Comment by JumpCrisscross
7 months ago
> Now that someone's said to Trump's face that Wall Street thinks he always chickens out, he may or may not stop doing it
The point is he’s powerless not to. The alternative is allowing a bond rout to trigger a bank collapse, probably in rural America. He didn’t do the prep that produces actual leverage. (Xi did.)
This was the most interesting thing I found during the past few weeks - even “The US President is the most powerful man in the world” can’t win a war against the bond market.
> even “The US President is the most powerful man in the world” can’t win a war against the bond market
"You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics" (D. D. Eisenhower).
Trump did zero preparation for this trade war. It's still unclear what the ends are, with opposing and contradictory aims being messaged. We launched the war simultaneously against everyone. The formula used to calculate tariffs doesn't make sense. And Trump decided to blow out the deficit and kneecap U.S. state capacity at the same time he's negotiating against himself on trade.
The U.S. President can take on the bond market. Most simply by taking the budget into surplus, thereby threatening its existence. But Trump didn't do that. He didn't even pretend he was going to do that. Instead, he's strategically put himself in a position where he has to chicken out, and it honestly seems like he's surrounded himself with people who are too high, drunk and/or stupid to see that. He's the poker player who shows up at the table, goes all in, looks at his cards and folds in one move.
There's no end - it's just Trump following his learned or innate behaviour.
Same behaviour that bankrupted every institution he's ever been in charge of before. The definition of insanity is doing the same thing again and expecting different results.
It's possible he'll stop chickening out to win his internal argument against that reporter who said he always chickens out. Feeling like he's winning seems to be important to him and he holds grudges for a long time. In that case the American economy goes bye bye.
We already know he wants to end the dollar reserve currency status, because he said so - trade deficit and reserve currency status are different words for the same thing.
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Can you expand on "probably in rural America"? Do you just mean that those smaller community banks are more at risk if rates rise? If so, because they issue more variable rate debt? Or is there something else?
edit: grammar
> Do you just mean that those smaller community banks are more at risk if rates rise? If so, because they issue more variable rate debt? Or is there something else?
Current issue is community banks have 3x the commercial real estate exposure of other banks [1]. They're also less liquid and have a lower ROA. So in cases where the shock comes from outside the financial sector, they tend to be the first we worry about.
[1] https://www.fdic.gov/quarterly-banking-profile 33% vs 11% of total assets
Never assume a narcissist will take the sane way out when their game blows up in their face.