an “America First” policy. Scott Bassett, Trump’s rumored pick for Treasury secretary, has laid out plans for what Arthur describes as a fast-track industrial policy.
Bassett’s ideas are eerily reminiscent of China’s own economic strategy: tax breaks, subsidies and cheap financing for companies willing to “relocate” critical industries to American soil.
Arthur argues that this is a pure “command economy” in which the government picks the winners. Target? Inflate GDP through the roof, ignoring traditional free market principles. Companies that play along receive government tax breaks, financing and all the incentives to keep production within US borders. Banks will also get in on the action, Arthur said, as Washington suspends restrictions on bank lending, allowing them to lend as freely as they please.
Who will win in this setup? Ordinary workers, at least at first, Arthur assumes. Jobs will grow, wages will rise, and the government will get its share through corporate taxes. But this victory will be short-lived, he warns.
Losers? Bondholders and savers, as long-term bond yields will lag behind inflation and wage growth. And for those who cannot cope with rising costs, Arthur predicts a bleak future. “Wage inflation will become the new normal,” he adds.
Arthur’s Cheat Sheet: Pay More Attention to Bitcoin and Hard Assets
Arthur has his own advice for surviving the coming economic shift. “Whenever a bill is passed and money is allocated to approved industries, buy shares of those industries,” he suggests. However, his recommendations are not limited to stocks. Gold and Bitcoin are at the top of his list.
“Obviously the hierarchy of my portfolio starts with Bitcoin,” he says, followed by other cryptocurrencies and industry stocks. Arthur also doesn’t play with fiat currency; he keeps just enough money in a money market fund to cover his American Express account.
Arthur also lays out his predictions for how Trump’s economic plans will affect the money supply. He calls the period from 2009 to early 2020 “the peak of trickle-down economics,” when the Fed’s quantitative easing benefited the rich primarily.
Wealthy investors poured this Fed-funded money into assets like stocks, bonds, and real estate, causing asset prices to skyrocket without generating any real economic growth. “Issuing trillions of dollars to holders of financial assets has increased the ratio of debt to nominal GDP,” says Arthur.
In a script that reads like a financial horror film, Arthur outlines a future in which banks cannot create endless money forever. “They must provide expensive equity capital for every debt asset they own,” he writes, pointing to the risk-weighted asset costs that banks face. Simply put, there are limits.
And when those limits are reached, Arthur warns that banks will stop lending altogether, potentially triggering a full-blown credit collapse around the world.
This is where the Fed will step in. He predicts a return to endless quantitative easing, with the Fed stepping in to buy up bad loans from banks, effectively giving them an escape route at the expense of the entire economy.
About the image above Arthur says:
“This is my own index that tracks the amount of US bank lending. In my opinion, this is the most important indicator of the money supply. As you can see, sometimes it outperforms Bitcoin, like in 2020, and sometimes it lags Bitcoin, like in 2024.”
If this sounds bad, that’s because it is. “The entire population will end up paying the bills due to currency depreciation,” he warns.
To top it all off, the crypto OG returns to his core message: “Bitcoin is king!”
