Great! And just as I was heading to bed. Well, at least I can try to sleep knowing we're in the hands of Donald Trump - the man with a Spine of Steel per Ms. Leavitt. And we already know he's a Very Stable Genius. And surrounded by a band of Brainiacs. Gulp. :-)
At what point does the US’s debt-ceiling threshold become an issue? The US has been operating under “extraordinary measures” to temporarily not fund certain intragovernmental obligations. There is an “X Date” coming — at some apparently indeterminate moment. Income tax revenues are expected to plummet as a result of the Rapid Unscheduled Disassembly of the IRS by the M-sk/Tr-mp Administration. It appears that US govt borrowing costs are likely to soar — further pressuring US deficit spending. Does any of this matter, in the greater scheme?
Stabilization actions should be expected at scale. And if there's one market central banks can stabilize best, it's sovereign bonds. Can bounce or dip since big holders around the world might have a hundred reasons now to make big buys or sells. But CB's have infinite buying and selling power, and a literal mandate to keep yields on these products stable. Will chase any sudden moves back to where they started the next day.
And no, neither FED nor ECB nor BOJ would sacrifice the wealth of elites just to punish Trump. (though the occasional headfake, eg to help a friend at a mega bank safely unload an unwanted asset, might not be out of the question)
The side effects, tho, will be felt. 100% on stuff from PRC imports to US. Impact not uniform, but concentrated on select biz that are exposed, and on population segments with shaky finances. Also unleashes wave of price gouging behavior in US domestic industry, which (tho we've seen it just recently in Covid) has its own positive-feedback tendency that I don't think analysts appreciate.
I don't know, but is there the upside the the GOP can't afford to hand a Trillion dollar tax cut to billionaires? And is Trumps dream of a trillion dollar defense budget disappearing? And will anyone tell him?
Trump's other avenue of attack in furtherance of the GOP tax break for billionaires is the radical application (or misapplication) of general accounting principles (GAP) to the institutions and agencies they've ransacked. Further creative accounting--a la DOGE--will "find" the funds they need to cover the delta for the tax break to billionaires. The only way tax breaks and tariffs pay for themselves is when they cook the books. The "Mar-a-Lago Accord" is a tell.
Accounting only goes so far. Eventually, they need to come up with the cash. Probably be printing money. But I guess that's just a form of creative accounting too.
Can they give the tax cut with the intention of causing a collapse? I hear nonsense about bringing on destruction of biblical proportions and question this. (No I'm not religious and am not a conspiracy theorist but other people are, just saying)
UPD - looks like Bill Ackman's April 6th appeal [1] for a 90-day pause was heard. However Trump's theatrical re-raise on the China bilateral made it impossible to back down without losing face. Had he waited a day or two, we might be on an entirely different path. Now locked into an unwinnable (for the US) head to head pain contest, where most business opportunities to replace the lost trade go to third countries.
Mass selling of Treasuries would seem to be the first step towards a move on Taiwan. It's not like the Chinese are going to want to finance a US war against them. So, if such a war may be in the offing they should sell first, creating chaos in the US. Then they can issue an ultimatum to Taiwan to accept peaceful annexation under a Hong Kong-like deal for face conquest. With the US enmeshed in its own problems, Taiwan would stand alone. What choice would they have?
At least this is how I thought of it 20 years ago. And i assumed they would take the Hong Kong-style deal. But now that China has reneged on that deal, this might have changed.
Now that we are here, I realize I lack deep understanding of these things and my rather superficial take from back then might be overly simplistic.
May not be in this scale (I show my age) -- but Baker's threat to West Germany in 1987 to raise rates on a Thursday afternoon in 1987, and a storm in the UK (uprooting several trees in Hyde Park), and a lack of traders in the London Banks' dealing rooms caught home in the storm aftermath--- led to one great panic sell that Friday with unwinding of arb trades all over the place -- and this carried on to NYK in the afternoon.
It puzzles me that an issue of the tariffs gets no attention: the burden of higher prices of RPC imported goods to USA on low income budgets. In 2019 episode the higher costs were translated to consumers: Cavallo, Alberto, Gita Gopinath, Brent Neiman and Jenny Tang. 2021. "Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy." American Economic Review: Insights, 3 (1): 19–34.
I have an almost unlimited appetite for this stuff. These are the hidden mechanics of our world.
Me too.
Great! And just as I was heading to bed. Well, at least I can try to sleep knowing we're in the hands of Donald Trump - the man with a Spine of Steel per Ms. Leavitt. And we already know he's a Very Stable Genius. And surrounded by a band of Brainiacs. Gulp. :-)
At what point does the US’s debt-ceiling threshold become an issue? The US has been operating under “extraordinary measures” to temporarily not fund certain intragovernmental obligations. There is an “X Date” coming — at some apparently indeterminate moment. Income tax revenues are expected to plummet as a result of the Rapid Unscheduled Disassembly of the IRS by the M-sk/Tr-mp Administration. It appears that US govt borrowing costs are likely to soar — further pressuring US deficit spending. Does any of this matter, in the greater scheme?
https://bipartisanpolicy.org/blog/debt-limit-2025-what-to-know/
Excellent questions.
