No President can turn in his economy as Trump has done and not send it into recession or even depression. The question is, how do we manage the chaos that follows from that?
This is the audio version:
This is the transcript:
When is the financial crash?
It's a question I ask because it's inevitable that we're going to have one at some point of time. Money is going to pour out of the USA, and I mean pour.
This is going to be what, in technical terms, we call capital flight, where money that has been saved in the USA by people from outside the USA will literally wish to exit in droves.
The faith in that economy is going to disappear.
Markets are going to collapse as a consequence, and all of this is about the creation of pinch points by Trump.
Trump's own reliability is perhaps one of the biggest pinch points of all - the pinch point meaning the moment when it becomes apparent that what we've had is no longer sustainable.
He has created that with his policy on tariffs, for example.
He's creating it with regard to his policy on human rights, which is alienating so many people around the world.
He's doing that with regard to his simple and straightforward claim that America is great again, as if the rest of us are not.
He is trying to create an environment where the world is divided between the States and everyone else, and at some point, everyone else is going to realise that this is the moment to leave the USA, and they're going to.
There's going to be a consequence.
The first, and perhaps most obvious, might be for the dollar. There's already a fight going on about the dollar between Trump and Jay Powell, who is in charge of the US Federal Reserve.
There is no agreement between the two about whether the dollar should have a lower interest rate or a higher interest rate, which is what the Fed are clearly looking at because of the uncertainty created by Trump. Only one of those two people can win that battle. And if as is probable, Trump does, then there's going to be that pinch point - the moment when people realise it's time to quit the USA. There will then be a literal crisis with the dollar, because people will ask, is this now the reserve currency of the world anymore? Will they want to sell out, buy something else?
They might.
They might buy the Euro.
They might buy the yen.
They might buy the pound.
Some of them will buy gold, but they will want to ditch the dollar.
And inflation caused by Trump might be another of those pinch points, and that too is going to happen. Let's be clear about it.
What else might happen?
There might be a crash in the US financial markets. I think that this is quite likely. We've seen a wobble in the last month after Trump announced his tariffs. They fell and they slowly recovered, and just at the moment they're falling a bit again, but there hasn't really been a crash.
But stand back and look at the US markets and 30% of all the value of the stock markets in the USA is made up of the value of just seven companies, and they are Apple, Amazon, Alphabet, Meta - Facebook's owner -Microsoft, Nvidia - the chip maker and Tesla, whose value has of course already fallen because of Musk.
If the confidence in those companies falls because of boycotts of US products, and again, that is quite possible as the impacts of tariff wars becomes apparent - and tariffs will be back, I am quite sure - then the value of those shares is going to fall and forget whatever happens in the rest of the market, they will drag it down. At that moment, there will be a mass exodus. A sale of US shares.
Something like 10% of the value of all UK pension funds is invested in US stock markets. A large part of it will be invested in those companies. If UK pension funds realise that these companies are now toxic brands, and that is quite possible, there will be sales.
And remember what happens in the event of a crisis of confidence. What happens every day in the market is that very few shares are bought and sold. That's a matter of fact. In proportion to the total number of shares available in any stock market at any time, the number that are traded in a day is really remarkably small.
So the price that is set is determined by the relatively small number of people who are actually wishing to buy or sell. But if you get a panic, the number of people who are trying to sell increases enormously. The number of people who are trying to buy does not and consequence is inevitable. Share prices fall - stock prices if you're in the USA. And what that means is that people will then compound a panic by trying to sell yet more shares.
We've seen it happen before.
This is what happened in 1929.
This happened to some extent in 1987, a crash that I remember.
This is what happened very slightly in the period just after 2000, when we had the .com crash. The markets fell heavily. They halved in value, but because of government intervention, we did not get a recession.
But we are going to see markets tumble this time. I think that's unavoidable. We have seen nothing as yet, and worse still, we could then see the consequences of that. Private equity funds and hedge funds might tumble as they did in the late 1990s, requiring massive market bailouts.
