Two Weeks of Chaos
A few quick reads for your weekend.
Hey everyone. I learned a lot about bond markets this week and I can tell you that they are not related to James Bond or Gold Bond powder. It is pretty easy for me to look at the stock market, watch it go down, and say, “That’s bad.” But the additional market stuff made me want to go read up.
So, I wanted to share two pieces I read that were super helpful (and a podcast), before I give you a big Holy Week post.
Watching Trump’s tariff strategy unfold has been depressing, mostly because you can see the short-term effects happening in real time. The stock market going down is the most obvious, but bank CEOs and economists going on TV saying there will be higher prices is another. JP Morgan and others have now said that the likelihood of a recession in the next 12 months is higher than 50%. BlackRock’s CEO said today that we might already be in a recession.
That sucks. But then I read Paul Krugman’s piece on the long-term effects of these tariffs and felt a lot worse. Money quote:
The common thread in currency and bond markets is that, thanks to Trump, dollar assets — traditionally the foundation of the global financial system — are no longer perceived as safe.
The combination of interest rates soaring amid a slump and the currency plunging despite rising interest rates isn’t what we normally expect for advanced countries, let alone the owner of the world’s leading reserve currency. It is, however, what we often see in emerging-market economies. That is, investors have started treating the United States like a third-world economy.
Krugman’s headline says that Trump essentially wiped out 80 years of credibility in less than three months. Bonkers. It is easy to watch the bad economic stuff happening during the day, but the really concerning stuff is happening at night when markets overseas open. The U.S. will have to work hard to get that credibility back and with Trumpism now a core part of the GOP’s brand, it may take a really long time.
David Graham also has a great, easy-to-read piece1 on Trump’s tariffs. Another money quote:
Points on the Dow Jones Industrial Average can be recovered quickly, but trust cannot, as my colleague Rogé Karma writes. If the administration’s trade policy leads the rest of the world to shy away from the United States, or even to stop treating the dollar as the world’s global reserve currency, it would be a big blow to American power, and it would be entirely self-imposed—created not by some external shock but by freely made choices. That seems like a bizarre way to increase American stature, and yet it echoes other Trump moves that voluntarily abdicate influence.
The theme seems to be consistent: We are in a different world now in regard to U.S. power. And it’s only been three months. Foreigners aren’t the only ones who are taking notice:
Not great, Bob.
Whenever I have big questions about scary bond markets, treasury yields, and general math stuffs, I turn to Bloomberg’s Joe Weisenthal. His podcast on a possible coming recession is here.
Try to enjoy your weekend. You get a big piece from me soon and then I’m off for Holy Week.
It is paywalled, but a neat trick with The Atlantic is that lot of their stuff is available in Apple News for free. I shared a link to the piece in Apple News.
Proper F*****