Editor’s note: No doubt you’ve been hearing about the “Mar-a-Lago Accord” in the financial media lately. But what is it? And what would a Mar-a-Lago Accord mean for you? Geopolitical investment analyst Jim Rickards was the first to identify the idea of a Mar-a-Lago Accord way back in 2019. He’s since provided coverage in his newsletter Strategic Intelligence Australia. So we invited him to explain what investors need to know…
The Mar-a-Lago Accord is an echo of the three major international currency accords since the original Bretton Woods Agreements reached in 1944…
The first was the Smithsonian Agreement in December 1971. This came in the aftermath of President Nixon’s decision on August 15, 1971, to end the convertibility of US dollars into physical gold by US trading partners at the fixed rate of $35.00 per ounce.
The major countries in the global system (U.S., UK, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, Canada, Belgium, and Netherlands) met at the Smithsonian Institution in Washington DC to decide how to reopen the gold window.
The main US goal was to devalue the dollar. In the end, the price of gold was increased by 8.5% to $38.00 per ounce (revalued to $42.22 per ounce in 1973), which equalled a 7.9% dollar devaluation. Other currencies were revalued against the dollar, including a 16.9% upward revaluation of the Japanese yen.
The effort to reopen the gold window failed. Instead, major countries moved to floating exchange rates, which remains the norm to this day. Gold moved to free market trading and is currently about $3,050 per ounce. That gold price represents a 98.8% devaluation of the dollar measured by weight of gold since 1971.
The period from 1971 to 1985 was tumultuous in foreign exchange markets including the Petrodollar agreement (1974), the Herstatt Bank collapse (1974), the sterling crisis (1976), US hyperinflation (50% from 1977-1981), a gold price super-spike (1980), and a major global recession (1981-1982). By 1983, inflation was subdued, the dollar was gaining strength, and strong economic growth was achieved in the US under Ronald Reagan.
The next major economic gathering on foreign exchange was the Plaza Accord in September 1985. This was convened by US Treasury Secretary James Baker at the Plaza Hotel in New York and included the US, Germany, the UK, Japan and France. At the time, the dollar was at an all-time high relative to other currencies. The dollar had even strengthened against gold, which had dropped in price from $800.00 per ounce in January 1980 to around $320.00 per ounce in 1985.
The purpose of the meeting was to devalue the dollar in stages. In this respect, the meeting was a success. Importantly, the method of devaluation was to be gradual and it was to be accomplished by central bank and finance ministry interventions in the foreign exchange markets. It was not a fiat devaluation; it was a finesse.
In practice, the market interventions were quite few. Once foreign exchange traders got the message, they took the dollar where it needed to go on their own. No foreign exchange dealer wanted to be on the wrong side of the trade if the central banks decided to intervene on any particular day.
The Louvre Accord, signed on February 22, 1987, among the US, UK, Canada, France, Japan and Germany was, in effect, a victory lap following the Plaza Accord. Between 1985 and 1987, the dollar did devalue against other currencies. The dollar also fell against gold, which rose from $320 per ounce to $445 per ounce by the time of the meeting.
It was mission accomplished for Treasury Secretary James Baker. The purpose of the Louvre Accord was to lock down the accomplishments of the Plaza Accord, stop further dollar depreciation, and return to a period of relative stability in foreign exchange markets.
This accord was also a success. The dollar was mostly stable after 1987, despite the introduction of the euro in 2000 (the euro bounced between $0.80 and $1.60 in the early 2000s. Today it’s $1.09, which is not far from its original valuation of $1.16).
The other wild card was gold. After hitting bottom at around $250 per ounce in 1999, gold surged to $1,900 per ounce in 2011, a 670% gain for gold and a de facto devaluation of the dollar when measured by weight of gold. The period of relative stability in foreign exchange markets lasted until 2010 when a new currency war was unleashed by President Obama.
A new Mar-A-Lago Accord
Which brings us to discussion of a possible new international monetary conference in the chain of conferences from the Smithsonian Agreement to the Plaza Accord to the Louvre Accord.
Given Donald Trump’s dominance on the world economic scene today and his love of ornate architecture of the kind seen at the Plaza Hotel and the Louvre (Trump owned the Plaza Hotel from 1988 to 1995), it’s not a stretch to expect that Trump would convene any new world monetary conference at his equally ornate Mar-a-Lago club in Palm Beach, Florida.
The first discussion of a Mar-a-Lago Accord appears in Chapter Six of my book Aftermath (2019), published six years ahead of current attention to the topic. That chapter is titled “The Mar-a-Lago Accord” and contains extensive discussion of the evolution of the international monetary system starting in 1870, including the more recent accords noted above.
It then moves through my private meetings with IMF head John Lipsky and Treasury Secretary Tim Geithner, with a focus on a possible new gold standard and the attempted replacement of gold by the Special Drawing Right (SDR), created in 1969 and used among IMF members ever since. It ends with the classic 1912 quote from Pierpont Morgan that, “Money is gold, and nothing else.” and recommends that investors acquire physical gold for their portfolios. The dollar price of gold has risen 120% since that recommendation.
