The stock market isn't America as proven by the absurd overreaction down and up. This was way beyond any impact on Main Street. We have no reliable allies so everything should be bilateral and transactional. Our trading partners need not be saints and none of them are but any deals must be for the benefit of the American people and not some myth about the Free World.
The stock indices have nothing to do with whether the average American is paid enough, can afford to fill their gas tank, has quality education for their children, can go on a holiday, can afford groceries or anyone of the every day things that every day people do everyday.
Nearly half of Americans are emplyed in small businesses and over 60% of jobs created since 1995 have been created by small business. The big guys in the Dow jsut don't move the needle for every day people.
Since the GFC the stock market is strongly correlated to interest rates and whether the fed will print money or not and weakly correlated to the economy generally.
Watching the stock market fall or rise day to day is just more distraction and hand waving. Bond markets are much more important but even then, post quantitative easing, they are juiced by the money printing machine.
The fact that markets soar or swoon on what some gormless beurecrat at the fed says will happen to interest rates tells you all you need to know about stock indices. They are fake fronts for massive government money printing.
The Dow could fall to zero tomorrow. The companies in it would still have exactly the same productive capacity. The assets wouldn't dissappear they would just change hands.
The banks should have been wiped out in the GFC. Banks are systemically important but individual banks aren't. They should have printed money to cover account balances for businesses and individuals and wiped out bank shareholders and bank bond holders.
And not paid the banksters any of their fucking outrageous bonuses.
Some should have gone to prison to.
Instead we have moral hazard expanding to swallow up our entire culture.
I think Quoth the Raven (here on Substack) and ZeroHedge called it correctly. A huge liquidity crisis was unfolding due to the unwinding of the basis trade. The basis trade is a highly-leveraged arbitrage play being used by hedge funds to turn interest rate differences between Treasury securities into huge profits through the use of enormous leverage. The market downturn and the resulting capital flows was forcing the hedge funds to unwind these trades, but the amount of leverage used is in the trillions of dollars. Today, we were on the verge of a repeat of the collapses that triggered the GFC.
Trump's call eased the crisis, but these trades are still in place and have the potential to create a catastrophe. It's certain hedge funds re-running the playbook that caused the 2008=2009 meltdown. Financial regulators and the Federal Reserve are aware of the potential for disaster and have held meetings on what to do. Apparently, the plan is to repeat the GFC solution, meaning print enormous sums of money to avoid a financial collapse.
Have a look at the two sites I mentioned above for a more detailed explanation of this ticking time bomb.
But this comes back to the same thing. All of these things are unstable they are all distorting the system from what it's was built to do.
Stockmarkets are meant to be a way for companies to raise capital more easily.
Futures are to hedge risk for buyers and producers of commodities.
Shorts are a way of keeping markets honest.
Now it's all just speculation, leveraged and then speculated again. And a growing sea of middlemen all clipping the ticket.
We print money and avoid recession like the plague so these imbalances just grow and grow and moral hazard becomes greater and greater.
Eventually it all has to blow up. The event that triggers the crash isn't at fault. It's the speculation and turning a blind eye and knowing something is risky and will eventually blow up, but doing it anyway, knowing the fed will bail out any mistake, that is at fault.
Which is why I agree with the tariffs. Stop making the US economy all about the Wall Street money men. The top 25 hedge fund managers "earned" $30.1 billion in 2024. For what? Moving money around? For creating enormously leveraged financial instruments that will crash the economy when they explode? They make huge sums from that stuff but when it all goes wrong, the problem is way to big to be their problem. It becomes everyone's problem. So heads they win and tails, we all lose. Sorry, but that already happened 15 years ago. Screw that.
The tariffs are about shifting the playing field back to Main Street and people who actually make stuff. It's unfortunate Trump had to pull back from that today because Wall Street has us yet again party to a financial suicide pact.
I'm not defending them, just noting they have good explanations of the basis trade. Other financial publications, Bloomberg, Barron's and the Wall Street Journal, also noted the unstable Treasury markets due to the basis trade. Their explanations as to what it actually is was cursory.
