These two are way over my head on this but as I was listening, I kept thinking that it all comes down to the fact that we have a madman, an outright lunatic, a certified moron, a demented idiot at the controls, and there’s no way to understand in a traditional rational sense where the hell any of this is going. Paul and Adam finally came around to that at the end. Trump can f-up a one car parade, but we’ve put him in charge of the largest, most complex economy on the planet. What could possibly go wrong?
It'd be interesting to see if Paul or Adam have any more data to support their joint impression that Wall Street and Corporate America in general are somewhat bullish on the direction of the economy right now for reasons (tax cuts? deregulation?). Sure, inflation only slightly ticked up this last quarter to 2.7%; but hiring remains steady...and yet none of the doomsday scenarios predicted by Paul and others in response to Tariffpalooza & Trumponomic craziness have yet appeared.
Could the economy just be more resilient than anyone anticipated? Or is this just the calm before the storm, where Tariffs are hurting both manufacturers and consumers, ICE damaging immigrant-dependent sectors of the economy--combine to create a major spike in inflation? That then leads to recession?
It is simply too soon for the doomsday scenario to have occurred yet when Trump kept backing off and having pauses. During these times, businesses stocked up on inventory and also took a wait and see approach.
The problem with "wait and see" is it typically means no growth decisions are being made, and in the meantime, anyone who can find an alternate market other than the USA is looking hard and some are moving on with new trading partners, at least in part.
These trade deals were signed and legally binding contracts that Trump simply decided to break, so why would anyone trust the USA again? They can make a deal, but would it be worth the paper it is printed on? Not likely. He has already broken some of what he has recently reworked with Canada and Mexico and even broke his version of NAFTA from last time. Many other nations are looking for partners who take legally binding documents seriously so they too can move on and away from the USA and have more certainty, once again, at least in part, for their own protection to get out from under his thumb.
Trump seems to approach trade like a mob boss, and uses it as leverage to get what he wants at any given moment and threatens a nation's economic health in order to do so. Take Brazil for example and Canada (one can assume).
In addition, there was almost no growth in Q1 even with all the stocking up by businesses and consumers buying cars and other items in bulk in advance to beat the steel and other tariffs and 2.7% CPI is still in the wrong direction, although in my view the target should be 2.5-3% and should have been under Biden, as well.
Q2s numbers will be in at the end of the month.
Debt to GDP is a ratio and we need GDP to grow and debt to slow to keep it from getting larger.
Trumps BBB and trade stagnation shrinks and/or slows the growth of denominator, GDP, and increases the numerator, Dept, and the speed with which it increases. This is the opposite of what we need to do to be able to afford the interest payments on the debt and to keep refinancing the rest. We did the exact opposite post WWII and the debt/GDP shrank until Reagan came along and was followed by other GOP administrations who cut taxes (no they do not pay for themselves and do not cause much change in growth). Bush and Trump's post tax cut growth was at or below average and yet they exploded deficits and debt and the debt/GDP ratio even pre-crisis.
Pipand Joe wrote, "The problem with "wait and see" is it typically means no growth decisions are being made, and in the meantime, anyone who can find an alternate market other than the USA is looking hard and some are moving on with new trading partners". Interesting.
I am a small "buy and hold"-type retail investor. Until recently my stock portfolio had been 98% US equities; after 'Liberation Day' I started shifting some into foreign stocks, but then hit the pause button on further changes because US indices were moving to record highs. Now I too am in 'wait & see' mode, and not really making any decisions until I get a better feel for the direction we're heading.
Any attempt to predict what Trump will do is doomed because his actions emerge entirely from his latest whim, which in turn depends on unpredictable circumstances: what he last saw on TV, who he talked to last, something that reminded him of something he heard 30 years ago, etc. That unpredictability plus the usual unpredictability of the impact of government actions makes crap shoots out of all business decisions.
Rex, Glad to see the Rethug fighter is reading Krugman and keeping up on matters. One, however, cannot listen to this conversation and conclude that investments and decisions as usual continue to make sense in the emerging economy. For example, investments diversifying away from the $US in foreign stocks and favoring short term bonds to catch the changing interest rates are likely to reduce the expected damage for the uncertainty and horror show that may be coming.
