American Financial Leviathan Hinders Reindustrialization 1: MAC - Market Access Charge.

Open American financial markets and growing public debt attract free financial capital from all over the world like a burning candle attracts moths on a stuffy night. The Bureau of Economic Analysis (BEA) has calculated that approximately 90 trillion dollars flow into America from abroad each year in the form of financial investments, but only 1-3% of them actually go to real investments—formation of fixed capital, such as construction or physical improvement of factories, farms, infrastructure, and office process automation. The remaining 97-99%—goes mainly to portfolio investments, such as bonds, stocks of non-controlling companies, bank deposits, etc. These speculative financial investments, which have sharply grown relative to GDP over the past decades, make rich speculators even richer (or poorer if they make wrong bets), increase risk and volatility, heighten the risk of large-scale economic crises in America similar to the 2008 crisis, and contribute to further inflation growth. However, such investments hardly contribute to increasing the physical productivity of American industry and the growth of its real GDP.

Alas, in the financial lexicon of the American "capitalist casino," "investments" mean all circulating money. However, this term can be misleading because it does not distinguish between money that contributes to increasing America's physical productivity and money that the rich use for speculation.

For example, foreign direct investors' expenditures on acquiring, creating, or expanding American enterprises in 2024 amounted to 151.0 billion dollars, down 24.9 billion dollars, or 14.2 percent, from 176.0 billion dollars in 2023, and were below the average annual figure of 277.2 billion dollars for 2014–2023. At the same time, even among these "physical" investments, the majority goes not to building new ones, but to acquiring existing American enterprises.

Meanwhile, financial investments contribute to the constant overvaluation of the dollar's exchange rate, much like a vacuum cleaner working in reverse, pointed upward, constantly holding a children's toy at an artificially set height (this advertising trick is loved by vacuum cleaner salespeople)! And the overvalued dollar, creating an illusion of prosperity (cheap imports), finishes off the remnants of American industry!

Meanwhile, China, Vietnam, Korea, and Japan undervalue their currencies, making their products more competitive on the world market, while the overvalued dollar makes American products more expensive on the world market. Low exchange rates of foreign currencies mean that dollar prices for foreign goods and services fall relative to dollar prices for goods and services produced in America. This makes dollar prices for foreign-made goods cheaper, reducing the competitiveness of American-made goods compared to foreign goods both on the domestic US market and on overseas markets.

As a result, the US imports more goods than it exports, leading to a constantly growing trade deficit over the past 25 years. The trade deficit more than doubled from 451 billion dollars in 2000 to 918.4 billion dollars in 2024. Public debt has nearly doubled since 2020 and amounted to 28.1 trillion dollars at the end of 2024. The growing dependence on debt financing from foreign states creates serious risks for America's financial, economic, political, and social future.

Trump's high import tariffs may help correct the trade balance (although not everything is so unambiguous, and this is a subject for separate consideration), but they cannot help weaken the dollar; on the contrary, they contribute to its strengthening based on elementary principles of supply and demand in the foreign exchange market. A decrease in US imports reduces demand for foreign currencies, while an increase in American exports leads to an increase in demand for the US dollar.

Therefore, in the American analytical community, other proposals are being developed to rein in the financial leviathan. One such proposal is the Market Access Charge (MAC), developed by John R. Hansen, PhD, founder of the organization Making America Competitive Again.

According to Dr. Hansen, MAC is "a small fee that will be charged on all foreign monetary funds entering the American financial markets… which will likely start at two percent (about half the Fed rate at the beginning of 2024) and will be charged by US banks receiving orders to transfer foreign monetary funds through systems like SWIFT." This fee will be periodically adjusted to reduce or eliminate the difference between higher US interest rates and lower foreign interest rates.

In other words, MAC is an import tax of 1-3% on the inflow of all foreign monetary funds. MAC will curb the overall inflow of "junk money," such as trillions of Chinese yuan and Japanese yen. These funds are "junk" because 97-99% go to the financial sector.

MAC will make American-made goods more competitive compared to imports into the US and foreign-made products for export. MAC will represent a "tariff on financial imports," which will be set quarterly—similar to how the Fed sets interest rates. At the initial stage, the Fed will set the rate at a low non-zero level if the trade deficit exceeds 1% of GDP. Quarterly, the Fed will monitor US trade balance trends (similar to how it does with interest rates and inflation). If the deficit exceeds 1% of GDP, the MAC rate will be increased by an amount deemed small enough not to cause a crisis and large enough to steer the trade deficit in the right direction.

Conversely, as soon as the trade deficit begins to decline toward zero, the MAC rate will gradually decrease to zero. The rate will be publicly available on government websites around the clock, and at any given time, only one rate will apply to all financial goods. Inflows of funds, regardless of currency, country of origin, amount, form of ownership, or intended use.

But MAC must always remain in force, even at a zero rate. If changes in global conditions lead to new US trade deficits exceeding, say, 1% of GDP, the Fed simply returns the MAC rate to a non-zero level. This would be an ideal combination of "temporary" and "permanent" regimes required by the IMF for capital flow management tools like MAC.

MAC will target the main cause of the growing US trade deficit, the reduction in US jobs related to the production of goods and services sold on the international market, and the reduction in US budget revenues. We will discuss other institutional details of MAC in the next article.