Rotterdam Well, isn’t this interesting. President Trump on his single-minded mission towards autocracy suddenly found out that there are limits. Of course, the message he ended up hearing was not the howls of pain from American citizens and countries around the world as he drove the global economy into recession in his ill-advised and obsessional tariff war, but from the usually dependable and stable bond markets. Money finally erected a barrier to narcissism and power poisoning.
I have never really wanted to spend much time trying to understand the ins and outs of the bond markets. I read enough to know that big money wants to balance stocks and bonds in order to hedge against the vicissitudes of all of the gamblers playing the daily odds in the various exchanges. I find it boring, but boring is in fact supposed to be the fundamental characteristic of bonds, especially in the United States and our still dominant economic position, unless Trump manages to destroy that as well.
We might owe some thanks to the historically short tenure of Britain’s 90-day wonder of a Prime Minister Liz Truss, who a little like Trump, but with different tools and objectives, took a hatchet to “correcting” expenditures and budget of the United Kingdom. In doing so, she panicked the bond market as the economy cratered. She was out of office famously in less time than it took a head of lettuce to wilt.
When US Treasuries are no longer stable and a safe haven for investors and many foreign countries, then the interest rates when buying them rapidly rise in order to collect more buyers. US Treasuries hit 5% after being in the 3’s not long ago. In the highly integrated financial nature of late-stage capitalism, that means that as bonds go up, the borrowing interest rates for money go up right down the line. Think mortgage rates moving back up to 7, 8, and beyond, unless checked. In less than 100-days since he took office, Trump has not just attacked democracy, the courts, his perceived enemies, and everywhere he itches, but in his tariff tantrums, the entire economy, making foreign governments and other big buyers of bonds scratch their heads and say, this stuff isn’t safe and stable anymore. Ahab is piloting the American ship, and no one can figure out when it will hit the shoals, but everyone is clear that’s where we’re heading.
So, less than a day after he fired off his global tariffs with his usual speech about never backing down, stand the pain, a better day is coming, he blinked and paused all of them for 90-days. He still has a 10% tariff on most countries, and increased them on China, likely as a face-saving ego thing.
If Reagan was the Big Gipper, then Trump is the Big Bluffer and Blinker, finally corralled by all the voices of big money as they were lining up in fear of losing their shirts. Not even Liz Truss wants to be Liz Truss, and certainly Trump, who thinks he’s such a big money billionaire, doesn’t want to be Liz Truss either. Will he learn something from this catastrophe that almost broke the entire country down? I doubt it. For example, how can playing tit-for-tat with China be a winner at this point? Pundits point out that there is no “off ramp” in that contest, but there is certainly a cliff with a hard bottom that we’ll find once we go over it. A contest between a real autocrat with no accountability and a wannabe autocrat with limited accountability is not a race where any of us want to lay down a bet.
Trump was finally forced to listen, but not to learn. This isn’t over yet, by a long shot.