MOVE FAST, BREAK THINGS

Posted on 2025/04/10 by secret santa

BENEFITS of a PAPERLESS OFFICE (cont.)
https://cnbc.com/company-that-stores-government-records-in-a-mine
https://cbsnews.com/pennsylvania-iron-mountain-mine-elon-musk-doge
Pennsylvania ‘Iron Mountain’ mine vs Department of Government Efficiency
by Mike Darnay / February 13, 2025

“An old limestone mine operated by Iron Mountain that’s located just north of Pittsburgh in Butler County is drawing the attention of Elon Musk. The mine is located in Cherry Township and its cool temperature and low humidity levels are supposed to provide optimal and secure conditions to preserve items. The United States government’s Office of Personnel Management (OPM) uses Iron Mountain to process and store paperwork when federal workers retire and now Musk is taking aim at the use of the facility.

“We’re told that the most number of people that could retire possibly in a month is 10,000,” Musk said while speaking from the White House’s Oval Office earlier this week. We’re like, well, why? Why is that? Well, because all the retirement paperwork is manual on paper. It’s manually calculated, then written down on a piece of paper, then it goes down a mine… there’s a limestone mine where we store all the retirement paperwork,” he said, referring to Iron Mountain. “The speed at which the mine shaft elevator can move determines how many people can retire from the federal government,” Musk went on to say. “And the elevator breaks down and then.. nobody can retire.”

“Doesn’t that sound crazy? There’s like 1,000 people that work on this,” Musk said. “So I think if we can take those people and say… instead of working in a mine shaft and carrying manila envelopes to boxes in a mine shaft, you could do practically anything else and you would add to the goods and services of the United States in in a more useful way.” Multiple employees with the OPM who wished to remain anonymous told the Butler Eagle that Musk’s comments are inaccurate, stating that the facility doesn’t have an elevator and that the processing of retirement paperwork for federal employees varies on a case-by-case basis. “No two retirements are the same,” one employee said. “It changes depending on the agency they worked for, their position, and numerous other factors.”

The mine houses more than just federal paperwork and KDKA-TV has taken viewers inside the mine on several occasions in the past. The facility also stores some of the nation’s most priceless treasures and studios from Hollywood rent space to store the original master copies of classic movies. The mine also stores millions of historical photographs, glass negatives, and original recordings from artists including Elton John. Countless businesses and organizations also use the facility to store their digital data on servers…”

MOVE FAST BREAK THINGS vs UNITED STATES GOVERNMENT
https://theglobeandmail.com/upending-underlying-architecture-of-government-itself
https://kiplinger.com/politics/what-doge-is-doing

“There’s still lots of uncertainty about DOGE — the Department of Government Efficiency. The new office in the Trump White House has tried to “move fast and break things” to improve the federal government, in many cases using legally questionable methods. But a concerted agenda is slowly emerging. So far, DOGE has dismantled federal agencies, most notably USAID — United States Agency for International Development — now in a state of limbo. It’s also laid off thousands of federal workers as a prelude to an even larger reduction-in-force effort that is now under way at various federal agencies…

…In the meantime, expect DOGE to try doing more things by the book. This includes implementing an even bigger reduction-in-force initiative across several agencies. The Department of Education is in the process of cutting 50% of its staff (roughly 1,900 people) via both layoffs and voluntary retirement. The Department of Veterans Affairs aims to return to its 2019 employment levels (400,000 employees) by shedding around 80,000 jobs. The Department of Defense wants to lose at least 55,000 of its roughly 780,000-strong civilian workforce. The Social Security Administration will look to cut 7,000 of its 57,000 employees. But note that the traditional RIF process can take months to complete and comes with numerous requirements that open the door to more legal challenges…”

SPECIAL GOVERNMENT EMPLOYEES
https://quillette.com/2025/04/09/the-nonsense-of-the-tariff-men
https://npr.org/special-government-employee-trump-musk-doge
Trump hired Musk as a ‘special government employee.’
by Joe Hernandez / February 13, 2025

“When Donald Trump took office for his second term, he moved quickly to bring his political adviser and top campaign donor — tech billionaire Elon Musk — into the government. Musk now helms the Department of Government Efficiency, or DOGE, a White House team tasked with cutting federal spending. The unit has terminated a slew of government grants and contracts, according to its X account, and disrupted the work at agencies including the U.S. Agency for International Development and the Consumer Financial Protection Bureau, where workers have also recently been put on leave or lost their jobs.

