The Problem We Face With Trump Is Like An Act Of Nature— Akin To Droughts, Floods, Pandemics...

Worse Than A Recession? What Could That Be?

Trump wasn’t the first consequential mega-mistake by the American voters. Our country’s history would be far better had Andrew Jackson lost in 1828, James Buchanan lost in 1856, Rutherford Hayes lost in 1876, Warren Harding lost in 1920 and Nixon in 1968. Along with Trump, these stand out because of their ripple effects— war, division, economic collapse, eroded trust… 

A lifelong monster Trump has never been— and is still not— well-liked or trusted by the voters. But what does that say about the garbage pile how so many people view the opposition party? We see the Democrats as the lesser evil. Enough didn’t to put Trump into the White House twice.

If Trump didn’t want chaos and a bad market opening today, why would he have sent Commerce Secretary Howard Lutnick onto This Week yesterday? He said the regime’s “decision Friday night to exempt a range of electronic devices from tariffs implemented earlier this month was only a temporary reprieve, with the secretary announcing that those items would be subject to ‘semiconductor tariffs’ that will likely come in ‘a month or two. All those products are going to come under semiconductors, and they're going to have a special focus type of tariff to make sure that those products get reshored. We need to have semiconductors, we need to have chips, and we need to have flat panels— we need to have these things made in America. We can't be reliant on Southeast Asia for all of the things that operate for us,’ Lutnick told Jonathan Karl.”

Even before Lutnick screwed up on national TV, Paul Krugman noted that “For electronics, at least, we’re now putting much higher tariffs on intermediate goods used in manufacturing than on final goods. This actually discourages manufacturing in the United States. Joey Politano puts it well:

“Uncertainty created by ever-changing tariff plans is arguably a bigger problem than the tariffs themselves. So look at the timeline so far. First we had the sudden imposition of average tariffs bigger than Smoot-Hawley. Then, a week later, Trump ditched that plan and replaced it with a plan that imposed average tariffs roughly the same size, but with the tariffs on individual countries either much higher or much lower than in the first plan. Then tariffs were taken off some but not all products just three days later. At this rate we’ll soon see tariffs changing every day, then maybe every three hours.

“The stench of corruption around these policies keeps getting stronger. There’s a lot of circumstantial evidence for massive insider trading around last week’s tariff announcement; the big beneficiaries from the latest move are companies that made big donations to Trump. Investing in plant and equipment looks like a bad idea given the uncertainty, but investing in bribes for the ruling family clearly yields excellent returns.

“So just like that we’re turning into a nation where policies are ill-considered and constantly changing, and business success depends not on what you know but on who you know and whether you pay them off.”

Yesterday, Meet The Press had a worried billionaire on, Ray Dilio, founder of the world's largest hedge fund, Bridgewater Associates, and author of a new book, How Countries Go Broke. Kristen Welker welcomed him with a tough question for his class: “You say that the tariff problem is a symptom of a much greater problem. What do you mean by that?”

There's a financial problem. There's an imbalance problem. There are basically five big forces through history that drive everything. First there's the money, credit, debt, economic cycle in which there's a building up of debt in a cyclical way. That becomes too large, and we're going to have problems. We're going to have a government debt problem… The second big force through time is the internal conflict force, the left and the right, differences in wealth and values causing a conflict that we're seeing changing our political order. So the first is changing our monetary order, the second is changing our political order internally, and then the third is the great world order… How countries deal with each other, when there's a rising power challenging the existing power. And now we are going from multilateralism, which is largely an American world order type of thing, to a unilateral world order, in which there's great conflict. And the other two factors all through history have been acts of nature, droughts, floods, and pandemics. And number four is technology, technology changing. And how they are coming together are the main forces behind this. For example, there can't be imbalances any more in that environment.”

He warned that if— HA!— Trump handles his tariffs “in a chaotic and disruptive way that produces great conflict makes all the difference in the world. [And] So far, very disruptive. So far very disruptive, right? And so we don't know what the numbers are. But that could be part of a process, right? It depends where we are at the end of the 90 days. Because what was put there is like throwing rocks into the production system. And those impacts are going— would be enormous in terms of the efficiency of the whole world, great cost. Welker asked him about the coming recession.

“I think that right now we are at a decision-making point and very close to a recession. And I'm worried about something worse than a recession if this isn't handled well. A recession is two negative quarters of GDP and whether it goes slightly there. We always have those things. We have something that's much more profound. We have a breaking down of the monetary order. We are going to change the monetary order because we cannot spend the amounts of money. So, we have that problem. And when we talk about the dollar and we talk about tariffs, we have that. We are having profound changes in our domestic order, how ruling is existing. And we're having profound changes in the world order. Such times are very much like the 1930s. I've studied history, and this repeats over and over again. So, if you take tariffs, if you take debt, if you take the rising power challenging existing power, if you take those factors and look at the factors, that… those changes in the orders, the systems are very, very disruptive. How that's handled could produce something that is much worse than a recession, or it could be handled well… The value of money, what is a "storehold" of wealth? That is a bond. In other words, one man's debt is another man's assets, bond holders. And so we're going to be in a situation where if that storehold of wealth is in jeopardy because there's too much supply and demand and so on, and we have a monetary inflation, we will have great disruptions, and that could be like the breakdown of the monetary systems of '71. It could be like 2008. It's going to be very severe. I think it could be more severe than those if these other matters simultaneously occur. Imagine if we have a downturn, politically and international conflict… To be very specific, the value of money, internal conflict that is not the normal democracy as we know it, and international conflict in a way that is highly disruptive to the world economy and could even be a military conflict just as these breakdowns have occurred before. You know, we have a new order that began in 1945, a new monetary order, and a new geopolitical order. And these go in cycles that can be measured, and I worry about the breakdown of that kind of an order… particularly since it doesn't need to happen. Because there are certain things that could be done in which this is better, a better restructuring of these debts and actions taken.”