Tag Archives: Donald Trump

Defence, National Security, Nuclear Weapons

Fears of a more dangerous Cold War

NUCLEAR WEAPONS

Intro: As weapons limits expire, the scene is set for a new nuclear arms race between the US and Beijing

Around midday on October 30, 1961, a Soviet plane flying above the Arctic archipelago of Novaya Zemlya dropped the most powerful nuclear bomb ever created.

The USSR’s “emperor bomb” was 3,000-times more powerful than the US atomic attack that killed 140,000 people in Hiroshima two decades earlier. On explosion, it unleashed a six-mile-wide fireball and a mushroom cloud that loomed more than 40 miles into the sky. And the Soviets were testing it at only half of its designed capacity.

Since then, decades of negotiations and arms-control treaties have massively reduced American and Russian warhead arsenals, with neither side testing a nuclear bomb in more than three decades.

But the last of these bilateral agreements has expired – and, with it, hopes that the nuclear arms race had been consigned to the history books.

The New Strategic Arms Reduction Treaty (START), which capped the number of deployed nuclear warheads held by the US and Russia, has now come to an end.

It is the first time since the 1970s that the two powers have had no agreement in place without at least negotiations for a new treaty under way.

At a time of huge geopolitical upheaval, analysts and diplomats are concerned that the stage is set for a new nuclear arms race – one that could prove even more dangerous than the world has seen before.

This is because the competition will not just be confined to Russia and the US.

China has also been developing nuclear weapons at a startling trajectory. It has more than doubled its stockpile of warheads over the last six years.

A three-way race will be hugely destabilising for the world order. If America tries to build an arsenal large enough to deter its twin foes at once, it will spur an even more dramatic increase in their respective stockpiles.

The director of the Project on Nuclear Issues at the Centre for Strategic and International Studies (CSIS), says that although this is the end of an era, it is not the end of arms control “but it is definitely the end of arms control as we know it.”

Smaller nuclear powers such as Britain and France will also face pressure to bulk up, particularly at a time when US security guarantees feel less reliable. And there will likely be a proliferation of new nuclear states.

Donald Trump has insisted for decades that he wants denuclearisation. But he seems to have no strategy in delivering this. His plans to build a new missile defence system – which he refers to as the “Golden Dome” – are only fanning the flames.

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Computing, Digital Economy, Technology

Quantum computing threatens crypto’s future

CRYPTOCURRENCIES

Intro: Bitcoin et al are increasingly becoming more insecure – and not just because of price volatility

In Robert Harris’s The Second Sleep, the novelist imagines a world hundreds of years in the future where humanity has regressed to a medieval standard of living, population, and way of thinking.

Towards the end of the book, we learn what might have caused this calamity: not a pandemic, meteorite strike, or nuclear war, but a complete collapse in the digital economy.

From payment systems to Just-In-Time supply chains and the wealth of machinery that sustains us, the modern economy is almost wholly dependent on digital instruction.

If everything went down all at the same time, a state of anarchy would rapidly establish itself. In the ensuing chaos, it would be every man for himself with likely devastating consequences for lives and civilisation more widely.

It is hard to imagine what combination of circumstances might completely and lastingly disable the digital economy. However, cyber threats are very much a real, present, and fast increasing danger.

You only need to look at what happened to Jaguar Land Rover last year to see the dire consequences when firewalls are breached. It closed the UK automotive company down for more than a month.

Growing resources and time are being devoted to further securing these systems in more or less every walk of life – a prime example of the diseconomies of technology if ever there was one – and not least in the wild-west world of cryptocurrencies, wholly dependent as they are on complex encryption to safeguard value and assign ownership rights. The threat posed to these assets by advances and developments in quantum computing has long been a main topic of debate in the Bitcoin community. The issue has recently gone viral after being raised in Christopher Wood’s much-followed Greed and Fear investment newsletter.

As the head of equity strategy at the investment bank Jefferies, Wood points out that deriving a public key from a private key is computationally simple. Bitcoin and other forms of cryptocurrency rely for their security on the assumption that the reverse operation would take trillions of years, even for a sophisticated supercomputer. But as Wood says, “This asymmetry collapses with the arrival of cryptographically relevant quantum computers, potentially reducing the time to derive a private key from a public key to mere hours or days.”

