Under the profound insight of economist Peter St Onge (from the Heritage Foundation), President elect Trump's series of economic plans, such as potential tax cuts and regulatory loosening measures, are foreshadowing unprecedented challenges to the Federal Reserve's influence in the future economic landscape.
St Onge pointed out profoundly that Trump's policy combination aimed at stimulating economic vitality, such as tax cuts and loose regulatory environment, may weaken the Federal Reserve's efforts in inflation control. These policies are expected to stimulate households and businesses to increase spending, potentially offsetting the Federal Reserve's measures aimed at slowing down economic growth. St Onge vividly depicts, "Powell is worried about Trump's determination to reverse this situation, with tax cuts, capital flowing back to the public, boosting consumption and investment, and active credit markets all expected by Trump
Furthermore, St Onge interprets the Federal Reserve's recent interest rate cuts (totaling one percentage point since September last year) as an acknowledgement of its past inflation management mistakes. He emphasized that the statement by Federal Reserve Chairman Powell revealed a sense of uncertainty, bluntly stating that "Powell is declaring his confusion to the world with unprecedented honesty, which the Fed has always done." In addition, he expressed deep concern about the Fed's pessimistic forecast for future economic growth (only 1.8% in the next three to four years), believing that this forecast appears particularly bleak from a historical perspective.
St Onge also questioned the authenticity of official economic data, suggesting that the Trump administration may make adjustments to it after taking office. He pointed out that there is a significant gap between public perception and official statistical data, and many American people believe that the country has entered the brink of recession.
In this context, St Onge calls for a complete end to the Federal Reserve, believing it to be the root cause of inflation and economic cycle fluctuations. He strongly advocated for the restoration of the gold standard, advocating for the Treasury to sell gold at a fixed price and replenish reserves in the open market to limit the Federal Reserve's manipulation of interest rates and the creation of economic instability. He bluntly stated, "The Federal Reserve, as the sole driver of inflation, is rooted in unrestrained monetary printing
St Onge firmly believes that the return of the gold standard will effectively curb the Federal Reserve's improper intervention in the economy, although this move may face strong opposition from beneficiaries of the current system, such as large banks and pension funds.
At the same time, he also explored the potential impact of Trump's economic policies on the US dollar exchange rate. Although Trump has expressed his desire to devalue the US dollar to promote imports and exports, his threat to impose tariffs on countries joining the BRICS monetary organization has made his stance appear complex and varied. St Onge believes that the long-term prospects of paper currency are not optimistic, but it may attract capital inflows into the US dollar in the short term.
In terms of investment strategy, St Onge tends to retain the US gold reserves as a "safety cushion" during times of economic turbulence. He expects economic growth to recover under Trump's policies, so his investment strategy is to 'prepare for the upcoming prosperity'. Although he acknowledges the risk of market collapse, he firmly believes that there is a greater possibility of economic expansion.
St Onge's viewpoint provides us with a fresh perspective that the Federal Reserve is not the guardian of economic stability, but a potential driver of inflation and economic volatility. He called for the restoration of the gold standard to reshape economic stability and explore a new path for future economic development.
