Monday, July 23, 2018

Could Trump Derail the Great American Ponzi Scheme?


Are America's Asian creditors getting tired of Donald Trump and his temper tantrums? An article in the South China Morning Post, Hong Kong's newspaper of record, suggests patience is running thin.

Asian governments hold the deed to an economy Trump is mismanaging – more than US$3 trillion of US Treasuries. The spectre of massive fiscal losses will be keeping Trump’s Asian bankers awake at night.

It’s weird that Trump would cosy up to Russia’s Vladimir Putin, whose economy is about the size of South Korea’s, and make a foe out of China’s Xi Jinping, Washington’s top creditor.

...Trump finding a foe in his own Fed head, Jerome Powell, would be dreadful for Asian economies, companies and investors. The spectre of the most powerful leader brawling with the world’s top monetary authority throws yet another imponderable at a region on the ropes.

...That puts Powell in an impossible situation. Hiking interest rates at the forthcoming policy meeting from July 31 to August 1 could have Trump slamming the Fed on Twitter. Throttling back could increase overheating risks. Either outcome risks denting the dollar’s credibility and driving up US bond yields. 
Trump, let’s remember, added to Powell’s stress level with a US$1.5 trillion tax cut, which an economy at full employment didn’t need. What did the former businessman think would happen when he tossed additional financial lighter fluid at a blazing economy?
...On top of the Russia-collusion scandal, Trump might be courting a controversy of meddling in the Fed’s affairs. It might give Asia less confidence to hold trillions of dollars of American IOUs.

21 comments:

Lorne said...

Heather Mallick looks at Trump's tariff tantrums over China from another perspective in today's Star, Mound: https://www.thestar.com/opinion/star-columnists/2018/07/23/trump-tariffs-a-ticking-bomb-for-numbed-americans.html

Anonymous said...

Could Trump be the cause of the next world depression? Anyong

The Mound of Sound said...


Thanks for the link, Lorne. Mallick isn't saying anything new about consumption-fueled modern American society. That has been facilitated by low, low-interest debt and easy credit. That's part of the strength of the greenback as the major world currency. It's a racket and one day will come crashing down.

The Mound of Sound said...


Anyong, if/when the next global recession/depression arrives, Trump will be one cause of the collapse but there will be others.

The era of neoliberalism played a great part in undermining global stability - economic and political.

We have honed our economies to a knife edge sharpness to extract maximum returns. That works for a while but leaves economies brittle, lacking in redundancy and robustness. It then magnifies the consequences of even relatively minor setbacks. Capital and governments are complicit in this.

Owen Gray said...

Everywhere Trump steps these days -- at home and abroad -- he destroys institutions. He's a little boy on a tear.

Karl Kolchak said...

Not only am I rooting for Trump to derail the U.S. economy, I also hope America's war-enabling Asian creditors lose their shirts in the process. All during the hideous Iraq War it was apparent that without China buying U.S. debt, W's little Iraqi adventure would have bankrupted the treasury.

"Deficits don't matter," said bloodthirsty war criminal Dick Cheney. No, they don't, until the inevitable day when the bill comes due.

Northern PoV said...

"Deficits don't matter,"

true ... if the proceeds are spent on long term public infrastructure and periodic support during recessions.

Pissing it all away in far flung places around the globe? Ya that'll come back to haunt you

Trailblazer said...

Trump has not disclosed his tax returns and more worrying is that USA politicians are not demanding that he do so.
Is it possible that ,as frequently suggested, that Trump is bankrupt; too big to fail?
If so perhaps the mute USA politicians on both sides of the house that give him a free run on this are also complicit in major fraud?
The American ponzi scheme is much closer to the surface than we think, it's likely under our noses.

TB

Purple library guy said...

This is a weird article in one respect: "overheating risks"? "blazing economy"? It's not like anyone's actual wages have gone up. And US growth is on course for, what, 1-and-change%? Whoo, blazing furnace!
Then there's the notion that tax cuts for the rich are going to stimulate much of anything except financial markets. They haven't and won't for the same reason all that QE didn't: They don't put any money in real people's hands, just in the hands of wealthy elites who will invest them in the casino.

Purple library guy said...

Oh, yeah, another bizarre thing: The idea that the Chinese would get all upset by the idea of the central government telling the central bank what to do. Ah, such a gauche faux pas against the (silly and dangerous) idea of central bank independence! Except the Chinese never bought that in the first place. The Chinese are absolutely down with the central government controlling finance; it's what they do. Why would they care about that?

I'm sure the Chinese, and probably some other Asians, are annoyed at Trump. And they may indeed be considering pulling in their markers; certainly that has for some time been a card in their hand when dealing with the US, albeit one they have to play very carefully. But not because of any nonsense about Trump telling the Fed what to do.

Jay Farquharson said...

You might not have noticed, but domestically and internationally, the Bankers always get paid first in bankruptcies, at $0.80-$0.90 on the dollar.

You probably havn't paid attention, but Internation Finance makes certain demands when countries go in the crapper. The 30% excess deaths from Argentine style austerity, the fire sale on lands, corporations and holdings to Foreign Investors, the rampant inflation and asset devaluation should be "interesting", for the US, Countries tied economically to the US like Canada.