I defer to you on investment decisions but think trying to guess what Trump will do is a waste of effort, although some observers might be better at it than Trump, himself.
Tariffpalooza and foreign investment, or the future lack of it, in our debt seem to me to be what will determine how this all shakes out. If, big if, he sticks with his tariff threats, including the “50 days and counting” secondary tariff on Russia, then I think the coming Christmas season will be a nightmare. If, another big if, foreign investors perceive us to be a bad risk, in no small part because of the damage tariffs will do to our economy, quit buying our debt, it will be beyond a nightmare.
Wall Street and Corporate America in general are somewhat bullish on *corporate profits*, not the economy. As Krugman repeatedly says, the market is not the economy.
I’ve been wondering for the past 20+ years what the potential effect of Boomers aging would have on consumption as well as labor. Now that most Boomers are older, the effects of interest rate hikes may be partially offset by wealthier Boomers enjoying the tail end of their lives after surviving ‘70s stagflation, early ‘80s double digit interest rates, and several recessions. They’re free from saving for 40-60 years from now, and like the bumper stickers says, are spending their children’s inheritance.
Maybe part of it, for sure. I have a full pantry including a yrs worth of coffee. It resembles a consumer's panic room + 1/2 a decades worth of sweatshirts and sweatpants, the basic uniform of a retiree.
Who are Trump’s main trade advisors and how did they get the USA to a position where America’s exports are falling and China’s are rising?
Here’s a breakdown of Trump’s key trade advisors, their strategies, and how their approach has contributed to declining U.S. exports and China’s export surge:
👥 Key Trade Advisors
Peter Navarro – Senior Counselor for Trade & Manufacturing
• Longtime Trump trade hawk, author of Death by China.
• Championed aggressive tariffs using Section 301, “reciprocal tariff” strategies, and border‑adjustment taxes to protect U.S. industry  .
• Credited with driving early trade war actions and pushing confrontational rhetoric toward China .
Jamieson Greer – U.S. Trade Representative (from Feb 2025)
• Former chief of staff to Lighthizer, now leading trade negotiations .
• Oversees implementation of trade policies including tariffs, countermeasures, and trade deals.
Howard Lutnick – Commerce Secretary (from Feb 2025)
Stephen Miran – Chair, Council of Economic Advisers
• Architect of the “Mar‑a‑Lago Accord,” aimed at targeting dollar valuation and trade imbalance .
Kevin Hassett – Director, National Economic Council
• Coordinates economic policy and defends tariff campaigns as “not a trade war” but necessary to curb trade deficits .
📉 Why This Strategy Hurt U.S. Exports and Boosted China
1. Tariff Escalation Backfired
• Trump’s tariffs under Navarro and company provoked hefty retaliatory tariffs from U.S. partners, disrupting exports.
• The ifo Institute found U.S. exports could drop by as much as 22% due to these tariffs .
• U.S. goods exports fell 5.2% in May, pushing the trade deficit to a record $96.6B .
2. China Leveraged Diversified Markets
• Despite U.S.-China tariff escalation, China shifted exports to Southeast Asia, Europe, Africa, and Latin America .
• Chinese exports rose ~5.8% in June despite a steep 16% drop in U.S.-bound shipments .
3. Supply Chain Realignment
• U.S. importers rushed goods into the U.S. before tariff deadlines—then pivoted supply chains to Southeast Asia (e.g. Vietnam) .
• China restructured its trade flows, maintaining global growth while minimizing dependence on the U.S..
4. Tariffs Didn’t Solve the Deficit
• Despite aggressive protectionism, U.S. trade deficit grew (still >$1T in 2023), while exports stagnated.
• Forbes estimated that U.S. exports to China were $160–$201 billion higher without the combined Trump‑Biden tariffs .
