"Techno-optimists believe that societies, like sharks, grow or die." Marc Andreessen uses this unorthodox definition to describe techno-optimism in his Manifesto, published in October 2023. He adds that techno-optimists believe "that growth is progress—leading to vitality, the expansion of life, increased knowledge, and greater well-being." More generally, techno-optimism is an intellectual stance arguing that technological progress will lead to a significant improvement in the human condition and will help solve the challenges facing humanity. While technical and technological innovation has indeed contributed to the improvement of the human condition since the Industrial Revolution, it could be poised to provide a solution to the debt burden that is weakening the United States.
Indeed, last week, the U.S. Senate passed the GENIUS Act, a bill that has been in preparation in Congress since February and aims to regulate the stablecoin market. Stablecoins are a type of cryptocurrency that seeks to maintain a stable value by backing their market value with an external benchmark (the dollar, for example). While this market currently represents $260 billion, it could grow to over $2 trillion over the next 3 to 5 years. And this is where the GENIUS Act comes into its own. It will force stablecoin issuers to prove they hold liquid dollars, in foreign currency or Treasury bonds, for each asset distributed. Thus, Theter already holds over $120 billion in Treasury bonds, more than a country like Germany. With a market expected to multiply eightfold in a few years, the United States has potentially found new creditors capable of absorbing its debt.
This news is all the more positive given that Jerome Powell is expected to continue to resist on the policy rate front. Indeed, while June inflation does not indicate an overheating of prices, with a 2.7% increase year-on-year (2.9% for core inflation), the path to the 2% target still seems distant, especially since interpreting producer prices remains difficult due to the upward revision of the previous month's figures.
In France, our Prime Minister does not have the luxury of being a techno-optimist and must therefore resort to more traditional tools to combat a growing deficit. The market considers Mr. Bayrou's budget to be reassuring, and while the risk of a motion of censure is receding, it is difficult to see how Parliament could pass it. It is nevertheless worth noting the slight easing in French rates (-2 bps on the 10-year to 3.40%, -4 bps for the 5-year), a decline similar to that of German rates.
Finally, the earnings season is intensifying this week, as after the (good) results from American banks last week, companies such as Alphabet, Tesla, SAP, UniCredit, BNP Paribas, and LVMH will be in the spotlight. This will give investors greater visibility into the initial impacts of tariffs. "We believe that not growing is stagnation, which leads to zero-sum thinking, internal conflict, degradation, and collapse [...]."