The New Era That Awaits
For two weeks, HAI has discussed recent Trump administration signaling of a notable policy shift back to “Hamiltonian economics.” In short, Hamiltonian economics refers to a government policy of high tariffs and high capital controls mixed with the need to settle any trade deficits in a viable neutral reserve asset (almost certainly gold) rather than U.S. government bonds and the stocks of U.S. companies.
One of the primary reasons for this shift (in addition to the fact that a U.S. dollar/Treasury reserve asset system artificially strengthens the dollar and thereby renders U.S. manufacturing globally uncompetitive), is that settling trade in both U.S. bonds and U.S. stocks allows trading partners and adversaries to gain an unacceptable degree of control over the U.S.
By contrast, widespread use of a neutral reserve asset (almost certainly gold), would help to ease the dynamics currently causing a structurally “too-strong dollar” that is choking off the U.S. industrial base. In addition, widespread use of a neutral reserve asset (almost certainly gold) would redirect trading partners and adversaries alike toward owning neutral value as apposed to ownership of our national interests.
Now, Hamiltonian economics was originally used to encourage the U.S. as a “pirate nation” to import (steal) foreign technologies, defend U.S. industries (using tariffs), and subsidize those industries (via industrial policy) to advance the industrialization of America.
But the principles of Hamiltonian economics predate Hamilton.
Britain did the same thing to establish its industrial dominance, the U.S. followed suit to establish its industrial dominance, and most recently China has been following the template by implementing the same strategy to establish its manufacturing dominance.
The good news for the U.S. is that the Trump administration seems to be signaling that it has both identified the devastating condition and understood the potential cure. It’s saying that it will return to the economic policy every great manufacturing power in our modern era has used to achieve that status.
In HAI‘s view, that is where we stand. The words have been spoken, but those words need to be verified by decisive and overwhelming action.
If the U.S. returns to Hamiltonian economic policies, it will amount to ending the post-1971 structure of the U.S dollar system in favor of a reserve asset (almost certainly gold) that floats in all currencies globally.
If the U.S. talks the talk but ultimately refuses to go back to Hamiltonian economic policies, the U.S. will very likely lose the industrial global power competition to China, just as the world lost to Britain before its heyday, and just as Britain lost to the U.S. in the late nineteenth century.
Now, as last weekend’s Washington Post article titled “U.S. teeters on return to all-out war with Iran after more troops killed” points out, this administration is talking about Hamiltonian economics but engaging in a war.
According to the Washington Post:
‘The U.S. is planning for a wider war,’ said one U.S. official familiar with internal administration discussions, adding that the Pentagon was increasing the number of military aircraft in the region.
But the official, speaking on the condition of anonymity because they were not authorized to talk to the media, cautioned that the expansion of U.S. operations will be limited by dwindling stockpiles of air defense and long-range munitions and constraints on the ability to surge more troops and aircraft into the area because of battle damage.
‘We do not have enough to safely sustain operations, and I don’t think the White House is aware of that,’ the official said.
Military experts have said that in addition to the toll taken on U.S. equipment and munitions stocks, the U.S. is unprepared for possible ground operations inside Iran that Trump last week refused to rule out.”
Now, HAI fully accepts that some readers dismiss the Washington Post as an unreliable source. However, in HAI‘s view, the fact remains that this WaPo article points out that we have a production problem that is interfering with our ability to implement policy, and this administration has already told us that we have a massive domestic production crisis bearing down on us.
Recall Secretary of State Marco Rubio’s words in his January 2025 confirmation hearing:
“If we stay on the road we’re on right now, in less than 10 years virtually everything that matters to us in life will depend on whether China allows us to have it or not.”
Like the Washington Post or not, in HAI‘s view, the U.S. either engages hard and fast in the Hamiltonian economic policy that can help reinvigorate a viable and competitive domestic manufacturing base, or we can hope that when it comes to “everything that matters to us in life,” “China allows us to have it.”
Even a decisive win in Iran won’t change (without Hamiltonian economics and a meaningful commitment to reindustrialization) the present peril facing the U.S.
Again, in HAI‘s view, the U.S. advocating for Hamiltonian economics is essentially the U.S. advocating for an end of the post-1971 structure of the U.S. dollar system as we’ve known it. That means gold would need to resume its role as the global neutral reserve asset (it is the only asset in a position to replace U.S. Treasuries in that role), but the gold market would need to get much bigger (in a supply constrained market, the price would need to go far higher) to do the job.
Perhaps that reality is part of the powerful truth that supports legendary hedge fund manager John Paulson’s claim this week on CNBC that “we are only in the early stages of a long-term bull market for gold.”
HAI wholeheartedly agrees. And apparently, so does China. As a Friday Bloomberg article titled “China’s gold imports surge to 173 tons in June, most since March 2024” reported, the Chinese see things as Paulson does. Despite the recent corrective pull-back in price, clarity over what’s likely coming on the broad monetary stage gives high confidence in gold as the must-own asset for the new era that necessarily awaits.
Weekly performance: The S&P 500 was down 0.61%. Gold was up 0.87%, silver was up 4.09%, platinum was off 0.83%, and palladium was off 0.64%. The HUI gold miners index was up 5.69%. The IFRA iShares US Infrastructure ETF was up 2.08%. Energy commodities were volatile and mixed on the week. WTI crude oil surged 9.62%, while natural gas was off 0.92%. The CRB Commodity Index was up 3.59%. Copper was up 1.31%. The Dow Jones US Specialty Real Estate Investment Trust Index was up 2.71%. The Vanguard Utilities ETF was up 2.17%. The dollar index was up 0.70% to close the week at 101.47. The yield on the 10-yr U.S. Treasury was off 13 bp on the week, closing at 4.68%.
Have a wonderful weekend!
Morgan Lewis
Investment Strategist & Co-Portfolio Manager
MWM LLC