🚩 Bottom Line
Trump’s trade playbook—designed by Navarro, Greer, Lutnick, Miran, and Hassett—prioritized high tariffs and economic confrontation. While intended to revive U.S. manufacturing and shrink deficits, this approach ended up:
• Undermining U.S. export performance
• Driving importers and exporters to seek non-U.S. markets
• Strengthening China’s diversified export network and eroding U.S. trade influence
• Leaving America vulnerable to supply chain disruption and higher prices domestically.
Thanks for the discussion. Much to think about over breakfast.
One thing I've been considering: there's a substantial duration mismatch in our insurance markets due to climate change. Even though insurance costs are rising fast, the climate disasters are coming faster and faster.
How many 100 year floods can we have in a week?
These problems are exacerbated by the lack of ROI in the form of dividends (let's leave crypto aside although THAT will be a big problem).
Additional problems come from defunding FEMA, which, as best I can discern, is an attempt to make people more desperate and easier to exploit by the private sector.
If you were designing a fix to this problem, what would you advocate?
Excellent point. Check out the MCJ (my climate journal) recent report about the LA fires “6 months on…”and how nothing is being rebuilt and the general under insurance problems, etc
I am not by any stretch of the imagination an economics guy, but I find these longer and geekier postings pretty interesting. There's something to be said for the "Learning via Osmosis" school of thought. Much thanks. Also, eat the rich.
Keep reading, re reading, gi back to your macro econ books ... there's so much to unpick here ... and it helps to understand events and impacts as they unfold.
If deporting the labor force. Playing tarrif roulette, and politicizing the Fed don't croak the economy we still have public spending on cryptocurrency to look forward to. I wonder when that will enter the discussion.
As to the 'cognitive dissonance' of the markets, if one is trying to 'make sense' of Chaos, well, that's what happens. Look at Trump's entire life. He is one thing alone -- and agent of Chaos. He creates it and then like a Great White shark trolls the waters for all the chum he has stirred up. No Rhyme or Reason as it is neither Poetry or Science -- it is pure self-dealing.
It doesn't have to be a firing. Hitler got rid of the Reichsbank President by naming him as Ambassador to the USA, which Hitler considered a backwater. Think I wrote a book about that.
Great discussion. I especially enjoyed getting the perspective from Adam's central banking experience. One thing I didn't hear discussed is Trump's claim that he wants the interest rates down that much because of the lowering of interest payments on US debt, which might on face of it sound reasonable to some, though of course why would people want to buy debt (on a ballooning deficit) at such a low rate of return is beyond me.
Well that was an interesting start to Saturday morning.
Thanks for getting in to the weeds. Donny is a figure head and he does crazy every day,but there are driving forces behind him that are substantial.
For what its worth, I have no idea where all this is going. I took money out of the market and put in CD'S in anticipation of a crash. Do I regret that? No. I think one day soon those on Wall Street will wake up from their dream and see reality. It will not be pretty.
Thanks for the discussion. I look forward to your sane posts every day even when they arw scary.
I took some money out and put it into a high interest rate bank account. I don't regret it either. The funds that I still have in my IRA cycle up and down weekly; one week, they're increasing more than my bank interest and the next they're under water. Even my financial advisors are recommending moving to their "cash" accounts for security.
I did the same thing during Trump # 1. I was close to retirement and wanted more security for my money. I did miss out on stock market gains I didn’t think would happen under T, but all in all I slept better at night.
Analysts should follow up more on Mr. Posen's speculation that "even if it's bad for the economy as a whole, profitability could be rising." The whole point of tariffs is to raise profits in favored firms.
Also, can we confirm historically that indexes of stock prices are direct measures of how concentrated wealth is, and not measures of future income?
I am not sure about the status of our economy. Sure, as it seems based upon the numbers available, the macroeconomic landscape looks somewhat ok. However, the microeconomic fabric seems not ok. We have an explosion of inequality that is feeding into uncertainty and it has an impact on the outcome of elections (as I have learned at the college - the “Basis” determines the “Superstructure” or the status of the economy is determine the political structure). The numbers of the labor market are not really great figures either because the growth seems mostly in service areas and hospitality. Yes, the status seems, from an macroeconomic standpoint, OKish - yet.