I'm fairly sure that many of the proposed tariffs were put out as a negotiating tactic. One that has paid off massively. At least when I wrote my post about Tump's tariffs on Sunday (ish) I predicted that countries would pick up the phone, call, and get a better deal. Pretty much exactly as seems to have played out.
In addition it is quite clear that the Trump team don’t care too much about the stock market, especially not short term. And longer term quite possibly they want to see the focus of the markets change and hence are unmoved by the potential losses to hedge funds and other financial engineers. They don't want the blow up the system as a whole but they do want less financial trickery and more actual investment in actual physical US assets and businesses. They also, I'm fairly sure, want Wall St to focus longer than the next quarter.
As far as I can tell the preferred Trump tariff on imports is 10%. There will be exceptions (both higher and lower), but 10% is the plan. 10% tariffs do not do any of the OMG the sky is falling harm. They change incentives so that businesses are more likely to invest in US manufacturing, but they don’t work as protectionism except in really really low margin business sectors. All they do is give domestic producers a slight advantage that will be overcome as soon as a foreign company comes up with a significant manufacturing advantage
Bessent made the case for tariffs really well and I’ll be disappointed if we don’t go through with them. Arguably the non tariff barriers are the biggest issue so hopefully those are dealt with in these negotiations, or else at minimum the 10 percent tariffs should remain in place. Canada, Eu, will never completely remove their tariffs anyway.
My question for libertarians and also for Democrats and other pretenders to classical liberalism: Should you be free to sell Zyklon B to a Nazi regime?
A funny aspect of free trade theory: besides the gains of trade, based on the division of labor and increased productivity as everyone produces what they have a comparative advantage in, classical liberal free trade theorists also said it promoted world peace.
And it does or did to a great degree, as countries don’t want to go to war with countries they have investments in or that are markets for their goods. But Putin was emboldened to take chunks of Ukraine because Democrats made Putin rich by raising the price of Russian fossil fuel exports when they curtailed American energy production. And a rich Chinese Communist Party will find it easier to risk WWIII and annex Taiwan or the Philippines if the U.S. continues to import Chinese slave labor produced goods. The Trump tariff policy that has reduced the Chinese stock market by 12% in 4 days could be viewed as a foreign policy move, especially as country by country other nations enter no tariff reciprocal agreements with the U.S.
As a libertarian I’ve always had a problem with free trade with unfree countries - e.g. shouldn’t there be a tariff on Cuban or Iranian imports to go into a fund for refugees from the same country?
Likewise, should one allow trade that enriches war-mongering, totalitarian, imperialist, or genocidal countries? Should one be free to sell Zyklon B to a Nazi regime?
Musk and Bassett are wrong: Germany is a worse offender on global economic trade and a "zero tariff" policy would not solve US deindustrialization and trade deficient. They just single handedly destroy Trump trade policy, get ready for a bloodbath in Midterms.
A little consistency from the President would be welcome. Well planned and executed policy and a consistent hand on the rudder would be more assuring to the public (and world leaders) than stop and go flip-flopping.
Some of that selling earlier in the week, is due to corrupt money streams being switched off by DOGE. Next, we need to get to the part where they break the silence about the 14 or so black money machines that were being used to cut 1 million dollar checks to anyone that wanted one who worked in the Treasury disbursements office, with zero accounting controls and oversight. This money bleeding, being shutoff, turned up the volume on the liquidity crisis, which was kept silent, by streams of USAID slush money. They just need how to break this news to the country, without tanking the USD internationally, but their grit perspective is fogging their vision.
As ever, the moral of the story is: Don't panic.
Correct. Don't panic.
China is the greatest threat -- and they panicked. Nice to see America winning. It's been a long time......
How did China panic?
The stock market isn't America as proven by the absurd overreaction down and up. This was way beyond any impact on Main Street. We have no reliable allies so everything should be bilateral and transactional. Our trading partners need not be saints and none of them are but any deals must be for the benefit of the American people and not some myth about the Free World.
But Wall Street ISN'T main street.
The stock indices have nothing to do with whether the average American is paid enough, can afford to fill their gas tank, has quality education for their children, can go on a holiday, can afford groceries or anyone of the every day things that every day people do everyday.
