The start of the new school year promises to be eventful in the United States. The US Federal Reserve (Fed) is expected to cut interest rates for the first time in five years. With the job market remaining fragile, the spectre of recession still looming, and the trade war adding to uncertainty, this decision shows above all that the major financial cycle that began in the United States is coming to an end.

Trump's policy is no accident. The US president wants to control history in a period as short as his term in office. By returning to protectionism, he has only one goal: to preserve American hegemony. He knows that it is in decline and that its fall is near if nothing is done to stop it. Many financial indicators are in the red: first, the country's debt recently exceeded $37 trillion, or $108,000 per American citizen. The budget deficit stands at 8% of GDP, but the slow de-dollarization of the world prevents the country from being able to run up its deficit indefinitely. The trade deficit is also very high, at $1.2 trillion, which means that the United States now imports twice as much as it exports. Corporate bankruptcies also rose by 20% last year, a historic rate. For American households, total debt has reached $17.5 trillion, an unprecedented level, with credit card debt exceeding a record $1.3 trillion and average interest rates above 20%. Mortgage interest rates average over 7%, further complicating access to housing, with the median age of buyers in the United States already at 56, compared to 31 in 1981. In this context, the household savings rate has obviously fallen further, to 3.5% at present, the same level as during the 2008 financial crisis.

On the other hand, since one person's debt is another person's asset, the US markets are doing very well indeed. The two main indices, the S&P 500 and the Nasdaq, continue to reach new highs thanks to new growth stocks. And the total market capitalization of US companies is over $45 trillion, or nearly 170% of GDP. Finally, the United States remains the preferred destination for global savings. 

However, this excessive financialization is leaving its mark. Apart from the social and political consequences, the United States has been steadily deindustrializing. For several decades, bank loans have been directed primarily toward the purchase of financial assets (real estate, stocks, etc.) rather than productive investment. Today, goods production accounts for only 10% of the country's GDP, with the rest coming from services. However, unlike goods, services produce very little real value. Such a model cannot therefore be considered sustainable. For this reason, in a world where scarcity is becoming the norm, Trump is resorting to protectionism to restore the country's manufacturing power. 

However, America's ambition appears to be compromised, as the transition from a financialized economy to an industrialized economy is proving difficult to achieve. It is indeed the financialization of the country that has led to its deindustrialization, as capital is directed towards the most profitable short-term investments rather than towards sectors linked to productive investment, which are unprofitable or too costly. Furthermore, not only has the country's deindustrialization been going on for several decades, but value chains have also shifted from West to East, particularly to the new Asian dragons, where labor costs remain particularly low. In addition, the production of many crucial industrial components (semiconductors, batteries, rare earths, etc.) is now mainly located outside the United States, particularly in Asia. This has led to the emergence of geopolitical tensions between powers, particularly between the United States and China, in a global race for accumulation. Finally, even in industry, production is highly automated and requires far fewer jobs than before. In 1980, industrial employment accounted for 20% of the country's GDP; today it is less than 8%. Seeking to bring back the factory jobs of yesteryear is an illusory goal that could weaken the country's competitiveness.

However, this policy could receive support from the US central bank. With targeted financing and a reorientation of credit towards industry, particularly through the development of regional banks, the Fed could help Trump's protectionism. But the central bank, constrained by the limits of its mandate, is subjecting itself to this policy rather than anything else. With inflation no longer falling below 2%, the application of tariffs will increase pressure on prices, complicating its inflation target and creating further uncertainty in the markets. This is particularly true given that Trump is pressing the institution to lower its rates further — while expressing his desire to replace the Fed chair — at the risk of reigniting inflation and sending it into a new spiral.The two or three rate cuts expected in the coming months would only fuel this trend.

While Trump's ambition is full of contradictions, his policy can only be understood through a long-term analysis. At a time when the financial stakes are so high, and when the world's leading power is aware that its supremacy is under threat, inconsistencies are compounded by the use of force, which becomes the last resort. This is an admission of a crisis of confidence in the country and of marked impotence. Hence the launch of a trade war against the rest of the world, sanctions against other countries, withdrawal from international organizations, etc. But the adverse effects of these measures are already becoming apparent. US policy appears counterproductive in many respects: the dollar continues to depreciate. While Trump wants to make the country more attractive, foreign investors are turning away from the US currency. So much so that central banks now hold more gold than US Treasury bonds... And gold buyers are located on the other side of the planet, in the East, where they are shaping the outlines of a new world, as demonstrated by the recent meeting of the Indian, Chinese, and Russian presidents at the SCO summit to strengthen their ties.

 

 

US policy will therefore do nothing to change the fact that the country is moving forward under the illusion of stability, buoyed by the omnipotence of its financial sector, which can only grow by weakening the country's overall conditions. This contrast has been visible in all countries that have experienced a period of hegemony, from medieval Italy to England during the Industrial Revolution and the Netherlands during the Renaissance. Yet all have met the same end: monetary and military power weakening in tandem with the emergence of new powers. For from a fall comes a reign, from a crisis comes hope, from creation comes destruction...

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