Furthermore, the economy is also in a state of transition. More and more companies will adopt the capabilities of AI, and, arguably, 70% to 80% of all work is repeatable work and can, hence, be automated. We, as a society, are not prepared for that paradigm shift - let alone that our educational system is not fully prepared for that future either…
The main pillars of our economy are based upon a strong applied research and science - and those pillar are under attack forcing universities to cap research or, at least, to suspend it. What are nightmare for scientists. All that has a huge impact on our economy, eventually.
The question that always pops up in my mind is - do we need a different economical model that takes into account the current technological advances and considers the needs to protect the climate (or to mitigate the upcoming impacts of climate change) - and can such a model be based upon growth as it seems that growth is having an adverse impact on our climate ..
We are facing many questions and we do not have many answers yet. Given our current political environment that is anti science and anti educational, we are losing so much valuable time …
Trump and many of his acolytes are fueled by rage, resentment and payback. Trump lashes out like a spoiled 9-year-old who didn't get what he wanted for Christmas. The chaos we're seeing is what we should expect from the MAGA Party of grift, corruption, greed and incompetence. These are our new masters and nobody in power seems inclined to stop them.
"There is no Republican Party. There's a Trump Party."---John Boehner
There’s also quite a bit of evidence to suggest that the whole tariff madness was so Trump and his friends could buy the dip. It worked and they’ll certainly do it again in six or eight months. There is certainly dementia present, but that’s unlikely to ameliorate the graft.
Buy the dip and as leverage. One might see a large purchase of Trump coin as well as some other benefit or desire satisfied when one is seeking relief from tariffs or other suddenly imposed hardship.
Thanks Paul and Adam, great discussion. I've already listened twice to unpack it all.
In my current environment, monetary policy discussions are heavily colored by banking or Wall Street interests over holistic view of state of the US to its cirizens. I listen to that banter with less than half an ear but enough to leave a stain of koolaide on my lips. Anyhow this was a treat and answered some of the concerns Ive had about the softening dollar and continued rise in intermediate interest
Kind of a downer ending but the fact is we have to accept, understand and act on what is unfolding here. I feel well armed to meet the conversation and dispel the bullshit.
"There's a bunch of sort of wishful thinking, inertial thinking that this is all somehow part of a sort of normal shift and, on balance, is positive. And again, I think we're under a genuine regime change. I argued for this after the election and a piece I did in Foreign Affairs. And I think people are just reluctant to price that in. It's understandable cognitive dissonance. They don't want to believe it. But I think that's what's going on in part.
Krugman: So, things are really scary, but people don't want to see it. There are quite a few horror movies like that. It’s not usually what we think of when we talk about monetary policy, but lots of stuff that was dry and boring is now terrifying."
"Under a genuine regime change"....so the Leonard Leo Society has sued Trump over tariffs....Musk claims that BBB doesn't cut enough, but what he's really bent out-of-joint about is that he was really depending on the corporate welfare for his businesses--Trump even stated such and returned threats like deporting Musk back to South Africa.....Musk brings up Epstein again and now MAGAts are all in an uproar (is that the compromat in possession of Putin? Musk?) JD Vance is at Rupert Murdoch's Montana ranch by invite...does this have something to do with Trump suing WSJ about that Epstein piece? Has the Project 2025 bunch got everything wanted under Trump's con man influence over the MAGAts, whose vote will no longer be needed, and he is being set up for JD Vance to take advantage of the "unitary executive" position granted by SCOTUS?
These two are way over my head on this but as I was listening, I kept thinking that it all comes down to the fact that we have a madman, an outright lunatic, a certified moron, a demented idiot at the controls, and there’s no way to understand in a traditional rational sense where the hell any of this is going. Paul and Adam finally came around to that at the end. Trump can f-up a one car parade, but we’ve put him in charge of the largest, most complex economy on the planet. What could possibly go wrong?