And there could then be something contagious going on as happened in the USA in 1929, and that that will spread outside that country even though it need not do so. But when the US sneezes, everybody else coughs at the very least. So we are going to see this move out of the USA, and although that capital flight is of money that is going to look for new homes, it is not going to create a boost anywhere else.
We are therefore going to need to worry. As a matter of fact, this is going to happen. It's going to happen in the USA. It's going to happen in the UK. It's going to happen in Europe. It's going to happen in Australia. It's going to happen in Canada. All of those countries are going be impacted, 📍 as are Japan and South Korea and onwards.
Therefore, what are we going to do because we have a President in the USA who has set out to destroy his own country's economy, and there's nothing that the rest of us can do about it.
We have to brace ourselves for this fallout.
We have to accept it's going to happen, but what we really need in that case are politicians who understand that it is going to happen.
We don't need politicians who are trying to cosy up to Trump anymore. That's history. That's gone. This man is toxic. His brand is going to lead us into crisis.
What we need are politicians who realise that he is the danger and not the solution to any known problem.
These would be politicians who would talk to each other about having a coordinated plan to deal with the consequences of Trump. There will be a need for government intervention. There will be a need for the equivalent of quantitative easing; at the very least, large-scale government injection of funds into the economy, even if that does not, and I hope it does not, involve the artificial sale of bonds and their repurchase by central banks.
There will be a need to run major government deficits because a crash will result in a fall in government revenues, but not in a fall in the demand for government services.
There will need to be a reappraisal and a new understanding of what the role of government is going to be in the biggest crisis that we've had, quite possibly since 1929, and which might make 2008 look like a picnic.
We need politicians with conviction.
We will need politicians with deep economic understanding.
And we will need politicians who are willing to work together to solve this problem, understanding that this is going to be a universal concern whe re trying to draw ring fences around their own states is not going to work because coordinated action will be necessary to sustain employment, to sustain demand, to sustain public services, to sustain the very role of government and the nation state.
Trump is trying to destroy all those things. That, after all, is his aim. Project 2025, the thing that he is seeking to deliver, deliberately set out to destroy the idea of the nation state, and its right to intervene in an economy and its right to supply services. That is what he wants to do. We need politicians who will understand that the reaction to the catastrophe that he's going to create as a result requires them to deliver exactly the things that he does not want.
If they don't, we're going to be in even deeper trouble because we're going to have a financial crash. It's unavoidable now. We cannot have gone through what Trump has done without this happening. Even if he reversed everything he had done, and there is absolutely no sign that he will, even if he cancelled every tariff, the confidence is already gone. The capital will flow out of America. The confidence will fail, and the crash will follow. So all we now need to talk about is what happens next. And next is when government has to step up to the mark.
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In these uncertain times, it’s reassuring to know that the UK has a competent and financially literate Government which cares about the welfare of the entire population. /s
🙂
That’s not funny at all.
Well it is………………but you know what I mean (weary sigh).
What PSR said, made swear and guffaw out lound at the same time, ffs, rolls eyes etc
A lot to take in. That figure of 30% of the American market value being just 7 companies has me choking on this morning’s coffee.
It seems so… precarious. Precious. Unwise.
Agreed
It was actually similar in 1929. The record high in the Dow was based on a handfull of companies by August 1929.
I think in the EU we have the politicians who see this. It was laughable that Italy’s most right-wing president was recently talking to King Donald about a trade deal with the EU when
a) Italy (nor any single member) has the power to sign a deal.
b) the last deal was wholeheartedly rejected by Europe after Trump halted all deal talks (8 years worth of hard work) upon assuming office and started a trade war with the EU.
The EU does have trade deals with most of the major powers listed in the post. I think we’ll be able to stay well seated during the bumpy ride that’s heading our way.
I agree with your sentiments. We have a U.S. administration whose leader and representatives will blatantly lie about anything and everything. Any agreement with them is utterly worthless and the Starmer/Reeves efforts to curry favour with this corrupt regime are disgustingly pathetic.