Musk is what’s known as a “special government employee,” a designation given to people who join the government for a short period of time typically to provide specialized expertise. What is a “special government employee”? In 1962, Congress created the role of “special government employee,” which allows the executive branch, the legislative branch and independent federal agencies to bring on employees for specific roles on a temporary basis.

Typically, SGEs are hired as experts or consultants or serve as members of federal advisory committees, of which there are roughly 1,000 across the U.S. government. SGEs are limited to working for the government for no more than 130 days out of a 365-day period, though they can work multiple years, and they can either be paid or unpaid. NPR has reported that Musk is not being paid for his work with DOGE.

One reason government officials take on SGEs is that it’s less burdensome than hiring regular federal employees, according to Joanna Friedman, a partner with the Federal Practice Group, a Washington, D.C., law firm specializing in federal employment law. “If you’re hired as a federal employee, you have to go through typically the competitive selection process, which means you have to apply for a job and you must be selected as the best-qualified candidate,” Friedman said. “This is just an easier way to bring someone on board without as much red tape.” The Trump administration has also designated other members of Musk’s DOGE team as SGEs…”

MAR-a-LAGO ACCORDS
https://detroitnews.com/trumps-big-picture-economist-already-has-wall-street-hooked
https://bnnbloomberg.ca/what-a-mar-a-lago-accord-would-mean-for-the-us-dollar
What a ‘Mar-a-Lago Accord’ Would Mean for the Dollar
by Bloomberg News / February 25, 2025

“President Donald Trump’s aggressive plans to shake up how the US trades with the rest of the world have fueled speculation about the potential for a grand multinational bargain that would deliberately weaken the dollar — helping American exporters compete with rivals such as China and Japan. Trump hasn’t said he’ll do such a thing, but that hasn’t stopped the Wall Street chatter. Analysts have already settled on a name, the “Mar-a-Lago Accord,” after Trump’s private club in Palm Beach, Florida.

Much of the attention has focused on a paper by Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisers, published in November 2024 when he was a senior strategist at hedge fund Hudson Bay Capital. In it, Miran laid out possible policy options for reforming the global trading system and fixing economic imbalances driven by “persistent dollar overvaluation.” He’s not the only one in Trump’s orbit thinking along these lines. Before being picked as Treasury secretary, Scott Bessent predicted in June that there would be “some kind of grand economic reordering” in the coming years.

What would a ‘Mar-a-Lago Accord’ attempt to accomplish? The rough concept is this: Trump has promised to deliver a golden age that will include a renaissance for American manufacturing and exports. He also has longstanding concerns about the size of the US trade deficit, which hit a record $1.2 trillion in 2024, characterizing it as effectively a transfer of wealth abroad. The trouble is, the dollar’s exchange rate has been historically strong, undermining US competitiveness by making imports relatively cheaper. Indeed, some analysts view the dollar today as overvalued based on economic models that look at things such as the domestic purchasing power of a currency. This overvaluation, and its effects, means Washington has an incentive to reach some kind of deal with other nations that would address the currency strength.

