On Wall Street, a notion of how the Trump administration could reorganize the global financial system to better suit American interests is beginning to gain traction.
The so-called Mar-a-Lago Accord, which was once thought to be an absurd concept, has recently caught the interest of strategists and researchers from big banks and research shops. They have attempted to analyze the viability of such a deal and its potential effects on markets and their clients in research provided to MarketWatch.
Supporters have referred to such a framework as nothing less than a restructuring of the global monetary system, but President Donald Trump has made no indication that he is pursuing or intends to pursue it.
However, at least two of the president’s top economic advisors, Treasury Secretary Scott Bessent and Stephen Miran, Trump’s choice to lead the Council of Economic Advisers, have made suggestions that it might assist the administration in fulfilling some of its goals, especially those related to lowering the national debt and reviving American manufacturing.
According to the Wall Street Journal, Bessent has stated that he will advocate for “some kind of global economic reordering,”
“Take it seriously, not literally,” Bianco Research founder Jim Bianco said in a post about the agreement on X.
The ‘Mar-a-Lago Accord’: what is it?
The deal would essentially aim to entice America’s largest trading partners and creditors to join forces in order to weaken the U.S. dollar, lower American borrowing costs, and promote more manufacturing-related investment in the U.S.—all while maintaining the dollar’s dominance on the global stage. This would be accomplished by enticing them with access to American markets or the American security umbrella.
The dollar DXY is the deal’s primary emphasis. According to Steve Englander, global head of G-10 currency analysis at Standard Chartered, the greenback is still trading around its best level since the mid-1980s on a trade-weighted basis, despite softening since the beginning of the year.
The specifics of the agreement’s operation are unclear, though, and it is still unclear if Trump will be able to win over both enemies like China and American allies like the Europeans.
What issue would the ‘Mar-a-Lago Accord’ address?
There are advantages and disadvantages to the U.S. dollar’s reserve status, as Miran outlined in a study released in November.
One disadvantage is that it increases demand for reserve assets like U.S. debt, which keeps the dollar permanently overpriced.
There are advantages as well. However, Miran noted that the drawbacks of this status become more significant when U.S. economic dominance declines. The Mar-a-Lago Accord would seek to address this issue.
How would it operate?
In order to implement it, Trump would have to get pledges from U.S. creditors and trading partners that they would cooperate to devalue the dollar. However, he would also have to make sure that the sale of reserves denominated in dollars wouldn’t increase borrowing rates.
Another complicating element is that the Trump administration has already implemented tariffs, which it has promoted as a way to increase U.S. manufacturing and generate income.
However, increasing tariffs also has the tendency to make a currency stronger. This could have the opposite effect of encouraging more businesses to produce items in the United States.
In his paper, Miran used a strategy first put out by Zoltan Pozsar, the former markets expert at Credit Suisse, who wrote a paper about the Mar-a-Lago Accord back in June, to achieve the difficult balancing act of creating a weaker dollar without raising the cost of borrowing in the United States.
The agreement would require U.S. creditors to exchange Central Bank-held U.S. notes for 100-year nontradeable “century bonds.” If not, Washington can threaten to remove them from the protection of U.S. security.
When these bonds mature, they might be redeemed at a small premium, but they wouldn’t have a coupon. Fed swap lines would be made available to enable creditors meet any short-term liquidity demands in order to make up for the shortage of liquidity.
“A multilateral monetary accord in the twenty-first century is given shape by the Mar-a-Lago Accord. “President Trump will want foreigners to contribute to the cost of the U.S.-provided security zone,” Miran wrote in his study.
“A reduction in the value of the dollar helps create manufacturing jobs in America and reallocates aggregate demand from the rest of the world to the U.S.,” he stated. “The reserve debt’s term-out helps avoid financial market volatility and the resulting economic harm. One agreement accomplishes several objectives.
Additionally, Miran suggested imposing “user fees” on foreign central banks that own U.S. debt, which would lower borrowing costs by effectively keeping a portion of the coupon payments normally made by the Treasury.
Using American assets, like as gold reserves and federally controlled land, to perhaps collateralize U.S. debt is another concept that might be included in the framework of the Mar-a-Lago arrangement. During a recent podcast interview, Bianco raised the prospect that this may also assist reduce borrowing costs in the U.S.
He pointed out that one step toward achieving this could be Trump’s executive order to investigate the establishment of a U.S. sovereign-wealth fund.
What dangers exist?
Establishing the Mar-a-Lago Accord may have unforeseen repercussions, even if Trump is able to get other governments to cooperate in weakening the dollar.
It might encourage U.S. allies to accelerate their quest for a dollar alternative by coercing them into an agreement that primarily favors Washington and the American economy. That would jeopardize the dollar’s reserve status, which Trump has stated he wants to maintain.
As overseas buyers demand more compensation to counterbalance the likelihood that lending to the U.S. could come with new strings attached, it could also unintentionally raise U.S. bond rates and, consequently, borrowing costs, according to Englander of Standard Chartered.
Additionally, there is always a chance that a declining dollar may raise the cost of imports into the United States, which could fuel inflation.
The goals of the deal seem to conflict with one another. Making the currency lower while promoting greater foreign direct investment in the United States is one example. To weaken the currency without raising borrowing costs, another strategy would be to persuade international partners to sell off assets denominated in dollars.
Despite this, Englander stated that Miran’s strategy could succeed.
“Is it feasible? It can work, of course,” he replied. “Will it succeed? Whether Trump has the political capital will determine that.
