Is President Trump an Idiot? Or does he think we are?

Dude! Really? Originally Posted by Yssup Rider

Ryan Rooth ring a bell Quazimoto?
So far ya'll have had two goofballs shopping at Ukrainian rummage sales.

(The below comments are excerpted from a couple of emails and posts I wrote during exchanges of information with other investment professionals and all were written between about last Thursday and yesterday, so are reasonably current. I believe all are pertinent to the tariff/trade deficit discussion.)

Did Donald Trump have something of an epiphany? Did Bessent sit him down in the Oval Office and initiate something like a "come to Jesus" meeting?

Since he backed down so quickly after people, in his words, became "yippy," I'm guessing so.

It sure seems that way, after the bond market began cratering in overnight trading after Trump launched an unexpectedly maximalist tariff threat against almost the whole world a couple of weeks ago.

A president can abide an equity market selloff, especially if investors are confident that the precipitating factors are transitory and that the market will recover. But the bond market is a totally different animal. Any president will surely rue the day that he decided to extend his middle finger toward it.

Remember the discussions that were taking place as Bill Clinton was about to take office in early 1993? Robert Reich, the left-wing Labor Secretary appointee, wanted to spend big dollars on various "stimulus" and "infrastructure" measures -- while Robert Rubin, appointed to Treasury, felt that we didn't have the fiscal space within which to do all that, and that the bond market would rebel as a consequence.

This prompted Carville to famously quip that if there was reincarnation, he had previously thought he'd like to come back as the president or a revered celebrity or a superstar MLB home-run slugger. But now, he said, he'd like to come back as the bond market. Because "if you're the bond market, you can intimidate everybody?"

Why is this relevant to the tariff discussion?

Well, because the flip side of the current account deficit (mostly our trade deficit but also including a few other items) is the capital account surplus.

In an earlier post about a month ago, I mentioned something called the "Triffin dilemma." This was first discussed way back in 1960, when Triffin testified before congress about what he expected to be the upcoming difficulties in maintaining the Bretton Woods gold-exchange-standard, agreed upon in 1944, wherein the US would fix the dollar's value at $35/oz and the rest of the world's major currencies would be fixed to the dollar. Of course, Nixon jettisoned the whole thing and closed the gold window in 1971, after which currencies free-floated and the rollicking inflation of the 1970s ensued.

In my view, even in our current fiat-money global system, the Triffin dilemma is just as valid as ever.

The trade deficits and budget deficits go hand-in-hand. One enables the other. In fact, I think it's fair to say that they mutually "force each other" to exist.

Since the USD is still the world's primary reserve currency, and such a large percentage of global trade not involving the US is priced in dollars, a whole lot of stuff falls completely apart if the US significantly cuts its trade deficit. Dollars we send overseas lubricate the international financial system, and if fewer of them are sent abroad, fewer come circling back around and support the market for net new issuance of treasury bonds, notes, and bills.

What all this means is that there's no way we can make large cuts in our trade deficit without concomitantly large cuts in the budget deficit. There isn't any way around that (at least, not without leaving a horrific amount of wreckage strewn about the global landscape).

And let's get real here. Does anyone believe for a minute that politicians (of either party) have the guts to push through tax hikes that would raise a significant amount of revenue relative to our current run rate of deficit spending, or spending cuts that amount to much more than "nibbling around the edges?" (Of course not!) Originally Posted by Texas Contrarian

Another great post.

You already know this. I used to know it, and just relearned it with the Wikipedia link below. I'll repeat here for anyone interested.

Economic identities relating GDP to consumption, investment, government expenditure, savings and taxes can be rearranged to show the following,

(Private Savings - Investment) + (Taxes - Government Spending) = Trade Surplus or Deficit

In the USA, government spending is much higher than taxes. That's not going to change. And Americans are spendthrifts. They're not going to spend substantially less than what they make, like many East Asians do. So, realistically, unless we're willing to starve the country of investment, we're going to run a trade deficit.

And as you imply, we could get away with it. Historically, until Liberation Day, the rest of the world wanted our dollars. They wanted our treasury instruments. They wanted to invest in American factories and real estate and the like.

Like I said before, if you want to reduce the trade deficit, reduce the budget deficit. Encourage people to save. If I were dictator, I might do it at gunpoint, by implementing something like Singapore's Central Provident Fund or Australia's Superannuation scheme, where employers and employees make large contributions to personal fund investments to pay for retirement and other purposes. And finally, through changes like Trump implemented in his first term, improve the competitive landscape in the USA. Lower corporate income tax, deregulate, and otherwise encourage companies and individuals to invest in America instead of Ireland, or wherever. Become more like Germany, which exports a lot, instead of like what India used to be.

And yes, it makes sense to encourage more production of items that are important to our national security here in the USA, perhaps even through outright subsidies for businesses like mining and processing rare earth ores.

https://en.wikipedia.org/wiki/Twin_deficits_hypothesis

Ryan Rooth ring a bell Quazimoto?
So far ya'll have had two goofballs shopping at Ukrainian rummage sales. Originally Posted by Why_Yes_I_Do

First of all, "Quzaimoto?" Is that the Japanese hunchback?

HAHAHAHAHAHAHAHAAHA

And second of all, GREAT AVATAR! If someone told Trump the guy's name was pronounced HEY-SOOS, then he'd come after you WYID.

Yes, he's THAT kind of idiot. And moves like that avatar are pretty strong evidence that he thinks you're one too.

Although completely unethical IMO, he is certainly no idiot when it comes to scamming folks to enrich himself... we officially now have the ultimate grifter as our damn POTUS. Who knew people ran for president just to make billions in a shady as fuck way and to stay out of prison? He's quite the unicorn. I'll give him that.

I may have to stop referring to him as an idiot. This money grab hustle/scam is pretty damn clever. I can't and won't deny that.

https://www.forbes.com/sites/siladit...ith-president/

The price of President Donald Trump’s official meme coin jumped up sharply late on Wednesday night, after an announcement that the token’s top 220 holders will be given a chance to attend an exclusive “gala dinner” where the president will be in attendance, in a move that is likely to raise ethical concerns, as the Trump Organization and its affiliates own 80% of the token’s supply.