Some places are going to be more resiliant than others. Overall, California, the 5th largest economy in the world will do okay, even though a lot of residents lives will be destroyed. Places like Arkansas, South Carolina will be completly gutted. Vancouver will do okay, but most of the interior will be destroyed.

Best put Grandma and grampa on an ice floe now, or smother them with a pillow during their afternoon nap, and put the money from saving on Retirement homes and elder care into canned food, now, while you still can.

Purple library guy said...

"Countries tied economically to the US like Canada"--aye, there's the rub. I have long considered the most important political/economic project for Canada in these times is to keep the adhesion between Canada and the US soft enough that when they go down the drain, we can somehow tear ourselves away, grab onto something, and go no further than circling it.

Jay Farquharson said...

74% of Canadian Trade is with the US.

So before Treason Tribble Трамп's Recession hits, you might want to look at your own numbers first.

If you can't survive 10 years without a steady income, be it a job, pension, rrsp, you should start making your "Hunger Games" plans.

Jay Farquharson said...

If you are running a grift, money laundering, or even just an immoral enterprise, you need a "safe" place to put your money.

If treasuries and the US dollar, become like the yuan has been for most of it's history, uS Treasuries and the US Dollar become worthless.

So does your RRSP, Pension and of course, house value.

Jay Farquharson said...

"If so perhaps the mute USA politicians on both sides of the house that give him a free run on this are also complicit in major fraud?"

The Dem's wern't "mute" on this issue before the election, nor have they stopped raising the issue after the election.

But nice try at Bothisderism, but you should leave it to the professionals.

Purple library guy said...

On those tax returns:
Normally I would suggest that politician X's personal corruption is not really an important issue compared to their systemic impact which comes from their . . . well, ideology is a dirty word to some, but I can't think what else to call it. But in Trump's case, there is very little to him beyond his personal corruption; he has no real economic worldview and neither knows nor cares how the world trade system, for instance, actually works. The man is willing to do far-reaching things like start major trade wars just on the basis that he thinks his base will eat it up, or as a retaliation for not being given enough graft on some real estate deal.

It's no surprise that the Dems are vocal on this issue though. They'll be vocal on any issue that's cheap--that doesn't have any real implications in terms of how the country should be governed and doesn't in any way offend anyone with a lot of money (well, other than Trump himself). Hence their fondness for endless Russia-the-enemy narratives over, say, issues of Trump's ongoing destruction of the Environmental Protection Agency or work to eradicate the concept of "food safety". Who cares if the food we eat is safe when trying to make it safe again might shrink somebody's profits and we can instead go "Look! Trump won't show his tax returns! Russia!"

Similarly, the Dems are happy to show some crying refugee children on TV but you won't find them questioning the US policies of destabilizing Latin America, the Middle East etc. that create refugees in the first place.

Jay Farquharson said...

Democratic Party Cantidates are running and winning on the issues, Fight For $15, VA Care, Medicare, Pharmacare, Social Security, Immigration, Civil Rights, Rational Taxes, DayCare, Workplace Safety, Unionization, amongst others.

Trump-Russia hasn't been mentioned as a Campaign issue by any of the Cantidates, but it is a constant Faux News Theme,

Funny how now it's all in your head, and your perceived "reality" ain't reality at all, just a bunch of RWNJ "talking points".

Funny that.

The guy who beat Roy (Pedophile) Moore never mentioned Trump once, never brought up Moore, pedo proclivity, just talked about the issues.

Purple library guy said...

Yeah, a candidate here and a candidate there are, before they're elected, talking up Sanders-type issues, at a local level, to try to get those votes. Kind of the way Liberals run to the left here in Canada. A few of them really mean it. A COUPLE of them will STILL mean it after the DNC works them over. But Democrats aren't going to be talking that stuff on MSNBC if they can possibly avoid it and they're not going to be pushing any serious bills past committee even if they snag a legislative majority. Maybe if one or two things get really high profile they'll make an apparently-valiant effort to pass something, only to carefully snatch defeat from the jaws of victory and blame the Republicans. Like Obama did with EFCA and various other things.

As to all in my head--so are you trying to tell me Rachel Maddow et al. haven't been yacking about Russia all this time? Pull the other leg, it has bells on. Incidentally, I actually have no idea what Faux news has been saying. I follow hard left news sources mainly; they have been documenting the coverage in Democratic-leaning mainstream media, like MSNBC and other big non-Fox networks, and the New York Times and like that, and that coverage seems to contain a whole lot of stuff about evil Russia.

Jay Farquharson said...

s on Trump Models Sex Trafficing, 8 stories on Trump Casino's Bankruptcies.

How do you go broke running a Casino, let alone a bunch?

The US MSM is lazy. Dem's in Disarray! Civility!

It's alot easier to write "horserace" stories than actually cover policy and platforms.

Did you know "Killary"s platform was 968 pages of proposals including the actual text of the proposed legislation?

Meanwhile, the Rethug's "tax cuts", yup, just two words, no policy, no legislation, got 984 articles.

LMFAO

Jay Farquharson said...

Cut off coment,

987,658 stories on "Killary's" EMails, 0 on Trump/Russia,

8 stories on the Trump's Models sex Trade,

"Dem's in Disarray!"

LMFAO,

The US MSM is gobshite on actually covering politics.

Check out Maggie Haberman's twitter feed.

She's a FTFNYT reporter, who's familie's wealth is built on Trump Org and NY Rethugs.

LMFAO

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