Trump is bringing financial markets down whilst increasing tensions inside and outside the USA. How long is it before he delivers a meltdown?
This is the audio version:
This is the transcript:
Is Trump in meltdown as he enters the third week of his time in office?
It looks very likely that something I predicted in November is correct. I said then that 2025 would be a nightmare year for Trump, and I stick by that idea.
There were, in essence, two ideas that I put forward in November when I made that claim. The first was that he would either fail to deliver his policies and the MAGA - the Make America Great Again crowd - who support his presidency would go mad with him because he had not delivered, in which case 2025 would be a nightmare and the Democrats would come back into office in 2026, at least in the Senate and the House.
Or he would try to deliver his policies, and we get meltdown that way instead.
Well, we now know which of those options is in play. He is very clearly delivering on his promises.
The consequence of Trump trying to deliver on those promises is quite extraordinary.
We've seen trade war break out with China, Canada, and Mexico.
Stock markets around the world are falling because they can see the obvious consequence of that trade war, which is going to be bad not just for corporate America, who are not going to like this, and other corporations around the world.
Trump has already warned the people of America that there will be a serious cost of these tariffs, but says it's okay, it'll all be worthwhile in the end. Yeah, what, when we're dead? I doubt it, Donald. And I don't think the American people are going to fall for that.
And we've seen the consequences elsewhere.
We are seeing FBI agents being sacked for having tried to uphold the law.
We are seeing Musk taking over the federal spending system of the US government. Six trillion dollars now appears to be under the control of him and a few of his associates, none of whom have security clearance and none of whom are state employees, but all of whom seem to think it's entirely within their right to decide who is and is not paid.
Musk has said that USAID, which tried to block this - USAID being the US overseas aid agency that is responsible for all its spending basically on aid programs outside the US, many of which are absolutely fundamental to, for example, the control of terrorism - he has described that organisation as criminal and needing to be shut down. The obvious consequence is that those foreign diplomacy programmes which have underpinned US soft power are in jeopardy.
But we've seen the same with regard to other Musk initiatives. Medicaid is in chaos.
There are over 2 million federal employees who do not know whether they have a job or not anymore.
And we could keep going onwards because the list is ever growing in terms of the chaos that Trump is unleashing.
We have to look then at what are the soft points.
I am worried about the state of US governance, the state of US taxation, the control of law and order and so on. But those aren't the things that most people worry about on a day-to-day basis. That's the preserve of people like me who are a bit geeky about government and those sorts of issues.
In Main Street America they'll be worried about two things. The first will be the fall in the value of their savings. Because that's a key measure of American economic strength, according to the US media. And shares are likely to tumble.
That will also have a major consequence, of course, for Trump's donors, who are not going to like seeing the value of their shares fall as a consequence of a wholly unnecessary trade war into which he has entered, as the Wall Street Journal has called it.
But more than that, the people of the USA are not going to like this because, in effect, what Donald Trump is doing is putting a tax on them because that is what tariffs will do. Tariffs are, in the way in which they will behave inside the US economy, a sales tax. And most of that sales tax, in proportion to income, will be paid by the lower-paid and middle-class earners of the USA.
They're the people who spend more on imports of products from Mexico, for example.
They're the people who will be paying more on fuel imported from Canada.
They're the people who'll be paying more on the import of electronic technology from China, for example.
And who will get the benefits of this tax reallocation from income tax, which is what Trump promised after all? It will be the wealthy. There's going to be a major reallocation of the tax burden from the wealthy onto those on low incomes and that is going to trigger a touchpoint as well.
Two things then will bring Trump into meltdown. One, falling share prices.
Two, increasing taxes.
There's no point in the Democrats discussing anything else because the rest of it doesn't matter to most people.
Political geeks don't like what's going on, and rightly so, and we should be upset and protesting and everything else. And that's for the Democrats to deal with in the House, in the Senate, and so on.
But, when it comes to Main Street America - ordinary people - then it is share prices, and taxes, and the consequent increase in inflation. This is where Trump is going to be in deep trouble.
Is he going to be in deep trouble? Yeah, I think he really will be in deep trouble because these things are going to have massive consequences.
We're seeing significant moves in share prices, as if the markets hadn't realised that Trump would do what he said, which is quite bizarre in itself.
Now we're going to see the tax changes as well because Trump will do what he said. That's the one thing we seem to be learning about this administration this time around. They're doing what they said.
And we're going to see inflation as a consequence.
And we're going to see tax increases on ordinary people in America as a consequence.
And all of that Is going to create the economic nightmare that I forecast for Trump in November.
Is this going to be a year of meltdown for Donald Trump?
We can only hope that America comes to its senses very quickly.
And that the rest of the world sees the consequence of voting a person like Trump into office and doesn't, as a consequence, move to the far right everywhere else.
We can live in hope.
That's the best thing I can offer to you right now because this journey is going to be decidedly uncomfortable.
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Agreed.