It'd be interesting to see if Paul or Adam have any more data to support their joint impression that Wall Street and Corporate America in general are somewhat bullish on the direction of the economy right now for reasons (tax cuts? deregulation?). Sure, inflation only slightly ticked up this last quarter to 2.7%; but hiring remains steady...and yet none of the doomsday scenarios predicted by Paul and others in response to Tariffpalooza & Trumponomic craziness have yet appeared.
Could the economy just be more resilient than anyone anticipated? Or is this just the calm before the storm, where Tariffs are hurting both manufacturers and consumers, ICE damaging immigrant-dependent sectors of the economy--combine to create a major spike in inflation? That then leads to recession?
It is simply too soon for the doomsday scenario to have occurred yet when Trump kept backing off and having pauses. During these times, businesses stocked up on inventory and also took a wait and see approach.
The problem with "wait and see" is it typically means no growth decisions are being made, and in the meantime, anyone who can find an alternate market other than the USA is looking hard and some are moving on with new trading partners, at least in part.
These trade deals were signed and legally binding contracts that Trump simply decided to break, so why would anyone trust the USA again? They can make a deal, but would it be worth the paper it is printed on? Not likely. He has already broken some of what he has recently reworked with Canada and Mexico and even broke his version of NAFTA from last time. Many other nations are looking for partners who take legally binding documents seriously so they too can move on and away from the USA and have more certainty, once again, at least in part, for their own protection to get out from under his thumb.
Trump seems to approach trade like a mob boss, and uses it as leverage to get what he wants at any given moment and threatens a nation's economic health in order to do so. Take Brazil for example and Canada (one can assume).
In addition, there was almost no growth in Q1 even with all the stocking up by businesses and consumers buying cars and other items in bulk in advance to beat the steel and other tariffs and 2.7% CPI is still in the wrong direction, although in my view the target should be 2.5-3% and should have been under Biden, as well.
Q2s numbers will be in at the end of the month.
Debt to GDP is a ratio and we need GDP to grow and debt to slow to keep it from getting larger.
Trumps BBB and trade stagnation shrinks and/or slows the growth of denominator, GDP, and increases the numerator, Dept, and the speed with which it increases. This is the opposite of what we need to do to be able to afford the interest payments on the debt and to keep refinancing the rest. We did the exact opposite post WWII and the debt/GDP shrank until Reagan came along and was followed by other GOP administrations who cut taxes (no they do not pay for themselves and do not cause much change in growth). Bush and Trump's post tax cut growth was at or below average and yet they exploded deficits and debt and the debt/GDP ratio even pre-crisis.
Pipand Joe wrote, "The problem with "wait and see" is it typically means no growth decisions are being made, and in the meantime, anyone who can find an alternate market other than the USA is looking hard and some are moving on with new trading partners". Interesting.
I am a small "buy and hold"-type retail investor. Until recently my stock portfolio had been 98% US equities; after 'Liberation Day' I started shifting some into foreign stocks, but then hit the pause button on further changes because US indices were moving to record highs. Now I too am in 'wait & see' mode, and not really making any decisions until I get a better feel for the direction we're heading.
Any attempt to predict what Trump will do is doomed because his actions emerge entirely from his latest whim, which in turn depends on unpredictable circumstances: what he last saw on TV, who he talked to last, something that reminded him of something he heard 30 years ago, etc. That unpredictability plus the usual unpredictability of the impact of government actions makes crap shoots out of all business decisions.
Crazy is its own universe, and we seem to be living in it now.
Rex, Glad to see the Rethug fighter is reading Krugman and keeping up on matters. One, however, cannot listen to this conversation and conclude that investments and decisions as usual continue to make sense in the emerging economy. For example, investments diversifying away from the $US in foreign stocks and favoring short term bonds to catch the changing interest rates are likely to reduce the expected damage for the uncertainty and horror show that may be coming.
Your acquainted retired probabilist/statistician.
I defer to you on investment decisions but think trying to guess what Trump will do is a waste of effort, although some observers might be better at it than Trump, himself.