Stabilization actions should be expected at scale. And if there's one market central banks can stabilize best, it's sovereign bonds. Can bounce or dip since big holders around the world might have a hundred reasons now to make big buys or sells. But CB's have infinite buying and selling power, and a literal mandate to keep yields on these products stable. Will chase any sudden moves back to where they started the next day.
And no, neither FED nor ECB nor BOJ would sacrifice the wealth of elites just to punish Trump. (though the occasional headfake, eg to help a friend at a mega bank safely unload an unwanted asset, might not be out of the question)
The side effects, tho, will be felt. 100% on stuff from PRC imports to US. Impact not uniform, but concentrated on select biz that are exposed, and on population segments with shaky finances. Also unleashes wave of price gouging behavior in US domestic industry, which (tho we've seen it just recently in Covid) has its own positive-feedback tendency that I don't think analysts appreciate.
Ruh-roh.
mom I’m famous
nice graphics yo
I don't know, but is there the upside the the GOP can't afford to hand a Trillion dollar tax cut to billionaires? And is Trumps dream of a trillion dollar defense budget disappearing? And will anyone tell him?
Trump's other avenue of attack in furtherance of the GOP tax break for billionaires is the radical application (or misapplication) of general accounting principles (GAP) to the institutions and agencies they've ransacked. Further creative accounting--a la DOGE--will "find" the funds they need to cover the delta for the tax break to billionaires. The only way tax breaks and tariffs pay for themselves is when they cook the books. The "Mar-a-Lago Accord" is a tell.
Accounting only goes so far. Eventually, they need to come up with the cash. Probably be printing money. But I guess that's just a form of creative accounting too.
They be
Can they give the tax cut with the intention of causing a collapse? I hear nonsense about bringing on destruction of biblical proportions and question this. (No I'm not religious and am not a conspiracy theorist but other people are, just saying)
UPD - looks like Bill Ackman's April 6th appeal [1] for a 90-day pause was heard. However Trump's theatrical re-raise on the China bilateral made it impossible to back down without losing face. Had he waited a day or two, we might be on an entirely different path. Now locked into an unwinnable (for the US) head to head pain contest, where most business opportunities to replace the lost trade go to third countries.
[1] - https://thehill.com/homenews/administration/5235232-ackman-warning-trump-tariffs/ ... substantially same article appeared in half a dozen MSM outlets on Apr 6th and 7th
Adam is usually chill, so this time must be different.
Buy the dip…oh snap I can’t
Mass selling of Treasuries would seem to be the first step towards a move on Taiwan. It's not like the Chinese are going to want to finance a US war against them. So, if such a war may be in the offing they should sell first, creating chaos in the US. Then they can issue an ultimatum to Taiwan to accept peaceful annexation under a Hong Kong-like deal for face conquest. With the US enmeshed in its own problems, Taiwan would stand alone. What choice would they have?
At least this is how I thought of it 20 years ago. And i assumed they would take the Hong Kong-style deal. But now that China has reneged on that deal, this might have changed.
Now that we are here, I realize I lack deep understanding of these things and my rather superficial take from back then might be overly simplistic.
What do others think?
I think all China has to do is wait.
That was my take. I thought in the end they would get Taiwan without any violence.
May not be in this scale (I show my age) -- but Baker's threat to West Germany in 1987 to raise rates on a Thursday afternoon in 1987, and a storm in the UK (uprooting several trees in Hyde Park), and a lack of traders in the London Banks' dealing rooms caught home in the storm aftermath--- led to one great panic sell that Friday with unwinding of arb trades all over the place -- and this carried on to NYK in the afternoon.
Thank you. I am much informed.
Excellent and timely. Thanks.
It puzzles me that an issue of the tariffs gets no attention: the burden of higher prices of RPC imported goods to USA on low income budgets. In 2019 episode the higher costs were translated to consumers: Cavallo, Alberto, Gita Gopinath, Brent Neiman and Jenny Tang. 2021. "Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy." American Economic Review: Insights, 3 (1): 19–34.
The answers to that issue are:
1. Yeah but in the future you might get a cool job in a factory like those guys in the beer adverts and movies.
2. Yeah you might be paying $2000 extra for standard consumer goods every year but you also got a tax cut of $1000 per year so that's good, right?
"The normal metabolism which “funds” the US government by way of Treasury market ceases to function" writes Tooze on potential risks