- In policy discussions, most investors tend to focus on tax cuts, tariffs, and deregulation. But the smart money is focused on something else – and they’re worried.
- Thanks to our sound economy, business-friendly laws, and political stability, America serves as the world’s economic safe harbor: investors here and abroad prefer to own U.S. assets, sell to U.S. customers, lend to U.S. consumers, and transact in U.S. dollars.
- We’re 4% of the world’s population, but 16% of its economy, and we capture 30 cents of every dollar invested by the rest of the world. That extra demand boosts the value of your home, your 401(k), and your business. It means you can borrow more – at lower rates. It means your dollar goes farther. Call it our “safe harbor advantage.”
- That safe harbor advantage is a lot like your personal credit rating. If you stiff lenders, your premium shrinks, and you pay more the next time. Over time, good credit builds wealth; bad credit destroys it. That’s why successful business people talk a lot about the value of their word.
- America is no different – just a bigger “business.” Our safe harbor advantage comes from honoring deals, paying our bills, doing what we say we’ll do. Financial markets don’t really think about “red” states and “blue” states. They value our predictability, transparency, and reliability.
- Reckless policymakers can diminish the value of America’s word with a trade war, by playing games with the U.S.’s debt limit, or meddling with Fed policymaking. Even a small increase in the financial markets’ rating of our political risk can, over time, wipe out trillions of dollars in wealth and destroy millions of jobs.
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If you’re asking the question “who’s better for the economy?” and not thinking about our safe harbor advantage, you are missing the big picture.
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