Tariffpalooza and foreign investment, or the future lack of it, in our debt seem to me to be what will determine how this all shakes out. If, big if, he sticks with his tariff threats, including the “50 days and counting” secondary tariff on Russia, then I think the coming Christmas season will be a nightmare. If, another big if, foreign investors perceive us to be a bad risk, in no small part because of the damage tariffs will do to our economy, quit buying our debt, it will be beyond a nightmare.
Wall Street and Corporate America in general are somewhat bullish on *corporate profits*, not the economy. As Krugman repeatedly says, the market is not the economy.
Consumer Addicts bingeing before detox?
I’ve been wondering for the past 20+ years what the potential effect of Boomers aging would have on consumption as well as labor. Now that most Boomers are older, the effects of interest rate hikes may be partially offset by wealthier Boomers enjoying the tail end of their lives after surviving ‘70s stagflation, early ‘80s double digit interest rates, and several recessions. They’re free from saving for 40-60 years from now, and like the bumper stickers says, are spending their children’s inheritance.
Maybe part of it, for sure. I have a full pantry including a yrs worth of coffee. It resembles a consumer's panic room + 1/2 a decades worth of sweatshirts and sweatpants, the basic uniform of a retiree.
My retiree uniform is holding on to my old "office casual" bits and pieces through the entire life cycle of clothes:
wear to office >> ok for travel >> ok for errands >> just around the house >> only for garden and handyman use >> thread cycle or dump
I prefer to call it preparedness. It well documented that if people expect prices to rise they tend to stock up with stuff before the prices rise.
Ask AI:
Who are Trump’s main trade advisors and how did they get the USA to a position where America’s exports are falling and China’s are rising?
Here’s a breakdown of Trump’s key trade advisors, their strategies, and how their approach has contributed to declining U.S. exports and China’s export surge:
👥 Key Trade Advisors
Peter Navarro – Senior Counselor for Trade & Manufacturing
• Longtime Trump trade hawk, author of Death by China.
• Championed aggressive tariffs using Section 301, “reciprocal tariff” strategies, and border‑adjustment taxes to protect U.S. industry  .
• Credited with driving early trade war actions and pushing confrontational rhetoric toward China .
Jamieson Greer – U.S. Trade Representative (from Feb 2025)
• Former chief of staff to Lighthizer, now leading trade negotiations .
• Oversees implementation of trade policies including tariffs, countermeasures, and trade deals.
Howard Lutnick – Commerce Secretary (from Feb 2025)
• Wall Street executive turned trade advocate.
• Supports reciprocal tariffs and backed Trump’s trade intervention agenda   .
Stephen Miran – Chair, Council of Economic Advisers
• Architect of the “Mar‑a‑Lago Accord,” aimed at targeting dollar valuation and trade imbalance .
Kevin Hassett – Director, National Economic Council
• Coordinates economic policy and defends tariff campaigns as “not a trade war” but necessary to curb trade deficits .
📉 Why This Strategy Hurt U.S. Exports and Boosted China
1. Tariff Escalation Backfired
• Trump’s tariffs under Navarro and company provoked hefty retaliatory tariffs from U.S. partners, disrupting exports.
• The ifo Institute found U.S. exports could drop by as much as 22% due to these tariffs .
• U.S. goods exports fell 5.2% in May, pushing the trade deficit to a record $96.6B .
2. China Leveraged Diversified Markets
• Despite U.S.-China tariff escalation, China shifted exports to Southeast Asia, Europe, Africa, and Latin America .
• Chinese exports rose ~5.8% in June despite a steep 16% drop in U.S.-bound shipments .
3. Supply Chain Realignment
• U.S. importers rushed goods into the U.S. before tariff deadlines—then pivoted supply chains to Southeast Asia (e.g. Vietnam) .
• China restructured its trade flows, maintaining global growth while minimizing dependence on the U.S..
4. Tariffs Didn’t Solve the Deficit
• Despite aggressive protectionism, U.S. trade deficit grew (still >$1T in 2023), while exports stagnated.
• Forbes estimated that U.S. exports to China were $160–$201 billion higher without the combined Trump‑Biden tariffs .