Today’s vogue in Mar-a-Lago Accord research began with a November 2024 paper written by Stephan Miran titled “A User’s Guide to Restructuring the Global Trading System”, published by Hudson Bay Capital. Although the title refers to the trading system, it explains how currency devaluation can be used to offset the impact of tariffs and refers to “persistent dollar overvaluation.”
From there, it’s a short leap to the ghost of the Plaza Accord and the need for a new Mar-a-Lago Accord. (Shortly after the paper was published, Trump appointed Miran as Chair of his Council of Economic Advisors, which gives his views added weight).
Issuance of 100-year bonds
In the currency section of the paper (pages 27-34), Miran not only suggests a devaluation of the dollar; he proposes that the US issue 100-year bonds.
In Miran’s view, 100-year bonds will be attractive to foreign reserve managers and will reduce any dollar selling needed to prop up their own currencies. Those long-term dollar holdings will mitigate short-term dollar devaluation in a way that moves the entire international monetary system toward a desirable equilibrium. Miran specifically uses the term Mar-a-Lago Accord to describe his proposed system.
There are many more technical details in Miran’s plan that we don’t have room to discuss in this article. These include use of the Treasury’s Exchange Stabilization Fund, the Fed’s Bank Term Funding Program, and Fed currency swap lines. Miran also suggests using the International Emergency Economic Powers Act of 1977 (IEEPA) to impose withholding taxes on interest payments to foreign holders of Treasury securities (a form of capital controls) as a way to discourage trading partners from holding Treasuries and therefore a way to devalue the dollar.
Trading partners would be evaluated using a traffic-light system. Countries would be ranked green (friendly), yellow (neutral) and red (adversary). Green countries would get US military protection and the most favourable tariffs, yellow would get reciprocal tariffs, and red countries would get no security help, punitive tariffs and possible capital controls.
A financial catastrophe in the making
In effect, Miran is trying to have it both ways. He wants to devalue the dollar and at the same time keep the dollar at the centre of the International Monetary System.
Nixon did this in 1971 and Baker did it in 1985. With regard to Miran, one cannot resist a paraphrase of Lloyd Bensen – ‘Stephan, you’re no Jim Baker.’ The success of the Plaza Accord depended entirely on close cooperation of the major country finance ministries. No such cooperation exists today given sanctions on Russia, tariffs on China and the US isolation of the EU with respect to the War in Ukraine.
Since Miran’s paper, the topic has spun completely out of control. A recent MarketWatch headline says, ‘Wall Street can’t stop talking about the “Mar-a-Lago Accord.”’
Some analysts propose that gold on the Federal Reserve’s balance sheet (actually a gold certificate) would be revalued from $42.22 per ounce to the market price (now $3,050 per ounce) with the “profit” added to the Treasury General Account. Another idea is to use US assets such as land and mineral rights to collateralize US debt.
As of March 2025, no one knows what a Mar-a-Lago Accord would actually be or whether it will even happen, so it’s impossible to describe the impact.
But here’s what we do know Trump is planning…
‘We’re going to become a wealthy nation again, wealthy like never before…’ That’s what President Trump told reporters aboard Air Force One in April. Most dismissed it as typical Trump bombast.
But what if he wasn’t exaggerating? I believe the President is preparing to unlock a staggering $150 trillion American asset — one that’s been shut away for decades by previous US administrations for several bizarre reasons.
Australian investors who know where to look could potentially benefit
enormously when this ‘sovereign wealth fund’ is unleashed. The Mar-a-Lago Accord will lie forgotten in a blaze of stock market surges.
But only within one particular sector. On Wednesday, I’ll reveal which one.
All the best,
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Jim Rickards,
Strategist, Strategic Intelligence Australia
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Murray’s Chart of the Day
– US 10-Year Bond Yield
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| Source: Tradingview |
Keeping an eye on US 10-year bonds is important as we move forward.
The chart above shows you a weekly chart of the US 10-year bond yield. Remember when the yield moves higher the price of the bonds are going down.
The chart shows the big jump in yields from near zero in 2020 to 5.00% in late 2023.
Since then the yield on US 10-year bonds has been stuck in a clear range between 3.25-5.00%.
I don’t think anyone knows which way 10-year bonds will break out of this range and the direction of the break will be incredibly important for the markets in general.
Above 4.80-5.00% is a danger zone because it will confirm a continuation of the current uptrend in yields. With the trade war affecting growth you would expect yields to fall.
But if slowing trade leads to less offshore buyers of US debt and China continues to sell US bonds to support the Yuan and buy gold, perhaps US 10-year bond yields will go up instead.
The weekly trend on yields remains down, so I think yields will continue to fall, with a move above the danger zone a low probability.
But there are signs trade between the US and China is about to fall off a cliff in the next few months unless a deal is made, so we have to be prepared for all outcomes.
A fall in US 10-year bond yields below 3.25-3.60% will be a relief for the markets, because it will confirm a change of long-term trend and the possibility yields will continue to drop.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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