Chartbook 363 Stockholm syndrome in Mar-a-Lago: The belief that "something must be done" and the sanewashing of economic policy in the age of Trump

Feast your eyes on this dear readers. The golden calf of Mar-a-Lago.

Right now, in the commentariat, the Mar-a-Lago accord meme has taken off. Those who have picked up the theme include Robin Wigglesworth, Gillian Tett, Martin Wolf, Alexandra Scaggs, Steve Kamin and Mark Sobel to name only those writing in the FT (apologies to anyone else in the paper that I have missed out).

In Chartbook 361 I grasped for this straw too. Looking for something that might be dubbed “MAGA for thinking people 2.0”, I too plumped for the Mar-a-Lago Accord idea.

After all, what is not to like? The idea of the Mar-a-Lago has a wonkish working paper behind it by Stephen Miran, now the youthful chair of Trump’s Council of Economic Advisors. Well known economist in the public sphere like Mike Pettis provide intellectual heft. An Accord would bite on big issues like deindustrialization, the balance of payments, public debt, the Treasury market.

Then, prodded by an email from my friend Mark Blyth, I began to wonder whether this search for a rational wing in Trump’s economic policy is not, in fact, a step towards sane-washing and whether this sane-washing is not driven by some engrained mainstream framings of America’s problems that react in sympathy with the Trump administration’s rhetoric of crisis and victimization even if they are out of sympathy with the Trump administration in general.

Is there a real and important continuity of problems in America’s political economy that at least parts of the new Trump administration are trying to address, thus forming a continuity with the Biden team and Trump 1.0?

Or is the shellshocked commentariat of 2025 in the grip of a kind of Stockhom Syndrome in which our own inner fears lead us to engage with our captors in a way which denies the actual reality of being hurled into a mad house? Call it Mar-a-Lago (Accord) Syndrome.

First let us very briefly run through the outline of the Mar-a-Lago Accord narrative.

What is it about?

Talk of a Mar-a-Lago Accord harks back to the September 1985 Plaza Accords under which the US negotiated a depreciation of the dollar with its main trading partners - the dollar was overvalued thanks to the massive interest rate hikes initiated by Paul Volcker in October 1979. It is widely seen as the last example of coordinated, world-level currency policy. In the years that followed, overt talk about currency policy became taboo. Instead there were tacit deals and deniable “understandings” between more or less coordinate central bank policies. The fetish of central bank independence made any explicit coordination in international affairs as taboo as any explicit coordination with fiscal policy at home.

The aim of a Mar-a-Lago Accord would be to address America’s twin deficits - on trade account and on government spending - by a complex maneuver involving the value of the dollar and foreign investments in the US. The dollar is to be devalued and foreign investment in the US on current terms is to be ended. This will make debt more sustainable, exports more competitive and imports less so. The ultimate aim is thus to redress America’s deindustrialization and its excessive fiscal deficit.

Torsten Slock has a succinct summary:

Mike Zaccardi has reposted a useful summary from ING:

It is, on its face a far-fetched policy proposal and it is easy to pick holes in it. So why are serious people taking it seriously?

In part we are all struggling to find some kind of rational purchase on the unhinged situation created by the Trump administration.

The Stockholm syndrome element kicks in when we come to the original framing of the problem: The belief that something must be done. Once you are convinced that “something must be done”, you become vulnerable to someone hawking a big plan to “do things”.

Why do sane people in contemporary America believe that “something must be done”? Ignoring the reflexive element of crisis by which Trump himself is the main reason something must be done, which renders one susceptible to any big idea that might fix Trump (even if elements of that “fix” are shared with analysis offered by the Trump camp itself) etc etc, there are two main schools of thought:

1. American deindustrialization and class balance. This is the line originally proposed by Matt Klein and Michael Pettis in their highly influential, Trade Wars are Class Wars. They argued that the existing system of capital flows and trade has been heavily biased against US industry and industrial employment and that if this imbalance is to be redressed, and the surplus countries cannot be counted on to cooperate, then the US should take actions to restructure the global economy. The Biden team could be seen as broadly in sympathy with Klein and Pettis, but nowhere near radical enough in the measures they were willing to contemplate. Pettis has shown some sympathy for measures along the lines of a more radical Mar-A-Lago accord. Pettis, notably, has argued for a tax on capital inflows.

