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Cast in Irony
When Bush the First spoke the words, “New World Order,” he birthed a thousand conspiracy theories that nourish a vast, expanding fan base of believers. Trump coined “Liberation Day,” and given its extraordinary popularity as meme fodder, it may well show similar permanence in modern speech. This typically Trumpian, which is to say Orwellian, expression, is cast in irony that will gleam brightly through the ages, impervious to the rust of familiarity. Because the consequences will last forever.
The US Has Liberated Itself from the Burden of World Economic Leadership
What did Trump liberate us from? He freed us from world economic leadership, and pitched us over a cliff into a spiral of increasing national debt, coupled with decreasing resources with which to pay it. The ill-advised maneuver has happened, and cannot be retracted. And to think -- it was primarily a matter of presentation. For my entire life, I have seen how US Presidents represented us on the world stage. Dressed in a tuxedo, unflappable, in control, holding all the cards and administering the game. The United States runs this game by issuing stable, reliable debt of unquestioned reliability, payable in dollars that keep their value with respect to other world currencies.
King Dollar
Dollars have been the hardest of all money in two senses -- unbreakable in their value, and difficult to acquire. Most other countries can only borrow money from international bankers if they promise to repay it in dollars. Why? Because then it doesn’t matter if the debtor country devalues their own currency – the debt is payable in dollars. This makes the United States the King of Debtors. Until Trump’s second term, everyone in the game wanted to lend us money. In a couple of moves, that all changed. Trump ditched the formal presentation and abandoned the cool projection of calm control and mastery that the United States has always relied upon to maintain its financial authority, swapping it for an insecure, unstable, anxious, urgent demand for big changes in the game that Trump had discovered was somehow “unfair” to the dealer, the USA, the issuer and lender of the world’s most important money. Suddenly, the emperor had no clothes. Indeed, he might as well have been posting dick pics on TruthSocial – the world’s reaction could not have been more negative. And you know, you don’t need to do anything really stupid more than once. From then on, everyone will remember you for it.
The Suicide King
So for whom was it really Liberation Day? For the rest of the world. On April 9th and 10th, the world was liberated from the illusion that the United States was sure to act rationally. Insane import tariffs went into effect, far more punitive than expected, and the word was out. Trump had channeled his ineptitude in financial matters into a frenzy of self-destructive acts. Assuming the invulnerability of the nation’s finances, he did the Titanic’s captain one better – he piloted the ship of state directly for the largest iceberg he could find, shouting, “I’m gonna move you, baby!” As the horrendous sounds of a mountain of ice tearing holes in metal bulkheads terrified all aboard, Trump was pumping his fist, and shouting like Slim Pickens in the closing scene of Dr. Strangelove, gleefully riding the nuclear missile down to ground zero, and kickstarting Armageddon.
I'm gonna get them doors open if it harelips everybody on Bear Creek!
-- Dr. Strangelove, directed by Stanley Kubrick, © Columbia Pictures Industries, Inc.
Crazy Pays a Premium
The world saw this insane spectacle and took shelter. From what? From the impending collapse of our finances. Kind of like yanking our credit cards, bond traders world wide started dumping US Debt Obligations, aka “Treasury Bonds” or “T-Bills.” They dumped them so fast that sellers of T-Bills had to take big losses to sell. So bonds got cheaper, so what? The interest rate goes up. And who pays the interest on T-Bills? You and me. We are the hamsters cranking that interest payment debt wheel, and except for a few aberrant moves, every administration that has ever breathed the air of Washington D.C. has lived by the principle that keeping the government’s borrowing rate low is good financial policy, and good politics. The government’s credit card got jacked from 3.9% to 4.5% in one day, increasing the total amount of interest payments by around 12.5%. Since our interest payments are already eating up 16% of the budget, we need this like a hole in the head.
Goodbye Dollar Stores
And what about consumer prices? Having not connected cheap consumer goods with “China,” Trumpers have been celebrating Trump’s tariff war as if they really wanted to pay $45 for a $12 t-shirt at WalMart, $100 for a $40 tool at Harbor Freight, or $3 instead of $1 for a pack of plastic face-shavers. It seems quite likely that, with a trade war with China in full swing, we’ll see Dollar Stores going belly up nationwide. That’ll make a lot of rednecks unhappy, but will they connect their unhappiness with their favorite President? I wouldn’t touch that bet.
Blood Bath in the Oil Patch
One bright spot -- oil prices have gone down! That’s good, isn’t it? Actually, it sounds a most discordant note for those reciting the “drill baby drill” mantra. US oil drillers have high production costs that only make sense when oil prices are high. Thanks to Trump’s trade war, world economic activity is expected to slow down, and future oil usage will decline accordingly. Thus, crude oil prices have already gone down so much that many oil drillers have suspended operations in the Permian Basin and other fracking zones. Just ask a shale oil man.
Shale boss Bryan Sheffield told Bloomberg that the situation right now is a “blood bath”. “The industry needs to cut immediately and hunker down to let the tariff war play out,” Sheffield was quoted as saying. OilPrice.com
The Fate of the Nation in the Hands of a Madman
How unfortunate that, when a great fool like Trump falls, so many are crushed under the wreckage. No one can destroy a man like himself, and the same holds for nations. A great many fools pulled their ballot levers to elect this fool, and the "wealthiest men in the world," if you can call people devoid of humanity "wealthy," threw their fortunes at his feet to gain his favor by helping him take power. Billions in the bank obviously do not make a person more able to distinguish the shit from the Shinola.
For light to accompany the heat, read the New Statesman article quoted and linked below.
Can the US truly boast that it does not discriminate between assets held by residents and assets held by foreigners, the kind of openness often presented as a condition for a currency to become an international reserve currency? Chinese companies would disagree – and many around the world now wonder if they might be the next target of America’s economic warfare. It is not possible to both create the rules of the game and act like one of the players.
Every time the rule of law is replaced by a system of political favour, investors take note. Their assets might be safer outside of the US, and good alternatives seem to be emerging in Europe and Japan, particularly as new debt will be necessary to fund their announced rearmament.
Finally, as the painful costs of issuing a global reserve currency continue to grow, Donald Trump will find it impossible to resist the need to address these costs. His voters demand action and now dream of a new industrial golden age. Trump may well believe that he can bring it about without sacrificing dollar dominance, but the last few days prove that every action has a reaction. After the recent fracas, he will surely try other ways to implement his agenda, and perhaps with renewed ferocity. King dollar will struggle to survive. The downfall of King Dollar