Agreed. And good to have it spelt out even though it is frightening.
Trump’s policies are, of course, appalling, and highly damaging. But I think a big factor in capital flight will be Trump’s unpredictability and untrustworthiness. There is no guarantee that people will be able to get money out of the USA if the leave it too long. There are already rumours that Trump is contemplating compulsorily converting Treasury bonds into low interest perpetual bonds. That is, he seems to be preparing to renege on financial contracts (as he has already reneged on other contracts, laws, and treaties). And there are other things he could do to stop people taking money out (exchanging dollars for a different currency). He may wish to do this, is likely to do this, when the flood of withdrawals starts and crashes the dollar. These are just the conditions to spark a panic once people realise the seriousness of the situation.
Whoa. If those rumours of which you write about Trump blocking US global capital flight prove correct, it would be a post 1989 political gamechanger.
Cui bono ?
Project Trump 2025 is all about the destruction of the Federal State, elimination of taxation, massive reduction of workers rights and wages
Project Trump 2025 is all about the destruction of the Federal State, elimination of taxation ( to be replaced by tariffs), massive reduction of workers rights and wages plus removing the rights of non whites and women.
The world is still trying to work out what to do.
What you do not do is plead for a “special trade “deal with Trump when he has proclaimed that the US and China can do a deal!
But that’s UK politicians for you. As the Colonel says the financial elite see more money continuing to rip off the UK than pursuing any decent policy that might actually benefit the UK.
Agree the blame will be put on the Federal ‘deep state’ and Mr Powell probably demonised as the cause of the capital flight, that and China.
As RM said the plan is to destroy democracy, the nation state which is the safe container of democratic systems, to have taxation without representation, a plutocracy.
Thank you for the shout out, John.
The UK is an extreme case, but the likes of Australia and Italy, to name just two, are little better.
Over the week-end, I caught up with some delegates en route to Washington for the IMF and World Bank spring meeting. They are stunned that the UK is prioritising a trade deal with the US and said the UK and even EU have options, and can play hard to get between the US and China / BRICS or not at all. I explained the elite corruption and even obsession with all things USian, not just in the UK, but the EU, too.
Much to agree with
Could you perhaps write something on the advantages and disadvantages of having the world’s reserve currency? I am a bit hazy about it, the Americans seem to prize it but not having it doesn’t seem to be a big problem for China, is it mainly a question of prestige?
On the video list
Thank you, David.
Some links to get you going:
https://www.nakedcapitalism.com/2022/12/dethroning-the-dollar-why-the-alternatives-are-not-ready-for-prime-time.html
https://www.nakedcapitalism.com/2023/05/ny-times-is-wrong-on-dedollarization-economist-michael-hudson-debunks-paul-krugmans-dollar-defense.html
https://www.nakedcapitalism.com/2024/09/brics-and-de-dollarization-an-alternative-or-potential-disaster.html
Please look out for material written by my friend and counterpart Kathleen Tyson.
Thanks
Surely at some stage he has to be stopped. Liz Truss was ousted pretty quickly and what she did was nothing compared to what Trump is doing. I don’t understand the American system but if there are no checks and balances surely the people will revolt.
I may be wrong but I don’t think the US constitution allows for a party to oust the president mid term. Unless it’s with a bullet…….
The cabinet can.
Or he could be impeached.
Then we get Vance.
The US constitution provides for checks and balances between the three estates – the Presidency, Congress (the Senate and House of Representatives) and the Supreme Court. In theory it was thought no president could take the kind of control now grabbed by Trump, because Congress and the Supreme Court would intervene to thwart him.
But the Supreme Court has been stacked with right wing idealogues and tame incompetents, while Congress has been captured by corporate interests so that not only the Republicans, but the Democrats have been compromised.
And lastly, social media and the capture of mainstream media by the like of Murdoch, have fed lies to the good citizens of the US, who have voted in a dangerous man, who would be king.
