GEOPOLITICAL UPGRADE / MACLEOD FINANCE

Geopolitical update

Trump’s MAGA policy opens up the world to China’s trade and influence, the rehabilitation of Russia, and a decline of the dollar’s role in international finance. The benefits will be reflected in gold

ALASDAIR MACLEOD 

Introduction

President Trump is keen to stop the USA being the world’s military policeman, except where foreign governments are prepared to pay for the privilege. 

Instead, his focus is to concentrate US power and influence on North and Central America. 

The Ukraine war is nearly over, with Russia close to winning it. 

The only outside area where he is likely to remain fully committed is with Israel and her security.

These are fundamental changes to the world order with important ramifications for nations in the Western alliance which are already in serious economic decline, benefiting the Asian hegemons.

Crudely put, under Trump the Americas are going to be the US’s primary sphere of influence. 

Asia and the rest of the world will be less so. 

The complete closure of USAID is the first casualty of this policy. 

It is a closure which plays into China and Russia’s hands. 

And it will lead to a decline in everyone’s dependency on the dollar as their medium of international exchange.

As a consequence, US allies are likely to drift away from her political influence, raising questions over global capital flows. 

Can the US Treasury still rely on foreign demand for US Treasuries to fund its deficit? 

And will the US retain ultimate control over global capital flows?

Funding the budget deficit is likely to require higher bond yields than it would otherwise require. 

And those nations with dollar denominated debt are bound to turn to China to reduce their exposure to dollar creditors.

Changes in US foreign policy in Europe

The new US president is anti-establishment and nowhere is this more important for the rest of the world than with respect to US foreign policy. 

He has made his intentions clear — to reduce foreign dependence on America in both trade and foreign wars. Trade tariffs are fundamental to his Make America Great Again policy, and he professes to be fed up with foreign freeloaders.

The only exception appears to be Israel. 

That mess is ongoing, and Trump’s current struggles for a solution appear unacceptable, at least to the Arab nations who see disrespect for Palestinian property rights in Gaza and potential refugee problems for themselves. 

Unable to withdraw from involvement with Israel, Trump may be more likely to restrict US involvement elsewhere as a result.

Trump has already closed down USAID. 

NATO is likely to be next in the firing line. 

And Trump has particularly expressed his dislike of the EU, whose states make up 27 of the 32 members. 

He sees them as freeloading on the back of US defence spending. 

So far, other than a meeting planned with General Kellogg, Trump’s special envoy with respect to Ukraine for which a date has yet to be set, and a courtesy visit by NATO Secretary General Mark Rutte to Palm Beach last November, there appears to have been little public NATO contact with Trump’s administration.

Undoubtedly, Trump has been preoccupied with domestic matters, but that will change. 

In any event, from the US’s point of view, NATO is a side issue, always supporting US foreign policy. 

US Presidents do not often consult NATO on policy. 

And so far as Trump is concerned, NATO is there simply to contribute to defence costs, and they don’t pay enough.

With respect to Ukraine, these signals will be keenly monitored by the Russians, who are close to gaining all the territory east of the Dnieper River. 

In any peace agreement, the minimum Putin will demand is to keep Crimea and the Russian-speaking Oblasts, and that the rest of Ukraine will be neutral. 

In my view, this will require a reconstituted government in Kiev wholly independent from NATO and even Russia-leaning in its foreign policy.

The reason Putin is likely to insist on Russian influence over Kiev is that the US has a history of reneging on agreements with Russia and a treaty is simply not to be trusted. 

It can only therefore act as cover for what actually happens on the ground. 

But once relations are normalised, Ukraine would then have the opportunity in time to benefit hugely from EU—Russian trade. 

Infrastructure investment with China’s involvement could then help rebuild this shattered nation rapidly.

Over time, Europe and Russia will reap the benefits of the US walking away from the Ukraine mess. 

Politically, Trump needs to distance himself from because America and NATO have lost the war, having badly underestimated Russia’s resilience and her battlefield superiority. 

A new Yalta treaty would provide cover for both the US’s exit and satisfy Russian demands.

In the wake of the Ukraine failure, NATO is likely to become even less important to the US administration given Trump’s autarkic focus on MAGA.

The consequences of US autarky

Trump’s general downgrading of foreign affairs and the greater priority afforded to the domestic economy will mean less power and funding for the Department of Defense. 

One can even imagine DOGE combing the DoD’s books for cost savings in foreign military establishments. 

It could be a protracted struggle between DOGE and Langley, but central to Trump’s intention to withdraw from expensive foreign commitments with little apparent benefit to America.

It promises to reset the global scene, with Russia and China freer to pursue their BRICS ambitions, building on global relations for a world not dominated by America and her NATO allies. 

For China, it has been a process which accelerated from the time of Trump’s first presidency and his attitude to US imports from China. 

Since then, China’s exports to BRICS members have overtaken those to the US.

Anti-Chinese sentiment has been fuelled by the US and followed dutifully by her epigones in NATO. 

But as Trump focuses on MAGA the pressure for Europeans to ostracise China, and Russia for that matter, will diminish. 

At first, it is likely to be a slow process but despite tariff wars the détente over Ukraine will be beneficial for Europe and Germany in particular.

Gold

An optimistic outlook following America’s declining influence is far from certain. 

But one area which is important is the dollar’s future. 

As the highest form of credit, the dollar is facing a challenge from money itself — gold. 

And China, Russia, and a plethora of central banks independent from US influence have been accumulating it aggressively. 

Of a combined supply of mining output and scrap, which according to the World Gold Council’s estimate was 5,031 tonnes in 2024, relatively little was taken by North America and Europe. 

Jewellery, bar, coin, and technology in those two areas were probably more than covered by their own scrap supplies, mine output going to Asia: China, India, Turkey, and Russia along with associated nations and their central banks.

Of the approximately 200,000 tonnes of above-ground gold stocks, the large majority is now held by Asian governments and their peoples. 

This imbalance is exacerbated by missing central bank gold from elsewhere which since the 1970s has been leased and not returned.

The US Treasury was and remains the ringleader in anti-gold propaganda. 

We can be sure that the bulk of missing central bank gold holdings (estimated to be a minimum of 10,000 tonnes by analyst Frank Veneroso in 2002) devolves on the US Treasury and the New York Fed, the latter acting as the repository for central bank earmarked gold. 

As one wag put it, Fort Knox is empty except for outdated IOUs from operators in the original gold-based carry-trade. 

The same might be said of the New York Fed, as Germany’s Bundesbank discovered.

Besides some of the obvious problems this imbalance in gold ownership imposes on the US, there is the institutional denial of gold as money — a denial in the face of common law. 

This post-Keynesian view is not generally shared outside Europe and North America, and the few nations that do such as India are having to rethink it. 

Consequently, while the dollar is tending to rise in value against other currencies, measured in real, legal money which is gold the dollar’s decline is accelerating.

Conclusion

This article has focused on the ramifications of US isolationism both in respect of foreign policy and the impact on the dollar. 

With respect to both global trade and the dollar’s future, the US Government’s stated intentions play into the hands of China and Russia, who are now realising Mackinder’s geopolitical dream, The Geopolitical Pivot of History, published in 1904.

Being a medium to long term extrapolation of President Trump’s stated policy objectives, the purity of this argument is likely to be overtaken and hidden by events, particularly an impending deflation of the current credit bubble. 

Nevertheless, it is a contributing factor to the ending of the dollar-dominated era.