“Crisis Investing” Issue 2 / February 2025 – Vol 2
Dear Reader,
On a September evening in 1985, finance ministers from the world’s largest economies gathered at New York’s Plaza Hotel for what would become one of the most significant currency interventions in modern history. The dollar had become too strong for U.S. exports to remain competitive, leading to factory closures, job losses across the industrial heartland, and record trade deficits. The Plaza Accord, as the agreement became known, set the stage for a controlled devaluation of the dollar, which would fall 40% against major currencies over the next two years.
The Plaza Accord worked because of two key factors—both of which feel relevant today.
First, the U.S. used trade threats as leverage. Just like now, the government pushed for tariffs, import surcharges, quotas, and tough talk about “unfair trade” to pressure surplus countries into negotiating.
Japan and West Germany, both heavily reliant on exports to the U.S., had a choice: accept a weaker dollar or get hit with punitive tariffs. They ran the numbers and came to a clear verdict: yielding to U.S. demands was the better option.
And so, the Plaza Accord was born—a carefully coordinated effort to bring the dollar down (without triggering a crisis).
Central banks worked together, selling dollars and buying yen and Deutsche marks to push the dollar lower. But the deal wasn’t just about currency markets—each country made key policy changes to support the adjustment. Japan agreed to open up its financial markets, Germany cut taxes, and the U.S. pledged to reduce its budget deficit.
The result? A high-stakes reset that rebalanced economic power among major economies and tilted trade back in America’s favor:
- A weaker dollar made U.S. exports more competitive, helping manufacturers.
- Trade deficits narrowed as imports became more expensive.
- Industrial production picked up, bringing back some jobs.
- Japan paid the price, with the yen’s sharp rise leading to asset bubbles and economic stagnation.
For everyday Americans, the Plaza Accord was a double-edged sword—it meant more jobs, but also higher import prices and tighter household budgets.
Note: In the end, the U.S. never followed through on its promise to cut deficits, which watered down the long-term benefits.
Fast forward to today, and it looks like we’re seeing a new version of the same playbook— only this time, the U.S. government is setting its sights higher.
A New Monetary Order
In Crisis Investing, our podcasts, and elsewhere, we talk a lot about money printing, unpayable debt, inflation, and the steady devaluation of our dollar savings. Up until now, it’s been like watching a slow-motion train wreck. But we’re convinced that’s about to change—radically. And we need to be ready.
Doug has warned for years that America is approaching an abyss. His warnings were mostly ignored. And no matter who was in office, the situation only got worse. Eventually, both the economy and the dollar would go over the edge.
It’s as if the Biden administration saw the abyss ahead and floored the gas pedal—looting and pillaging what they could before the inevitable collapse. We didn’t expect much better from Trump. We were wrong.
Right now, we’re standing on the precipice. But, for the first time, it looks like someone in government actually sees what’s coming—and is trying to pull off a maneuver to avoid disaster.
Will it work? We don’t know. But we’re convinced they’re going to try.
Before stepping in as Trump’s Treasury Secretary, Scott Bessent let the cat out of the bag:
We’re in the midst of a great realignment, a Bretton Woods realignment in terms of global policy, global trade… I’d like to be part of it, either on the inside or the outside.
Well, Bessent is on the inside. And he, along with other Team Trump members, has a plan.
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