Have similar accords ever been agreed? Yes. In 1985, a group of governments agreed the Plaza Accord — named after the New York hotel where officials met — against a similar backdrop: high inflation, high interest rates and a strong dollar. A deal was reached between the US and France, Japan, the UK and (then) West Germany to weaken the dollar against their currencies. The pact was made on the basis that the greenback’s huge move higher was damaging the global economy. The surge in the dollar had been spurred by the tighter monetary policy of Federal Reserve Chair Paul Volcker to bring down inflation, as well as President Ronald Reagan’s expansionary fiscal policy with tax cuts and increased spending. At the time, Japan was dominating exports and sparking a protectionist backlash from US lawmakers, much like China is today. While the accord succeeded in depreciating the dollar, it was later blamed for strengthening the yen too much. Plaza was followed in 1987 by the Louvre Accord, which attempted to draw a line under the dollar’s decline and cool the yen’s gains. In Japan, the agreements were blamed for playing a role in the nation’s descent into economic stagnation in the 1990s — a period known as the “Lost Decade” — a lesson that won’t be lost on China as it grapples with its own deflationary pressures, a real estate crisis and manufacturing overcapacity.

How could a ‘Mar-a-Lago Accord’ work? A traditional approach would involve American trading partners pledging to boost domestic consumption of the goods they produce, reducing their manufacturers’ reliance on exports to the US. It could also incorporate agreements to intervene in the foreign-exchange market to forcefully tilt currencies in the desired direction, although the market’s gargantuan volume of daily trading — $7.5 trillion at the last count — would make that a challenge. There could be provisions about interest-rate adjustments too, but central banks are even more independent today than they were at the time of the 1980s accords, making any pledges in that area problematic. The language from Miran and Bessent last year indicated they favored going beyond previous templates. Miran’s analysis embraces the concept that current account deficits (when the value of a country’s imports exceeds its exports) are the flipside of net capital account inflows (when more money is flowing into the country than goes out). Because the dollar is the world’s reserve currency, other nations keep buying it. That results in a persistently overvalued dollar that weighs heavily on US manufacturing. Any multilateral accord would need to diminish this source of upward pressure on the greenback.

How would US debt figure into the discussions? One area of recent speculation has centered on the idea of the US Treasury issuing government bonds that don’t pay interest — so-called zero coupons — and mature in 100 years. In his November piece, Miran cited a suggestion written in a June paper by former Credit Suisse analyst and founder of the Ex Uno Plures research firm Zoltan Pozsar, of an agreement between the US and its military partners, whereby in return for American security guarantees, allies are required to buy these century bonds. Others have raised the idea of the Treasury swapping some of the existing foreign holdings of US government debt for long-dated zero coupons. Allies that refuse to participate could have their security guarantees pulled, or be hit by tariffs, or both.

What would be the consequences of such a restructuring of US debt? The thinking is that it would help reduce US interest rates and the fiscal deficit, thereby weakening the dollar. But such a radical idea could also risk a crisis of confidence in the $29 trillion Treasuries market. The federal government’s long-stated debt-issuance mantra is to be “regular and predictable.” Putting pressure on allies to engage in a debt swap or to buy century bonds could do unpredictable damage to the Treasury market’s reputation. A key reason these securities have long been the world’s benchmark is that they’re viewed as highly liquid — in other words, easy to trade — and subject to the universally understood rule of law. The prospect of upending this landscape is why it’s difficult for many to envision a Mar-a-Lago pact involving debt swaps taking place.

But wait, hasn’t Trump championed a strong dollar? Both Trump and his economic team have said that the US remains committed to maintaining a strong dollar and have threatened tariffs on emerging-market economies that seek to move away from using the greenback to settle trade. Pursuing a policy that both supports the dollar’s role at the center of the global economy and seeks ways to weaken its value would be a tricky balancing act for the administration. What are the possible risks of a weaker dollar for the US economy? A weaker dollar would drive up the cost of imports and could send inflation higher as a result. It could also scare off investors who flock to US assets for their higher yield and safe-haven status, potentially diverting some of those flows into rival currencies such as the euro or the yen.”