For too long, too many Americans have believed their own propaganda that the US is the flagship of democracy and freedom. They are reaping what they have sown, in their blinkered optimism, and as Richard points out, we will all suffer the consequences.
Starmer must be made to face up to this reality – what will it take?
Thank you and well said, Helen.
With regard to Starmer, he’s been on US payrolls for two decades, so he can’t do anything else. His successor Streeting, too.
The UK is going down with the US. That has been the case since Suez. The EU gave us options, but Brexit took away these options AND imposed tariffs on the UK before Trump did.
As I write this, let me again laugh at remainers and centrist log rollers who thought Starmer was one of them and undermined Corbyn to get Starmer. They made their beds, so they should lie in it.
I’m sure you don’t want your site to rival Martin Lewis. One’s enough! But here’s a List of the Day that might help those on low incomes to plan for what’s coming. Much of this is well known, but it could be useful to people to have it all in one place.
1. Maximise Your Income
Check you’re receiving all entitled benefits Use tools like the Citizens Advice “Help on a low income” guide to confirm entitlement to Universal Credit, Housing Benefit, Tax Credits, Income Support and Pension Credit.
Apply for local welfare assistance and cost-of-living payments Councils offer Household Support Funds and discretionary welfare assistance for essentials (energy, food, travel) whether or not you already receive benefits.
Seek charitable grants Turn2us and its Elizabeth Finn Care arm provide hardship grants and welfare information to cover immediate needs like heating, clothing and essential bills.
2. Manage Essential Outgoings
Budgeting and payment plans Work out a simple budget to know exactly what you can afford each month, then agree affordable payment plans with energy suppliers, landlords and creditors.
Energy bill support Contact your supplier for payment plans and apply for the Warm Home Discount (a £150 winter rebate) if you receive means-tested benefits or are on a low income with high energy costs.
Council Tax discounts and relief Check eligibility for single-person discounts, Council Tax Reduction and discretionary council hardship funds via GOV.UK or Citizens Advice.
Housing cost relief Claim the housing cost element of Universal Credit or Housing Benefit, and apply for Discretionary Housing Payments if rent exceeds benefit.
Food support If you cannot afford groceries, seek a referral to your local Trussell Trust or community food bank through Citizens Advice or welfare assistance schemes.
3. Deal with Debt Effectively
Early free debt advice Contact Citizens Advice or StepChange as soon as debts become unmanageable; early advice can prevent charges and enforcement, and save social costs.
Explore formal debt solutions If informal arrangements fail, check eligibility for a Debt Relief Order (for debts up to £50,000 with minimal assets) or a Debt Management Plan through free providers.
Use breathing space schemes Take advantage of statutory “breathing space” to pause interest and enforcement when seeking debt advice.
4. Build Small Resilience Funds
Save what you can, however small Even £5–£10 a week in a credit union savings account or informal savings club can cover minor emergencies without resorting to costly credit.
Use banking tools Some banks offer round-up savings features or small guaranteed-interest accounts suitable for low-income savers.
5. Strengthen Skills & Networks
Free training and job support Look into DWP-funded programmes, local college adult learning courses and online platforms to improve employability and income prospects.
Community support groups Engage with local church groups, charities and food co-ops for bulk-buy food schemes, communal cooking and peer budgeting help.
6. Stay Informed & Connected
Monitor benefit changes Follow GOV.UK updates on Universal Credit and Income Support reforms so you can adapt swiftly to policy shifts.
Keep in touch with advice services Regularly liaise with Citizens Advice, local welfare rights teams and debt charities to review your situation and access new support as needed.
By combining full benefit take-up, disciplined budgeting, early debt intervention and targeted support schemes, low-income households reliant on welfare can reduce financial vulnerability and better navigate the risks of a downturn. Proactivity and use of free advice services are the strongest shields against income shocks and rising costs.
Very sensible points. Something I would add (and I would say this, of course!) is that there are now millions in “Defined Contribution” pension plans, either via an employer’s scheme or on a personal basis. Mostly, these plans are invested in ‘default funds’ that are supposed to ‘de-risk’ the pot as the selected retirement age gets nearer. That doesn’t always work, unfortunately.