Nearly half of Americans are emplyed in small businesses and over 60% of jobs created since 1995 have been created by small business. The big guys in the Dow jsut don't move the needle for every day people.
Since the GFC the stock market is strongly correlated to interest rates and whether the fed will print money or not and weakly correlated to the economy generally.
Watching the stock market fall or rise day to day is just more distraction and hand waving. Bond markets are much more important but even then, post quantitative easing, they are juiced by the money printing machine.
The fact that markets soar or swoon on what some gormless beurecrat at the fed says will happen to interest rates tells you all you need to know about stock indices. They are fake fronts for massive government money printing.
The Dow could fall to zero tomorrow. The companies in it would still have exactly the same productive capacity. The assets wouldn't dissappear they would just change hands.
The banks should have been wiped out in the GFC. Banks are systemically important but individual banks aren't. They should have printed money to cover account balances for businesses and individuals and wiped out bank shareholders and bank bond holders.
And not paid the banksters any of their fucking outrageous bonuses.
Some should have gone to prison to.
Instead we have moral hazard expanding to swallow up our entire culture.
We still need allies. I like the strategy of a focused effort against China. We need others to join in.
It seems to me that his mass tariffs approach achieved two obvious goals:
1. Push for and attain negotiations
2. Place China in an untenable position (they can’t cave to US pressure like this)
I thought things went pretty well.
I think Quoth the Raven (here on Substack) and ZeroHedge called it correctly. A huge liquidity crisis was unfolding due to the unwinding of the basis trade. The basis trade is a highly-leveraged arbitrage play being used by hedge funds to turn interest rate differences between Treasury securities into huge profits through the use of enormous leverage. The market downturn and the resulting capital flows was forcing the hedge funds to unwind these trades, but the amount of leverage used is in the trillions of dollars. Today, we were on the verge of a repeat of the collapses that triggered the GFC.
Trump's call eased the crisis, but these trades are still in place and have the potential to create a catastrophe. It's certain hedge funds re-running the playbook that caused the 2008=2009 meltdown. Financial regulators and the Federal Reserve are aware of the potential for disaster and have held meetings on what to do. Apparently, the plan is to repeat the GFC solution, meaning print enormous sums of money to avoid a financial collapse.
Have a look at the two sites I mentioned above for a more detailed explanation of this ticking time bomb.
But this comes back to the same thing. All of these things are unstable they are all distorting the system from what it's was built to do.
Stockmarkets are meant to be a way for companies to raise capital more easily.
Futures are to hedge risk for buyers and producers of commodities.
Shorts are a way of keeping markets honest.
Now it's all just speculation, leveraged and then speculated again. And a growing sea of middlemen all clipping the ticket.
We print money and avoid recession like the plague so these imbalances just grow and grow and moral hazard becomes greater and greater.
Eventually it all has to blow up. The event that triggers the crash isn't at fault. It's the speculation and turning a blind eye and knowing something is risky and will eventually blow up, but doing it anyway, knowing the fed will bail out any mistake, that is at fault.
100% agree.
Which is why I agree with the tariffs. Stop making the US economy all about the Wall Street money men. The top 25 hedge fund managers "earned" $30.1 billion in 2024. For what? Moving money around? For creating enormously leveraged financial instruments that will crash the economy when they explode? They make huge sums from that stuff but when it all goes wrong, the problem is way to big to be their problem. It becomes everyone's problem. So heads they win and tails, we all lose. Sorry, but that already happened 15 years ago. Screw that.
The tariffs are about shifting the playing field back to Main Street and people who actually make stuff. It's unfortunate Trump had to pull back from that today because Wall Street has us yet again party to a financial suicide pact.
Absolutely 100% agree.
It's more of the elite telling us peasents "how the world works".
Even the whole tarifs are bad thing. Are they really? Sure in an artificial perfect strading system that doesn't actually exist anywhere.
I am baffled how there are many countried with tariffs on the US. When they change or add to those tarrifs it's nothing to see here.
But Trump does it an suddenlt its a trade war, even if he didn't fire the first shots.
It's more Trump derangement hypocracy.
They might be right, it might be a disaster, but they can't know they are right.
The west needs to move back to making things other than spreadsheets.