(“Adds that Trump hasn’t said he’ll pursue an accord and that Miran’s paper presented possible policy options.”)

a USER’s GUIDE to RESTRUCTURING the GLOBAL TRADING SYSTEM
https://hudsonbaycapital.com/A_Users_Guide_to_Restructuring_the_Global_Trading_System
https://nationalpost.com/opinion/ian-lee-this-is-trumps-plan-for-global-economic-domination
A paper by one of the president’s cabinet picks sets out the strategy behind tariff threats
by Ian Lee / Feb 05, 2025

“During the past several weeks, federal cabinet ministers have claimed that we did not know what United States President Donald Trump wants to accomplish by threatening Canada with tariffs. Some pundits have claimed that the president of the U.S. has no substantial understanding of what impact these tariffs will have, and that they are some sort of a vanity project. Both claims are wrong.

Trump’s aspirations and intended results can be found in an audacious and radical November paper written by one of his cabinet picks, Stephen Miran, which lays out the theory behind his economic strategy. Miran, who previously worked on Wall Street, has a Harvard University economics PhD and served 10 months of the first Trump presidency in the U.S. treasury department as a senior advisor. He was nominated shortly after he authored the paper to be the chair of the Council of Economic Advisors. The Miran paper is the only systemic exegesis of the Trump doctrine in writing thus far. It is no exaggeration to suggest it is a crystal ball into Trump’s mind, revealing his economic vision for the next four years. Its title, “A User’s Guide to Restructuring the Global Trading System,” gives that away. Miran (and Trump) start from fundamental economic facts. The U.S. is the largest economy in the world today, accounting for approximately 25 per cent of global GDP among the 193 sovereign countries in the United Nations. And Miran assumes most businesses from most countries around the world want access to the U.S. economy. This is the U.S. “Trump card.”

Indeed, the U.S. is the modern Roman colossus, and now, as world hegemon, it wants to exploit its economic might to become even more hegemonic. This is extraordinary for international and regional hegemons throughout human history — such as Sparta, Rome, Persia, Egypt, Germany, Russia, Spain, Austria, the U.K., etc. — have mostly used military force to conquer others. Miran clearly indicates the U.S. will use its economic might — not its military might — as its primary instrument of coercion to achieve its strategic objectives. Moreover, Trump has stated he will create the architecture of a new world order without using soldiers and the military as the principal force de frappe. Or more accurately, the U.S. “soldiers” deployed to increase the hegemon’s power will be Google, Apple, Meta, Nvidia, Microsoft and other American tech giants.Miran documents and analyzes why Trump believes that the entire postwar international financial architecture, variously called the Bretton Woods system or simply multilateralism, has harmed American interests.

He states clearly that friend and foe alike took advantage of the U.S. in demanding and obtaining full access to American markets while protecting some segments of their own markets from entry by American corporations. He argues that the U.S. dollar has been consistently overvalued as it is the world’s reserve currency. This led to a hollowing out of American manufacturing and chronic current account deficits (since 1982) with the rest of the world. However, currency markets did not rebalance by driving down the value of the U.S. dollar.Currency markets did not adjust because of the high demand for U.S. dollars and U.S. Treasury securities by countries and corporations around the world, as part of macroeconomic policy and corporate strategy of these countries and corporations. Even worse, according to Miran, since 1945, the U.S. spent trillions on national defence to protect its allies. In 2024, the U.S. Department of Defence spent approximately $1 trillion. Miran notes that many allies did not contribute the two per cent of GDP agreed upon years ago by NATO signatories and thus were free riders benefiting from the U.S. military umbrella.

These flaws in the international system, which, argues Miran, harmed American interests, were compounded by the overvalued U.S. dollar. As he writes, “Demand for reserve assets (by countries and corporations around the world) leads to significant currency overvaluation with real economic consequences.” While this would normally lead to credit risk in U.S. assets — known as the Triffin tipping point — and lead to its loss as the world’s reserve currency, there are no credible alternatives to the U.S. dollar. Countries and corporations therefore continue to maintain high demand for U.S. dollar and U.S. Treasury securities. Miran argues that a fundamental reshaping of the international monetary system is required to address these ultimately unsustainable imbalances. He rejects past attempts at multilateral currency agreements. He notes multilateral currency agreements will only work if other currencies have U.S. dollars to sell. However, most U.S. dollar reserves are held in Asian and Middle Eastern countries (for example, China holds over $3 trillion) — and these countries are not friendly to the U.S.

