Brief Update On The Economic/Money Front
I’ve maintained for months that Trump’s primary goal in his approach to international trade has been to shore up the USD as the world’s reserve currency. This can only now be achieved by addressing America’s unsustainable debt situation. The Trump Tariff shock and awe approach was intended to stampede the world into accommodations (“deals”) that would, in effect, feature the rest of the world paying off America’s debts. None of that has worked out as planned, due in major part by Chinese resistance. In the meantime Trump’s ability to “deal with” China—pivot to China, pressure China—are also being hamstrung by the ongoing war on Russia. The stupid attack on Russia’s nuclear triad only strengthens Russian resolve and convinces Russia’s strategic partners—especially China and Iran—of Trump’s hostile plans for them. Here I present a few brief tweets to illustrate the conundrum Trump faces after four months of treadinng water:
The American bond market is completely wrecked. Outside of a small group of investors no one realises that every auction is a nail-biter.
The COVID shutdown of exports was the first cause of the inflation in the US. It is very hard to see how this doesn’t result in more inflation. A third of goods previously coming from China are not going to arrive!
Finbarr Bermingham @fbermingham
New Chinese trade data out today for May might deepen anxiety over trade diversion in Europe.
China's exports to the US down 34.52%
China's exports to the EU up 12%
Philip Pilkington @philippilk
The US is getting inflation, Europe is not. The spread between US and European interest rates will widen. USD lending globally will dry up, replaced by euro and probably renminbi lending. Big changes are coming to the global monetary system.
Philip Pilkington @philippilk
The EU is already pivoting to facilitate. When this inflation hits the US 10y is going to maybe 7%. No one is borrowing at 7% + risk premium. The US capital markets are going to have to shrink dramatically.
Philip Pilkington @philippilk
Ignore this chart at your peril…
While the author may be overstating matters, it should give serious pause for thought.
China doesn’t need the United States in any way, shape, or form. Chinese trade data for May show a huge rise in China’s trade surplus with many countries, offsetting the fall in its surplus with the US.
Comments welcome.
Readers commenting on the LA Insurrection will want to read Turley:
Always Ready, Always There: Democrats Mobilize Against the National Guard Deployment
https://jonathanturley.org/2025/06/09/always-ready-always-there-democrats-mobilize-against-the-national-guard-deployment/
I don’t know if the bond market is melting down but a 7% long yield when the deficit is 7% of GDP and Trump is breaking the supply chains for the second time isn’t far fetched. Is anyone watching the precious metals? Silver and Platinum have finally started to follow gold.
The money printing has to stop, but that would require fiscal discipline.