Lower taxes but higher interest rates.
That, in six words, is what is likely to happen in the US. Given the way big ideas and big money cross the Atlantic, that is what is also likely to happen here too.
Like political pollsters, financial markets get things wrong – and sometimes spectacularly so.
But though we are only days into the world of Trumponomics, two things are becoming clear.
Changing times: Donald Trump’s presidency will likely see lower taxes but higher interest rates
One is that he will cut both personal and corporate tax rates. The other is that US interest rates will rise faster, maybe much faster, than seemed likely ahead of his victory.
On Federal income tax, the plan is clear: three bands, with a 33 per cent top rate, 25 per cent for middle earners, and 12 per cent for those on low incomes.
The present top rate is 39 per cent, though the rich find all sorts of ways of holding down the tax they pay.
In the case of much legislation, presidents propose while Congress disposes, but in this case, since the plan has the support of the Republicans – who control both Houses – something on those lines is likely to go through.
There will be offsets, the closing of loopholes, and that is still to play for. But it looks very likely that in a couple of years time the US will have a reformed income tax system.
Changes to other taxes are less clear. The big idea on corporation tax would be to cut the headline rate, currently 35 per cent and about the highest in the world, to 15 per cent or thereabouts.
That would bring it in line with George Osborne’s plans for the UK.
The deal for the US, however, would be to close the loophole whereby its multinationals stash profits overseas in places such as Luxembourg, Dublin and the Caribbean islands, without paying any tax on them. They would have to bring the money home.
The prize of achieving a more rational tax system is a huge one. Whether the president and Congress can manage to seize it is another matter, but whatever they do the likelihood is America’s fiscal deficit will rise.
There should be faster growth but meanwhile, if you cut taxes by that much, you get less in revenue.
He’ll spend more Federal money too, for example on infrastructure, and he’ll get that through. One of the things we know about American politics is that Congress likes to spend.
If you have a wider fiscal deficit, interest rates are liable to go up. That has already happened. We will get a rise in short-term interest rates next month, but long-term rates have already moved up sharply.
On Monday, the ten-year US Treasury bonds yielded a bit over 1.8 per cent; yesterday they approached 2.2 per cent. Capital Economics predicts that they will be 2.5 per cent by the end of the year.
All this affects us. We don’t have the freedom to run a looser fiscal policy as does the US, but this cuts our Chancellor a bit of slack when he brings out his Autumn Statement.
Our deficit will be higher than forecast, but he’ll get a better reception than he might have done before Trump’s victory.
The fact sterling has had a really good week demonstrates that in relative terms investing in Britain does not look a bad bet.
As for interest rates, if the US pushes them up steadily next year then it creates space for us to do so too. There is a wind of change sweeping across the world of finance.
The age where central banks spray money around is coming to an end. The age where savers get a zero return on their money is coming to an end too. Where America leads, we march behind – and we march to a different tune from a week ago.
China is marching to an American tune too, but in a quite different way. For them the tune is consumerism. Forget Black Friday – the biggest splurge for shoppers anywhere in the world is the Chinese festival of Singles Day.
China has chosen November 11, a day remembered very differently in Britain and the rest of the Western world, for its great consumer festival.
Alibaba yesterday had David and Victoria Beckham to launch it – an example, by the way, of how Britain’s ‘soft power’ reaches into the Middle Kingdom.
So this is a story about the appeal of a Western concept, consumerism, striking a chord in China. But it is also a story about the genius of Alibaba chief Jack Ma in tapping into the idealism of youth.
I had a couple of hours with him at a conference earlier this year. He is tiny, mercurial, optimistic. But his key quality is his ability to inspire the young in the audience, who cheered at just about everything he said.
His message was that anyone can make it, the American dream. One way you celebrate your success is by buying things.
Whatever happens in the difficult trade negotiations between the US and China, Singles Day shows how those two giants are more similar than perhaps either country appreciates.