Miran notes that as the U.S. has the lowest effective tariff rate in the world at three per cent per the World Trade Organization, it has greater latitude to raise its tariff rates. Miran clearly sees tariffs as a major policy tool to drive the rebalancing to reduce the value of the U.S. dollar relative to other currencies to improve the competitiveness of American manufacturing. This approach is additionally justified, Miran argues, by the enormous annual spending (currently $1 trillion annually) of the U.S. defence department to protect allies around the world, which Trump believes to be unfair. In Miran’s words, “tariffs create negotiating leverage for incentivizing better terms from the rest of the world on both trade and security terms” because “national security and trade are joined at the hip.” This allows Trump to claim that it is a “privilege and not a right” for any foreign firm to enter the U.S. market.

Indeed, Miran argues for a “much stronger demarcation between friend, foe and neutral trading partner.” Friends, he describes, “are inside the security and economic umbrella, but there is more burden sharing” and “may experience more favourable trade or currency terms. Those outside the security umbrella will also find themselves outside friendly arrangements for international trade and easy access to the U.S. consumer,” he adds. “They will have more aggressive costs imposed on them via tariffs and other policies.” Miran concludes that the second Trump presidency “presents potential for sweeping change in the international economic system and possible accompanying volatility.” He predicts that it will be “quite likely tariffs are used prior to any currency tools” because Trump has shown the former can be used to “extract negotiating leverage — and revenue — from trading partners.”

A close reading of the Miran geopolitical analysis of the perceived failures of the international economic system reveals that the Trump doctrine — much as Canadians may intensely detest it — represents an audacious, radical plan to revise the Bretton Woods system of multilateralism in place since 1945, which will address perceived inequities that harmed American interests to the advantage of countries around the world. If Henry Kissinger — the student of Klemens von Metternich and Otto von Bismarck — were still alive, he would instantly understand the strategic objectives of the Trump presidency to reorder the entire world economic and financial system using tariffs, to effect currency revaluations to drive capital investment to the U.S. While Canada’s national and provincial leaders may ignore it, they cannot deny it.”

“Ian Lee is an Associate Professor in the Sprott School of Business at Carleton University where he has taught the corporate and business strategy capstone course for 35 years.”

BRETTON WOODS III
https://static.bullionstar.com/blogs/uploads/2022/03/Bretton-Woods-III-Zoltan-Pozsar.pdf
https://www.iese.edu/insight/articles/trump-financial-strategy-dollar-diplomacy/
What might global investors expect from President Trump’s second term?
by David Teeters / November 8, 2024

“On November 5, 2024, the American people delivered a clear mandate to President Trump and the Republican Party. While mainstream news agencies reported the key issues on voters’ minds, I spoke to senior financial market participants in New York this week. They highlighted potential implications of an aggressive policy of financial realpolitik and dollar diplomacy from Trump in response to changes in the international monetary financial system.

A tiny bit of background: In 2022-23, Zoltan Pozsar captured the attention of global markets with his Bretton Woods III thesis. With BRIC nations’ ascendancy, this was “our commodities, your problem” as the self-imposed supply shock in the West from sanctions on Russia fed through to higher structural inflation. Inflation no longer perceived as transitory led to tighter monetary policy, exacerbating underlying debt dynamics. Years of accumulated imbalances on the U.S. sovereign balance sheet faced refinancing amid challenging market conditions and reduced demand from global investors for U.S. Treasury markets.

