Better in their words…

Unless otherwise identified, the quotes are from Philip Pilkington. We start with a reminder from yesterday and from today’s first post:

“The US is taking an enormous gamble. This new strategy, then, can be understood as a high-risk gambit to get the country on a stronger economic footing in an increasingly multipolar world.”

Trump’s trick has always been to get the libs to defend ridiculous things and look silly. The goal is to destroy their sense of political identity. The libs are now moving to defend Wall Street. Within a year they will have no principles left and be catatonic.

Translation: The Libs, in the name of “free trade”, are defending modern Wall Street—itself a creature of a rigged system.

I think the tariff policy isn’t the ideal way to get this done. But the reality is Trump pulled a fairly rough trigger while you guys did nothing. Now you defend stock market valuations. No offence, Joey, you guys look like losers.

Hey, PP, don’t let the perfect become the enemy of the really good. Waiting for Bretton Woods 2.0 is a mug’s game.

Financelot @FinanceLancelot

Scott Bessent is telling you exactly what they’re doing.

“The top 10% of Americans own 88% of the stock market.”

Baby boomers are sitting on generational wealth with multiple homes, while 90% of people under 40 are dirt poor.

Unlike 2008, the target of this crash isn’t to screw over young people that now have nothing. It’s to steal the hidden wealth hoarded by baby boomers for 40 years.

They sent Jim Cramer on CNN to convince retirement fund baby boomers to sell 

This is too perfect because they’ll sell at the bottom before one of the largest bear market rallies we’ve ever seen, only to finally buy back in at the top of the 3rd wave.

.

Philip Pilkington @philippilk

I don’t think tariffs are a good way to do this. But partial tariffs are just dumb and speed up decline. Full tariffs at least breaks globalisation. I hope we will come to a better equilibrium point. But at least there is purpose and a goal to this. Might be a disaster though.

For years Wall Street lobbied the US Treasury for a strong dollar. This deindustrialised the US economy so Wall Street could make money reinvesting foreign dollar surpluses. Wall Street is going to regret this now that the result has been deglobalisation turbo-tariffs.

Looks like a lot of hedge funds are going to blow up in the coming weeks. There are going to be a lot of permanently unemployed Wall Street types looking to reskill in the coming years. Many of them can code, but Silicon Valley isn’t looking so hot right now.

Robin Brooks @robin_j_brooks

Global FX since the reciprocal tariff announcement. Global safe havens like Swiss Franc and Japanese Yen are rallying against the Dollar, while EM currencies and any G10 currency with heavy commodity exposure (Australia) are falling. FX is positioning for global recession…

Philip Pilkington @philippilk

If this assessment is accurate it means that USD is no longer a safe haven currency. That, in turn, means it’ll be a lot harder for the US government to borrow when its budget deficit blows out in a recession.

In a multi-polar world under a balanced trade system this result is inevitable. It’s another example of the need to listen to Trump with a critical understanding. Recall how he was threatening any country or bloc that attacked the USD? Now he’s doing it—to save it. The DOGE offensive and slash and burn so far is directed toward softening the inevitable budget blowout, although Trump probably has much bigger plans for that.

Mr D’Arcy @The_One1001

If a 2 thousand point index drop is getting you margin calls, that tells me these people are leveraged beyond their eye balls…

Indicative of poor fund management, my team is barely 40% invested right now, we’ve been waiting for this !

Even if the market fell another 50% , we are ready

Philip Pilkington @philippilk

My sense is a lot of hedgies are basically day-trading with massive amounts of leverage. The tide is going out. I predict a lot of naked swimmers.

But I’ll close with another contrarian view—Larry Johnson’s. LJ argues that the real goal of the tariffs is to drastically lower interest payments on USG debt. While I continue to believe there’s more to it than that—the evidence that Trump has thought along these lines for many years is persuasive—there’s no question that debt payments are a major concern. The rush to cut the budget is also aimed at cutting debt payments. There’s a story out that Trump may cut 90K from the military, strictly to cut spending.

Some Observations on Tariff Hysteria

My brief excerpt simplifies, but you’ll get the idea:

I simply want you to consider another explanation for Trump’s tariff policy, which has nothing to do with the actual import and export of goods and services, and everything to do with reshaping the US balance sheet, particularly with respect to short-term debt.

I had lunch with a good friend today, who has access to Trump financial officials, and he said this is the real purpose of the tariffs — i.e., restructure the US balance sheet, shrink the deficit and reduce the amount of short-term debt owed by the US Government.

I was told that if the average US citizen understood how fragile the US financial system is, especially from the burden of short-term debt, that this could cause a panic, followed by an economic crash. Trump is behaving like a magician — i.e., asking people to focus on potential trade benefits and increased jobs, while doing financial legerdemain.

The other side of this argument would be that attempting to force the US ot live within its means doesn’t exactly qualify as “financial legerdemain.”

Refinancing onerous debt is something Trump has done multiple times in his business career, and managed to become a billionaire in the process. Whatever objections you have about other Trump policies, particularly Ukraine and the Israel/Palestine war, don’t make the mistake of assuming he’s stupid on this one and does not know what he is doing. Still, it is a gamble. We’ll have to wait a couple of months to see it this was a desperate Hail Mary pass or a shrewd, albeit risky, financial deal.

Agreed. Trump isn’t stupid, although sometimes either misguided or unscrupulous. That he uses rhetorical flourishes—as I have repeatedly maintained—to sell his policies is beyond argument. But so, also, is the dire reality of America’s position. Everyone talks about the debt, without ever intending to do anything about it, supposing that they can leave that to the next generation. Trump is trying to actually do something about it—and maybe much more.