2. American debt. The second conventional conviction that motivates calls for radical action is the belief that something has to be done about America’s spiraling fiscal imbalance. Rising debt must be curbed either by making it cheaper or through new sources of revenue. An explanation of the link to Mar-A-Lago is provided by Jim Bianco here:

   

Both arguments 1. and 2. are well known. Both are also contentious. No reader of Chartbook will be surprised to hear that I find both 1. and 2. unconvincing. But that is not my point here. My point is that if you do believe either 1. or 2. you need to be on your guard against Mar-A-Lago syndrome.

Even if you disapprove of the Trumpites style and lawlessness, you may be tempted to take at their word the more reasonable members of the highjack team who insist that they offer a dramatic and comprehensive plan to address the crisis you also believe in, leading you to lose track of the fact that … they are highjackers and they are holding you hostage!

By buying into the reality of underlying problem that Mar-A-Lago claims to be addressing you run the risk of overemphasizing the rational element in Trump 2.0.

What, instead, if we treat all this gesturing to high and worthy causes as part of the flim-flam, part of the “West Wing” rhetoric, which nourishes both sides in US politics - one the Aaron Sorkin version, the other the WWWF-Mar-a-Lago loop?

What else might the talk of a Mar-a-Lago Accord be about? What alternative interpretations might serve as antidotes to Mar-a-Lago syndrome?

So far it seems to me that there are four interpretive offerings.

#1 5-dimensional chess: The fallout is part of the plan.

In a characteristically gothic tweet, Izabella Kaminska imagines that chatter about the Mar-a-Lago accord and the market “correction” that this is likely to provoke, is the outward sign of the Trump administration playing 5-dimensional chess. The shock to investors delivered by all the loose talk about tariffs and currencies is deliberate. It is a means to achieve the same effect as Beijing’s rougher regulatory interventions in Chinese markets: One off adjustments of wealth claims. Under Trump team Mar-a-Lago replaces Powell and the Fed as the main lever of financial power.

This is imaginative and clever, but to my mind it gives the Trump team far too much credit. Kaminska’s rationalization is the highest form of sane-washing, fueled, to return to my original thesis, by the assertion that something big “must be done”. In Kaminska’s case the really big thing that must be done is her claim that “there is no way to recalibrate the US economy without a wealth transfer”. All else follows.

#2 “Debtor-on-creditor violence” (Scaggs), or bullying not as a means to an end, but for its own sake.

Much of the more mainstream commentary on the imagined Mar-a-Lago accord consists in pointing out that it is hard for any reasonable person to see how the terms of the Mar-a-Lago accord could be acceptable to any of America’s partners. So, rather than critiquing the plan as though this was a failure of mind (Denkfehler) on the part of the Trump people, let us imagine that this “glitch” is not a bug, but a feature.

As Shawn Donnan points out in a typically perceptive comment on Bloomberg Supply Lines newsletter, most of Miran’s report isn’t about currencies. Most of Miran’s report is devoted to laying out a brutal logic of punitive sanctions. When sensible liberal observers scratch their heads and conclude that no reasonable counterpart to the US would accept such a deal, they are both seeing and missing the point. The point of the Mar-a-Lago “Accord” vision is to create a grand stage on which Trump’s America will demonstrate its coercive power to unilaterally change all the basic parameters of the world economy. The fact that only coercion will allow America to reconcile the contradictions between depreciating the currency, re-profiling debt and preserving reserve status, the fact that America has the heft to monetize its security guarantees and then to dress the whole thing up as an “Accord”, is the point. Overt and visible coercion dressed up as consent is precisely what a Mar-a-Lago Accord would deliver.

