American Wealth Skew & Scott Bessent: Cracking the 21st C. ERM

The vaunted ERM completely overvalued the British pound in the late 20th century, compelling a sophisticated capital markets orchestration, including the nominal intervention of George Soros' fund, to give the BoE political cover "to abandon" the ERM in 1992.

What followed exiting the ERM was 16 years of economic growth.

Now, do you understand why Trump's people are optimistic?

The Genius, though, of Scott Bessent's strategy is below:

If Scott Bessent could, I wager he would impose a massive wealth tax on the top 1% of Americans, especially on the top 0.5% Americans who drive capital flows.

However, a "wealth tax" would fail, miserably, politically in America. Likewise, an "unearned capital gains tax", which would achieve many of the objectives in this post and did succeed in the UK, also has no political backing in the US. Instead, we stuck to what works for Americans: FOMO-as-a-tax.

The "Stealth Capital Gains Tax" first induced a monotonically growing bubble in AI: by compelling the wealthiest Americans into an unsustainable bubble, Bessent can:

• finance infrastructure investment required for reshoring industry to America (done)
• push capital into AI-aligned investments that parallel reshoring, e.g. mining, manufacturing, and chemicals (done)
• finally, with the bubble popping, liquidate surplus capital gains that drive inflation... while.... (ongoing)
• INCREASE WAGES AT THE BOTTOM OF THE 'K' ECONOMY (ongoing)

Scott Bessent has, with his team, orchestrated a transformation of the American economy using "hot capital flows" that could have otherwise DROWNED America into an inflationary death-spiral: instead, the very capital that would have PUNISHED wage hikes for the "bottom of the K" and lower interest rates for the "bottom of the K" is about to be LIQUIDATED in a series of brutal margin calls.

Ponder this: the wealthiest population in your economy have lost 5% of their wealth: for the "highest velocity" capital, it's a catastrophic deflation. Meanwhile, the lower 90%, and skewed moreso to the lower 80%, of your population enjoy a modest inflation of wages. Then, with correct tuning, an economic orchestration(collaboration across C. Bank/Treasury/elite hf etc.) can deflate the wealthy while inflate the working classes without a wage-price spiral. That's the agenda, and it seems Bessent's right-on-track for achieving it.

In short, the unnecessarily rich speculators will, patriotically, liquidate their "paper gains" into cash losses to protect workers' REAL gains, as they enjoy wage increases and lower mortgage rates. With the skew and margin at record highs, a nice, nasty AI crash should send inflation expectations to the floor, possibly even opening room for a rate cut, by the end of the year.