The more you see of what is happening, the more you question how his presidency actually came about. And I’m not talking about voter discontent here – I’m talking about the Black Operations, the money, the internet delivering lies and hatred at scale, the vested interests, foreign collusion.
Truss happened because of a political party system that seems to think it has the right to appoint a leader without a general election – a crappy undemocratic system in the UK, aping monarchy.
What is incredible to me however is that the Left/Socialism is still pilloried in both countries yet the chaos is being unleashed by ideas of the Right. It’s as if we have given ourselves nothing but a bad choice rather than walk towards the Left and adopt some its ideas, to balance things out.
What is worse is that we are told that this bad choice gives us freedom!!!
It may give us plenty of ‘Freedom to’ but it seems no ‘Freedom from’, as Tim Snyder points out in his latest book.
I spoke last night with a very astute, insightful American 70 year old businesswoman who has always tended to the right politically.
She is delighted with what is happening at the moment.
1 – Musk is uncovering what she considers mind-blowing amounts of waste and procurement corruption in the government system. Masses of money to save…
2 – We raised our money by tariffs till 1913. Then we created income tax. Time to go back to 1913.
3 – DEI policies give jobs to unqualified people. All Trump wants to do is make sure DEI people are qualified to do the job.
4 – Trump only wants to kick out undocumented immigrants who break the law. Why on earth should we keep them?
Extremely scary
Regarding waste and procurement corruption, these two blog posts do a better job than I ever could at highlighting the hypocrisy of Musk promising to eliminate government waste.
https://pluralistic.net/2025/01/27/beltway-bandits/#henhouse-foxes
Musk doesn’t want the government to spend on the people, he wants it for himself. Being the worlds richest man isn’t enough apparently.
Business people are not smart.
“We are seeing Musk taking over the federal spending system of the US government.”
I have been reading a very detailed article about the Federal Spending System this morning in which the author, Nathan Tankus (https://www.crisesnotes.com/aboutnathantankus/) says that Musk and his tech acolytes stand a very real chance of crashing the entire federal payments system
https://www.crisesnotes.com/elon-musk-wants-to-get-operational-control-of-the-treasurys-payment-system-this-could-not-possibly-be-more-dangerous/
And here:
https://prospect.org/economy/2025-02-03-filled-with-unmitigated-terror-musk-treasury-tankus-qa/
Meltdown indeed
Thanks
Yip! Still runs on COBOL apparently. No doubt FElon’s goons think they can master it overnight and take full control. I’ve seen predictions today that it’s that which will scupper them and crash it.
I’m old enough to remember, just about, a speech by John Kennedy on 12 September 1962, about going to the Moon. Is it too much to yearn for a new dream for America, that would go something like this?……………
“We choose end poverty in the World in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too.”
Because they could, if they choose to do so.
Precisely
It might be worth reflecting on what the EU might be able to do to compromise and get the temperature down a bit. I think there’s been some misreporting in the media, confusing tariffs with VAT and implying that the EU doesn’t impose tariffs on US stuff. That’s not right. As I understand it, the key areas are:
Industrial Goods:
Automobiles: The EU imposes a 10% tariff on imported cars from the U.S. In January 2025, BMW’s CEO proposed reducing this tariff to 2.5% to align with U.S. rates and mitigate potential trade tensions.
Agricultural Products:
Dairy and Meat: Certain U.S. agricultural exports, such as dairy and meat products, face higher EU tariffs, over 30% for some products, reflecting the EU’s protective stance on its agricultural sector.
Steel and Aluminum:
Tariff Rate Quotas (TRQs): In October 2021, the EU and the U.S. agreed to replace previous tariffs with TRQs, allowing a specific volume of U.S. steel and aluminium to enter the EU market without tariffs. Imports exceeding these quotas are subject to tariffs.
Do you think there’s any scope here for “doing a deal” and calming things down, at least in this part of the World?
Why?
This has worked
Not at the cost of importing adulterated food and competing with our EU farmers who have to abide by higher standards.
Fair enough. But maybe moving towards the 2.5% on cars, and relaxing quotas a bit on non-hormone treated beef and poultry and dairy, might be enough to enable Trump to claim a victory without doing any real harm to the EU.
This is Yrump we are talking about…
That wull in no way satisfy him
This, on the New Wayland site, is worth a read, though it doesn’t include any actual suggestions on how a breakthrough could be achieved. I think you’re right. It’s just so hard to accept that reason has left the room.
https://new-wayland.com/blog/time-to-talk-tariffs/
The closest analogy to Trump is Boris Johnson.
Give him enough rope and he will hang himself was the advice of some. They were right.
Trump 1.0 was constrained and hemmed in by the checks and balances of the US system.
Trump 2.0 is not so constrained and we are seeing the maniac in all his glory.
Bluster and Bullying cannot overcome the weakness of his hand.
The US will lose more in a trade war than they can gain.
The US population will lose money, have reduced living standards, many will lose access to healthcare and essential public services.
His only solution will be to create a crisis, suspend the constitution and install himself as a dictator.
When this becomes obvious there will be a war.
but not an external war .a civil war
I am nit too keen on wars