The launch by Microsoft of the Majorana One quantum chip may have accelerated so-called “Q-Day” – the date when quantum computers become powerful enough to break most current public-key encryption – by several years. A report published early last summer by Chaincode Labs estimated that up to 50pc of all Bitcoins in circulation (four to 10 million of them) could be vulnerable to theft, with reused addresses and “Satoshi-era” wallets thought to be the most exposed. These were named after Bitcoin’s anonymous founder.

They call Bitcoin “digital gold”. A better description might be fool’s gold, for the whole construct depends crucially on a constantly expanding pool of demand.

Once that demand stabilises or falls then the whole store-of-value illusion begins to collapse. Whether the threat from quantum computing is real or not, it’s giving plenty of pause for thought. It also appears to be quite seriously damaging attempts by Donald Trump’s White House to normalise crypto as a respectable asset class.

BlackRock flagged quantum computing as a key risk when launching its iShares Bitcoin Trust ETF last year while El Salvador, the first country to adopt Bitcoin as legal tender, has seen fit to split its reserves of the virtual currency between 14 different addresses as insurance against potential theft.

Wood himself was an early convert to crypto, but he appears to have lost the faith, reallocating the entire 10pc of his synthetic portfolio once occupied by Bitcoin to physical gold and gold-mining stocks.

Not that you need to crack the encryption code to steal Bitcoin. Contrary to the sales pitch, cryptocurrencies are already one of the most insecure forms of money around – and not just because their price is so volatile.

North Korean hackers managed to swipe $1.5bn (£1.1bn) from the crypto exchange Bybit in February last year. For the year as a whole, a total of $3.5bn of Bitcoin is reckoned to have been stolen. Particularly vulnerable are those who brag acclaim about their crypto wealth on social media: extortion or kidnap can quickly follow.

And because the whole purpose of crypto is to be free of government oversight and interference, it makes the funds virtually impossible to recover once a wallet has been opened and drained by someone else.

In any case, some quite extreme solutions to the quantum threat have been proposed, including simply burning the vulnerable coins in an attempt to preserve the currency’s underlying integrity.

Extreme, yes, and also a root-and-branch betrayal of individual property rights – a bit like telling half of all sterling account holders that their money had been cancelled. In such circumstances, the pound would never be trusted again.

It is not just crypto that is at risk from quantum computing. The entire payments system, which is similarly just numbers on a computer screen, would also be exposed.

Harris’s imagined societal collapse in his novel may not be as fanciful as it seems.

From its early origins in Caesar’s cipher, encryption has been a constantly evolving and improving form of security. Maybe money, both crypto and fiat, can indeed be made quantum resilient.

But there is no compelling answer to the quantum threat yet and the two underlying forces that have sustained Bitcoin and its mini-mes from the start – worries about debasement of fiat currencies and the appeal of self-custody – will lose their value if it turns out your wallet can be easily stolen. There has never been an exact correlation between the price of Bitcoin and that of gold but up until the past several days, the two seemed to have completely decoupled, with the gold price surging ahead over the past year but Bitcoin flat or falling.

Digital gold it is not, and that’s possibly got something to do with the threat posed by quantum computing.

Despite enthusiastic backing from the Trump White House, crypto has so far failed to achieve the credibility among institutional investors that promoters were hoping.

For all its faults, fiat currency – backed by the taxpayer and underwritten by the central bank – continues to be a more secure form of money than the snake oil of a decentralised ledger.

Like almost everything else, crypto has become part of the culture wars divide, such that true believers are far more likely to be on the American Right than the Left.

Yet, any hopes Trump might have had of enriching himself, his backers, and his supporters by fully embracing the crypto revolution have so far proved misplaced.

Recent falls have wiped out the entirety of the gains seen under Trump’s swashbuckling, deregulatory agenda. It’s not the end of the world – but nor is it the reinvention of money once promised or hoped for.

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Britain, Business, Economic, Financial Markets, Government, International trade, United States

The US dollar: down but not out

ECONOMIC

Intro: Reports of the declining status of the US currency have been greatly exaggerated

For economists, the impact of a falling US dollar and how that impacts Britain will be observed and monitored closely. Of interest will be why the dollar has fallen of late, what President Trump’s attitude is towards the US currency, and how that impact will be felt.

The dollar lost around 2pc during January against a basket of major currencies (as measured by the DXY index). At the time of writing, the DXY is close to a four-year low of 96.79 – a staggering 10.7pc lower than this time last year. This significant weakening of the dollar has been driven by US policy shifts, tariff uncertainties, and geopolitical tensions. It also, to a lesser extent, reflects global effort to “de-dollarise” led by China and other large emerging markets.