🚩 Bottom Line
Trump’s trade playbook—designed by Navarro, Greer, Lutnick, Miran, and Hassett—prioritized high tariffs and economic confrontation. While intended to revive U.S. manufacturing and shrink deficits, this approach ended up:
• Undermining U.S. export performance
• Driving importers and exporters to seek non-U.S. markets
• Strengthening China’s diversified export network and eroding U.S. trade influence
• Leaving America vulnerable to supply chain disruption and higher prices domestically.
Thanks for the discussion. Much to think about over breakfast.
One thing I've been considering: there's a substantial duration mismatch in our insurance markets due to climate change. Even though insurance costs are rising fast, the climate disasters are coming faster and faster.
How many 100 year floods can we have in a week?
These problems are exacerbated by the lack of ROI in the form of dividends (let's leave crypto aside although THAT will be a big problem).
Additional problems come from defunding FEMA, which, as best I can discern, is an attempt to make people more desperate and easier to exploit by the private sector.
If you were designing a fix to this problem, what would you advocate?
Excellent point. Check out the MCJ (my climate journal) recent report about the LA fires “6 months on…”and how nothing is being rebuilt and the general under insurance problems, etc
Sorry, not sure how to repost it.
I am not by any stretch of the imagination an economics guy, but I find these longer and geekier postings pretty interesting. There's something to be said for the "Learning via Osmosis" school of thought. Much thanks. Also, eat the rich.
Keep reading, re reading, gi back to your macro econ books ... there's so much to unpick here ... and it helps to understand events and impacts as they unfold.
If deporting the labor force. Playing tarrif roulette, and politicizing the Fed don't croak the economy we still have public spending on cryptocurrency to look forward to. I wonder when that will enter the discussion.
As to the 'cognitive dissonance' of the markets, if one is trying to 'make sense' of Chaos, well, that's what happens. Look at Trump's entire life. He is one thing alone -- and agent of Chaos. He creates it and then like a Great White shark trolls the waters for all the chum he has stirred up. No Rhyme or Reason as it is neither Poetry or Science -- it is pure self-dealing.
It doesn't have to be a firing. Hitler got rid of the Reichsbank President by naming him as Ambassador to the USA, which Hitler considered a backwater. Think I wrote a book about that.
Great discussion. I especially enjoyed getting the perspective from Adam's central banking experience. One thing I didn't hear discussed is Trump's claim that he wants the interest rates down that much because of the lowering of interest payments on US debt, which might on face of it sound reasonable to some, though of course why would people want to buy debt (on a ballooning deficit) at such a low rate of return is beyond me.
Lowering overnight rate is not going to lower interest on long(er) term T-bills.
I’m not saying it will. Trump is. 😊
Well that was an interesting start to Saturday morning.
Thanks for getting in to the weeds. Donny is a figure head and he does crazy every day,but there are driving forces behind him that are substantial.
For what its worth, I have no idea where all this is going. I took money out of the market and put in CD'S in anticipation of a crash. Do I regret that? No. I think one day soon those on Wall Street will wake up from their dream and see reality. It will not be pretty.
Thanks for the discussion. I look forward to your sane posts every day even when they arw scary.
I took some money out and put it into a high interest rate bank account. I don't regret it either. The funds that I still have in my IRA cycle up and down weekly; one week, they're increasing more than my bank interest and the next they're under water. Even my financial advisors are recommending moving to their "cash" accounts for security.
To put hard figures in there, my IRA is up 0.67% for the year. My bank account pays 3.75% APR.
Get a better investment advisor.
I did the same thing during Trump # 1. I was close to retirement and wanted more security for my money. I did miss out on stock market gains I didn’t think would happen under T, but all in all I slept better at night.
Analysts should follow up more on Mr. Posen's speculation that "even if it's bad for the economy as a whole, profitability could be rising." The whole point of tariffs is to raise profits in favored firms.
Also, can we confirm historically that indexes of stock prices are direct measures of how concentrated wealth is, and not measures of future income?
The oligarchs think trump is eccentric. They are about to find out he is closer to schizophrenic.