The feeling in November 2024 is clearly different. The U.S. is enjoying a unipolar moment of exceptionalism derived from strong economic growth and self-sufficiency as an energy superpower — despite our divided politics. Whereas Trump’s first term was marked by a hastily assembled team of advisers, financial markets expect a more experienced team looking to make a quick impact, since Trump only has one term left and midterm elections loom in 2026. The likely candidate for Treasury Secretary is experienced international financier Scott Bessent. Bessent has actively helped define a coherent economic plan for President Trump’s return to the White House. Inspired by the “three arrows” of Abenomics, policy goals would be “3-3-3”: 3% real economic growth; reduce the deficit to 3% (of U.S. GDP); a marginal increase of 3 million barrels of oil per day.

These goals directly address both the economic angst felt by the Americans who voted Trump back into office as well as a historic opportunity for the United States to grow its way out of the otherwise currently unsustainable U.S. Treasury debt trajectory. We should also expect to see former U.S. Trade Representative Robert E. Lighthizer as a key member of the administration. In his book No Trade Is Free, he takes on the unbalanced nature of global trade, which has been detrimental for the American workers to whom Trump is so loyal. This takes us back to the much-discussed role of tariffs and the original idea of Bretton Woods III as a new international monetary financial order.

So far, the theory that this would be initiated by opponents to America’s hegemony has failed to take off. At the recent summit in Kazan, Brazil’s President Lula didn’t even show up, highlighting the difficulty in creating unified action from such disparate national interests. What has changed? It is now in the clear and present economic interests of the United States to negotiate with its allies in a U.S. dollar bloc of trading influence, rather than the Wall Street elites who have benefited from the financialization of the economy. This policy aligns with Bessent’s 3-3-3 and the interests of Trump’s voters — to reshore manufacturing and promote the United States’ long-term strategic interests. However, underlying these goals is the need to restore U.S. sovereign funding to a sustainable path, one of the primary responsibilities of the Treasury Secretary.

Talk this week in New York with financial market participants has been about who pays for both the previous accumulated excesses (represented by the debt to GDP ratio, which is high even accounting for the U.S.’s special case of exorbitant privilege as global reserve currency to the world) as well as the anticipated future cost. There is clear path dependency and inherent tension between the three policy levers that Bessent discusses. We can expect some creative solutions as President Trump looks to cement his legacy early in his last term. The provision to the world of U.S. Treasury bonds as global reserve asset is not enshrined in the Constitution; in fact, there is realization in the Pentagon and elsewhere that it may be against the national interest to continue to provide the global public good of a safe asset. With no other national candidate, gold is expected to increasingly take on the role of a neutral reserve asset.

This could involve some accounting magic: as the U.S. Treasury doesn’t “mark to market” its world-leading gold holdings, simply remarking these to current market value would mechanically deleverage the U.S. balance sheet. Beyond marking to market, we could see a negotiated non-linear revaluation of gold as in the national interest of multiple major stakeholders, an appealing carrot in the “art of the deal.” Luke Gromen estimates that for every $4,000/ounce increase in the gold price, $1 trillion would be injected into the Treasury General Account. The message behind the relentless global central bank purchases over the past 10 years is clear: there is truth in the market adage, “Don’t do as they say, but do as they do.”

All financial crises are resolved by resorting to a larger outside balance sheet. The U.S. Treasury is currently overrelying on short-term bill issuance for financing. If the household, corporate or banking sectors are unwilling or unable to provide balance sheet (despite financial repression) at current market prices, the other remaining possibility is the foreign sector. This is the extreme financial realpolitik and dollar diplomacy mentioned at the beginning. If necessary, President Trump’s economic team could use the threat of tariffs to make a deal that America’s allies could not refuse: provide term funding for the U.S. Treasury (for example, with an off-market asset swap into a non-marketable century bond), locking in a new era of dollar dominance and explicitly allocating the costs of Pax Americana. Like central banking, balance sheets are best when boring. The extreme dislocations in global balance sheets need to be addressed. Accumulated losses do not simply disappear, they are allocated in inherently political decisions. And this week the American voter has spoken.”

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