Just days ago, the Federal Reserve held its main policy rate at 3.5-3.75pc. But the US central bank previously cut rates by 25 basis points at three consecutive meetings – in September, October, and December 2025. Lower rates typically weaken the dollar by reducing its appeal to yield-seeking investors, prompting capital flight to higher-return assets elsewhere. Financial markets are anticipating one or two more US rate cuts in 2026, putting further downward pressure on the dollar.

Since Trump took office last January, Fed boss Jerome Powell has come under intense pressure to cut rates faster and further, with the President eager to stimulate investment.

Nominated by Trump during his first term and reappointed four years later by President Biden, Powell has resisted. He has warned of the dangers of US inflation – 3pc as recently as September and still up at 2.7pc, above the 2pc target. Trump’s announcement that he wants Kevin Warsh as the next Fed boss when Powell’s term ends in May has seen the dollar strengthen, given Warsh’s reputation as an inflation-fighting hawk. Warsh, however, is also son-in-law of Trump’s long-standing friend and billionaire donor Ron Lauder. It is doubtful whether he’d be the president’s pick without having pledged to nudge the Fed’s policy committee towards lower borrowing costs – so the pace of rate cuts could quicken, putting more pressure on the dollar.

In theory, Trump’s tariffs should have bolstered the US currency by reducing imports and improving the US trade balance. But the scale of the measures announced on “Liberation Day” in April 2025 instead contributed heavily to the dollar’s fall in value.

The president’s measures – initially hiking average effective tariffs from 2.5pc to 27pc within a month – sparked market turmoil, including an asset sell-off that pressured the US currency. Direct retaliation from major trading powers including China and the EU further eroded investor confidence and prompted US capital outflows. Trump’s tariffs, while they are less punitive than first announced, have combined with broader macroeconomic concerns – including the rise of America’s debt from 100pc to 125pc of GDP over the last decade – to drive considerable “sell America” outflows to other major currencies.

While the related dollar weakening has aggravated US inflation, a cheaper currency helps US exporters, not least “rust belt” manufacturers that are a priority among Trump’s “Make America Great Again” (MAGA) movement. That’s why many are inclined to think the president wants the dollar to keep on falling.

Trump has fuelled these concerns, pointing to the “great valuation” of the sharply depreciated US currency. There are suspicions the White House initially made its maximalist tariff demands not only as a bargaining ploy, but to strategically devalue the currency. The president’s dollar stance is nuanced – and often contradictory. He values “reserve currency status”, which sees the dollar demanded around the world both for payment transactions and a store of value. That supports the US currency, allowing America to run looser monetary policy without the inflationary impact of a dangerously weak dollar. Nonetheless, Trump has also shown willingness to tolerate and even encourage dollar depreciation for export gains (given his emphasis on appealing to blue-collar workers). Talk of the dollar’s demise, and its loss of reserve currency status, is, without doubt, overdone. The US currency still accounts for about 60pc of global foreign exchange reserves and almost 90pc of global transactions by value, underscoring its entrenched role.

Quite clearly, as the dollar has weakened, certain “safe haven” currencies have gained, with the Swiss franc up 13pc against the dollar during 2025. And despite its recent volatility, gold has soared from around $3,100 to over $4,900 an ounce since April 2025, such has been the impact of Trump’s “shock and awe” tariff announcement and the escalation of geopolitical tensions ever since.

When it comes to pound sterling, and the broader UK economy, a weaker dollar delivers a mixed offering. Benefits in lower import costs and inflation are offset by challenges for exporters, investors, and multinational firms. Since Trump’s second term, the pound has strengthened around 12pc against the dollar, from roughly $1.23 to $1.37. This makes dollar-denominated imports cheaper, reducing costs for US goods and dollar-priced commodities like oil.

And while the UK remains an inflation outlier, with a headline rate of 3.4pc in December, up from 3.2pc the previous month and higher than other G7 nations, domestic price pressure would have been even worse were it not for a falling US currency. Tourists and businesses travelling to, or dealing with, the US have also gained, with pounds stretching further abroad.

Yet the downsides are significant, particularly for UK-based companies with substantial US exposure. British-based exporters to the US have found their goods more expensive in dollar terms, undermining competitiveness and demand – especially amid US tariffs that add further barriers.

Overall, while a weaker dollar has flattered the value of sterling, and helped keep a lid on UK inflation, it has also exposed many of the UK’s structural weaknesses – a trend that looks set to continue.

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