Government is there to support the dollar system, not the other way around. This is how your slavery is accomplished.
Zero Hedge has predicted 15 of the last two recessions.
I'm not defending them, just noting they have good explanations of the basis trade. Other financial publications, Bloomberg, Barron's and the Wall Street Journal, also noted the unstable Treasury markets due to the basis trade. Their explanations as to what it actually is was cursory.
I'm fairly sure that many of the proposed tariffs were put out as a negotiating tactic. One that has paid off massively. At least when I wrote my post about Tump's tariffs on Sunday (ish) I predicted that countries would pick up the phone, call, and get a better deal. Pretty much exactly as seems to have played out.
In addition it is quite clear that the Trump team don’t care too much about the stock market, especially not short term. And longer term quite possibly they want to see the focus of the markets change and hence are unmoved by the potential losses to hedge funds and other financial engineers. They don't want the blow up the system as a whole but they do want less financial trickery and more actual investment in actual physical US assets and businesses. They also, I'm fairly sure, want Wall St to focus longer than the next quarter.
As far as I can tell the preferred Trump tariff on imports is 10%. There will be exceptions (both higher and lower), but 10% is the plan. 10% tariffs do not do any of the OMG the sky is falling harm. They change incentives so that businesses are more likely to invest in US manufacturing, but they don’t work as protectionism except in really really low margin business sectors. All they do is give domestic producers a slight advantage that will be overcome as soon as a foreign company comes up with a significant manufacturing advantage
Bessent made the case for tariffs really well and I’ll be disappointed if we don’t go through with them. Arguably the non tariff barriers are the biggest issue so hopefully those are dealt with in these negotiations, or else at minimum the 10 percent tariffs should remain in place. Canada, Eu, will never completely remove their tariffs anyway.
President Trump is the MOST rational of the bunch, what’s wrong with you?
My question for libertarians and also for Democrats and other pretenders to classical liberalism: Should you be free to sell Zyklon B to a Nazi regime?
A funny aspect of free trade theory: besides the gains of trade, based on the division of labor and increased productivity as everyone produces what they have a comparative advantage in, classical liberal free trade theorists also said it promoted world peace.
And it does or did to a great degree, as countries don’t want to go to war with countries they have investments in or that are markets for their goods. But Putin was emboldened to take chunks of Ukraine because Democrats made Putin rich by raising the price of Russian fossil fuel exports when they curtailed American energy production. And a rich Chinese Communist Party will find it easier to risk WWIII and annex Taiwan or the Philippines if the U.S. continues to import Chinese slave labor produced goods. The Trump tariff policy that has reduced the Chinese stock market by 12% in 4 days could be viewed as a foreign policy move, especially as country by country other nations enter no tariff reciprocal agreements with the U.S.
As a libertarian I’ve always had a problem with free trade with unfree countries - e.g. shouldn’t there be a tariff on Cuban or Iranian imports to go into a fund for refugees from the same country?
Likewise, should one allow trade that enriches war-mongering, totalitarian, imperialist, or genocidal countries? Should one be free to sell Zyklon B to a Nazi regime?
The bond markets might have more to do with the move toward moderation than bessent or musk.
It's a relief to know that cooler heads prevailed. I have been very impressed by Scott Bessent.
Musk and Bassett are wrong: Germany is a worse offender on global economic trade and a "zero tariff" policy would not solve US deindustrialization and trade deficient. They just single handedly destroy Trump trade policy, get ready for a bloodbath in Midterms.
A little consistency from the President would be welcome. Well planned and executed policy and a consistent hand on the rudder would be more assuring to the public (and world leaders) than stop and go flip-flopping.
Some of that selling earlier in the week, is due to corrupt money streams being switched off by DOGE. Next, we need to get to the part where they break the silence about the 14 or so black money machines that were being used to cut 1 million dollar checks to anyone that wanted one who worked in the Treasury disbursements office, with zero accounting controls and oversight. This money bleeding, being shutoff, turned up the volume on the liquidity crisis, which was kept silent, by streams of USAID slush money. They just need how to break this news to the country, without tanking the USD internationally, but their grit perspective is fogging their vision.