Too many I meet are using the ‘probabilities-based’ retirement income option of drawing from their fund, often in arrangements set up before the Truss/Kwarteng debacle, and are being persuaded by their advisers (if they have one) to stay invested – cynically, to keep the advisers fee stream going. Many will run out of pension fund long before they die.
The alternative, ‘safety-first’, option is to use some or all of their pension pot to purchase a guaranteed lifetime annuity. The annuity offer has improved significantly as long-term interest rates have increased and life expectancy has slowly declined. Most of my clients are sensible enough to purchase RPI-Linked pension annuities, thus securing a ‘real income’ in the context of whatever happens to inflation for the rest of their lives, rather than a ‘nominal income’ buy purchasing a fixed annuity. Unfortunately, some 80%-85% of annuities bought are fixed, but that decision needs to be seen in context with the individuals overall financial circumstances.
We always use the ‘open market option’, where we invite bids for the clients fund and, clearly, the highest offer is where the annuity purchase is placed. 30%-40% of people simply don’t bother with this which I think is reckless.
The other thing to remember is that annuities don’t pay people like me very much in the way of fees. We agree a fixed fee with the client, commensurate with the estimated workload involved. This is paid from the pension fund by the annuity provider. Once an annuity has been set up there is nothing more to do. The fee point is important.
A short while ago, we advised a client to spend exactly £500,000 on a pair of increasing annuities (one linked to RPI, the other increasing by 5% each year, compound) and our fee was £3,750 (0.75%). They had looked on-line and the fees indicated were £15,000 (3%). The existing pension arrangement they had set up in 2011 has cost them £26,800 (4%) to set up and the ‘adviser’ was also taking a fee of 1.25% per annum, and eye-watering £8,000-odd a year on a fund value of about £667,000. Total ‘advisory fees’ of something around an astonishing £130,800 – mostly unnoticed as the fund value had increased over most of the 13-year investment period. They got very little in return for the annual fee.
You can see my point, I hope, that understanding fees is so important and ignoring the ‘annuity offer’ because of vested interests can be very detrimental as far as ‘maximizing one’s income’ is concerned.
I like the sound of your type of advice Mark
The financial reckoning is coming—not by accident, but by design. Trump’s policies aren’t just destabilising; they’re a deliberate unravelling of global confidence in the U.S. economy. Tariffs, isolationism, and erratic leadership aren’t blunders—they’re triggers. And when they detonate, the fallout won’t be contained to Wall Street.
This isn’t speculation—it’s cause and effect. The dollar’s dominance? Fragile. The tech giants propping up markets? Vulnerable. The illusion of American exceptionalism? Shattered. When capital flees, it won’t trickle—it will haemorrhage. And the world, tethered to U.S. markets, will bleed with it.
The question isn’t if—it’s when. And when it happens, half-measures won’t cut it. We need leaders who grasp the severity, who reject denial, and who prepare for the crisis Trump is engineering. The alternative? A global depression that makes 2008 look like a footnote.
The countdown has already begun. The only uncertainty left is whether we’re ready.
The similarities with the pandemic are very strong.
2019 There we were alarm bells were ringing all over the globe with the World Health Organisation taking a lead in informing health agencies to prepare for a possible pandemic.
And as usual our UK government paid no heed at all, a lack of action that caused undue infection rates illness and deaths and required hundreds of billions to be poured into the UK’s economy.
Here we are now the warning signs are clear the ramifications of Trump’s actions will be hugely detrimental to the economies of the world and the global financial and trading systems.
What are the chances that Starmer and Reeves would organise a weekend at chequers with the full cabinet and all senior heads of departments of the civil service.
Then a full cabinet meeting with the board of the BOE and the treasury to game play all possible outcomes of the fall out of a Trump induced economic tsunami.
Chances are nil,zip fuck all zero and nada.