I am not sure about the status of our economy. Sure, as it seems based upon the numbers available, the macroeconomic landscape looks somewhat ok. However, the microeconomic fabric seems not ok. We have an explosion of inequality that is feeding into uncertainty and it has an impact on the outcome of elections (as I have learned at the college - the “Basis” determines the “Superstructure” or the status of the economy is determine the political structure). The numbers of the labor market are not really great figures either because the growth seems mostly in service areas and hospitality. Yes, the status seems, from an macroeconomic standpoint, OKish - yet.
Furthermore, the economy is also in a state of transition. More and more companies will adopt the capabilities of AI, and, arguably, 70% to 80% of all work is repeatable work and can, hence, be automated. We, as a society, are not prepared for that paradigm shift - let alone that our educational system is not fully prepared for that future either…
The main pillars of our economy are based upon a strong applied research and science - and those pillar are under attack forcing universities to cap research or, at least, to suspend it. What are nightmare for scientists. All that has a huge impact on our economy, eventually.
The question that always pops up in my mind is - do we need a different economical model that takes into account the current technological advances and considers the needs to protect the climate (or to mitigate the upcoming impacts of climate change) - and can such a model be based upon growth as it seems that growth is having an adverse impact on our climate ..
We are facing many questions and we do not have many answers yet. Given our current political environment that is anti science and anti educational, we are losing so much valuable time …
Trump and many of his acolytes are fueled by rage, resentment and payback. Trump lashes out like a spoiled 9-year-old who didn't get what he wanted for Christmas. The chaos we're seeing is what we should expect from the MAGA Party of grift, corruption, greed and incompetence. These are our new masters and nobody in power seems inclined to stop them.
"There is no Republican Party. There's a Trump Party."---John Boehner
There’s also quite a bit of evidence to suggest that the whole tariff madness was so Trump and his friends could buy the dip. It worked and they’ll certainly do it again in six or eight months. There is certainly dementia present, but that’s unlikely to ameliorate the graft.
Buy the dip and as leverage. One might see a large purchase of Trump coin as well as some other benefit or desire satisfied when one is seeking relief from tariffs or other suddenly imposed hardship.
Thanks Paul and Adam, great discussion. I've already listened twice to unpack it all.
In my current environment, monetary policy discussions are heavily colored by banking or Wall Street interests over holistic view of state of the US to its cirizens. I listen to that banter with less than half an ear but enough to leave a stain of koolaide on my lips. Anyhow this was a treat and answered some of the concerns Ive had about the softening dollar and continued rise in intermediate interest
Kind of a downer ending but the fact is we have to accept, understand and act on what is unfolding here. I feel well armed to meet the conversation and dispel the bullshit.
Love the horror movie plot analogy!
"There's a bunch of sort of wishful thinking, inertial thinking that this is all somehow part of a sort of normal shift and, on balance, is positive. And again, I think we're under a genuine regime change. I argued for this after the election and a piece I did in Foreign Affairs. And I think people are just reluctant to price that in. It's understandable cognitive dissonance. They don't want to believe it. But I think that's what's going on in part.
Krugman: So, things are really scary, but people don't want to see it. There are quite a few horror movies like that. It’s not usually what we think of when we talk about monetary policy, but lots of stuff that was dry and boring is now terrifying."
"Under a genuine regime change"....so the Leonard Leo Society has sued Trump over tariffs....Musk claims that BBB doesn't cut enough, but what he's really bent out-of-joint about is that he was really depending on the corporate welfare for his businesses--Trump even stated such and returned threats like deporting Musk back to South Africa.....Musk brings up Epstein again and now MAGAts are all in an uproar (is that the compromat in possession of Putin? Musk?) JD Vance is at Rupert Murdoch's Montana ranch by invite...does this have something to do with Trump suing WSJ about that Epstein piece? Has the Project 2025 bunch got everything wanted under Trump's con man influence over the MAGAts, whose vote will no longer be needed, and he is being set up for JD Vance to take advantage of the "unitary executive" position granted by SCOTUS?