On this reading, the plans for a Mar-a-Lago Accord relate to normal economic policy in the same way that the grotesque facelifts and boob jobs that are de rigueur at Trump’s resort relate to beauty. The unapologetic “in your face” aspect of the violent surgical intervention, is the point. Btw: On facelifts and the politics of Mar-a-Lago this piece by Inae Oh at Mother Jones is fantastic.

#3 The Grift.

In a world of fake another move follows naturally: the grift.

This is what grabbed my attention in Mark Blyth’s original email. What Mark forwarded to me was a note from one of the market insiders with whom he is regularly in touch. This offered an interpretation of the Mar-a-Lago Accord quite different than the high-ground of macroeconomic policy.

Anecdote: “Revised 2025 Bitcoin Act has been published,” texted Marcel Kasumovich, never really sleeping, one eye always open. “Key differences: (1) 200k bitcoin purchases per year, (2) Holding period now permanent, (3) Exchange Stabilization Fund (ESF) engaged as a coordination function, and (4) Gold reserve revaluation being used to fund bitcoin purchases,” continued Marcel, keeping the team current.

The ESF is an emergency reserve fund managed by the US Treasury, created under the Gold Reserve Act of 1934. Initially funded with $2bln from the profits of revaluing US gold reserves after abandoning the gold standard, its original purpose was to stabilize the dollar’s exchange rate.

“Each Federal Reserve Bank is independently funded by Gold Certificates issued by the Treasury. By law, the gold is valued at $42.22 per ounce. Book value of those certificates is ~$11bln, market value ~$800bln,” wrote Marcel. “After revaluing the gold reserve to market prices, the Fed would be mandated to send the difference to the US Treasury. Voila, ~$789bln in fresh capital for the Treasury.” The Fed would credit the Treasury with nearly $789bln in newly created money (Fed liability), set against its revalued gold reserve (Fed asset).

These newly minted dollars could buy bitcoin, fund a sovereign wealth fund, or be used by Treasury for other purposes. “This would insulate the US balance sheet to a dollar depreciation. Hence, a Mar-A-Largo Accord aimed at weakening the US dollar would be shared with foreign creditors, a pill they would swallow with hopes and expectations of playing a stronger role in the future monetary system.”

If the dollar weakens, gold and bitcoin appreciate, and the US is not particularly worse off even as foreign investors lose money in real terms. “The directional of travel is clear.”

What if the maneuver is not about working-class industrial jobs or public debt at all. What if it is really best thought of as a grift, as wise-guy arbitrage, as play between devalued fiat currency, gold and Trump’s new bitcoin reserve?

#4 And then finally there is the simplest and crudest of them all.

Trump is tariff man. Tariff is the most beautiful word in the english language. The boss wants tariffs. You deliver tariffs on something and someone and for whatever reason. The rest is noise.

Pulling this altogether, here is my point:

None of us really knows where this clown car is headed and what drives it on its crazy course. It seems like a mystery even to many on board. Quite reasonably we look for elements of rationality. We ask: who inside MAGA 2.0 is thinking and what are their thoughts? We then relate that to our own efforts to diagnose America’s history and the history of the world economy. At the very least we need to explain how Trump 2.0 happened. Sometimes we will find a match between a strand of policy from inside MAGA and our own analysis and it is tempting to label that as “MAGA for thinking people” and to look for continuities with the Biden team etc. That mode of analysis is reasonable. To historically minded people it is appealing for obvious reasons. But it puts us at risk of is underestimating the radicalism of the break marked by the Trump administration. In search of historical context we miss what is most historically significant. We avoid facing the conclusion that the vision of a Mar-a-Lago Accord may have more in common with grift, a protection racket or a facelift pandering to the ignorant vanity of an old man than with economic policy as we have hitherto known it. Faced with Trump, the risk is that conventional realism is a form of escapism.