Meanwhile rachel from accounts is in USA trying to get a trade deal with a raving lunatic and sociopath.
FFS!!
Indeed
Thank you, both.
@ Pat: With regard to civil servants, many look enviously at the pay and glammed up look obtained by their former colleagues now at US firms. That has been the case for two decades.
A Swedish engineer, Birger Dahlerus, in 1939 travelled with some Englishmen, via Sweden and met Goering and then Hitler – this was in the last hours before war in an attempt to prevent war – it failed, but they saw Hitler in one of his rages, and which Dahlerus describes – “Suddenly he (Hitler) stopped in the middle of the room, and stood there staring. His voice became blurred and his behaviour was that of a completely abnormal person … His voice became more indistinct and finally one could not follow him at all … Just then he seemed more like a phantom from a story book than a real person, I stared at him in amazement and turned to see how Goering reacted, but he did not turn a hair. It was a terrifying reflection that this man was the man with the fate of the world in his hands at that moment.” Does history repeat itself with some leaders?
Good question
Hitler was already a serious drug addict by then. It did, of course, get much worse.
What happens if you factor in that when Trump reduces the tariff on China, as there is talk of him doing, China doesn’t reciprocate?
Who knows?
What I can say with certainty is that US investors are looking outside of the US. The ones that have been in touch with me have all said almost the exact same thing: “…now is not the time to invest in the US, we are looking to invest overseas…are you interested?”
As per the Chinese proverb (somewhat altered)…we are living in interesting times.
Just to add to all of the above, have you picked up on the Trump proposal to charge a ‘user fee’ on foreign US Treasury holdings? Sounds like the implications could be really serious. See here for the story: https://x.com/BalticSnowTiger/status/1914774202957410317
I had
The man is trying to destroy the dollar
There is a video coming on this
“The man is trying to destroy the dollar”
I have no doubt that he’s a raving lunatic, a narcissist and a social pathogen, but my lay question as to above re $ is:
Why? Why would the US president deliberately do that to his own country? The analysis seems real, and I can get that much, but I can’t understand the rationale. Is it simply to declare martial law in the event of mass panic if a 1920s style crash comes? Or to short stuff and make enormous profits?
He thinks a crashed dollar will encourage US exports and so jobs.
It is bonkers.
Richard:
In the Canadian election — they vote 28 April — the two main parties which are the only ones who can win ( it is FPTP after all, just like in the UK ) are both pushing economic nationalism to counter Trump’s expanisionist nationalism.
One party will win, but it will NOT be a progessive step forward and that country ( my birthplace) will really feel the heat when the predicted crash comes. .
https://theleftlane2024.substack.com/p/patriotismnationalism-the-last-refuge
Thanks for the reply.
Even I understand the economic incoherence and insanity of that.
I wonder if the sane amongst the U.S. establishment will take “action” if push comes to shove economically, even if Vance would take over? I don’t think Vance, who is certainly odious, is actually mad. He’s just a slimy little camp follower, not a leader.
Trump was never likely to fire Powell. He needs a scapegoat for when (and I do mean when, not “if”) the economy crashes. By lashing out repeatedly at Powell and the Federal Reserve for not cutting interest rates, he has set up Powell as the fall guy and the one to blame when things fall apart. “It’s not my fault. It was the Federal Reserve not cutting interest rates that was the cause of this crisis. Nothing to do with me!”. The Trump faithful will blame Powell because Trump told them it was Powell’s fault and Trump and the millions who will lose their jobs will come up appearing to be the victims of Powell’s so-called incompetence.
If he’d fired Powell now (legally impossible, I know, and yet … ) and replaced him with a tame puppy of his choosing, then when the crash in the economy still happens, he wouldn’t have had anyone to blame. Then what would the Republican faithful do? Who would they blame then? Trump? Heaven forbid!
With the repeatedly bashing of Powell and the Federal Reserve, Trump has now firmly established the fall guy/scapegoat prior to the inevitable fall. Jerome Powell.
[…] the crash that I talked about yesterday will […]