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Yield Curves Invert in U.S., U.K (bloomberg.com)
395 points by samsonradu on Aug 14, 2019 | hide | past | favorite | 634 comments

Everyone serious knew that a trade war would set a recession in motion, and that it would be a trade war the US would lose because of the directionality of the trade. The thought has always been that the president was using a high leverage negotiating strategy (see https://www.newyorker.com/news/news-desk/for-trump-diplomacy..., for example) to extract maximal concessions from PRC. But in the end, most of the people involving in mid and long range investment decisions thought that they could model him as a rational actor. What we are seeing is the investment community's realization this might not be true. You can look for many recent examples of shifts in investment activity (https://www.autoblog.com/2019/08/13/ford-gm-preparing-for-ec...).

And things will be worse because China is also heading into recession.

You know, you need sell all these products to somebody... And when US consumer stops buying new iPhones (or what ever) combined with recession then situation is going be really really tough.

So this will be worse that 2008. Much worse. Back in 2008, China was growing and helping to ease the recession. I do not think China's economy will grow during this cycle.

The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. The leadership on either side of the 2008 transition was much better at every level. Also, 2008 was a balance sheet depression that was more tractable to fix with monetary approaches.

What is happening, right now, is literally what happened in the Great Depression (with the concurrent reemergence of nationalism) and is what led to two back-to-back world wars https://www.dartmouth.edu/~dirwin/Eichengreen-IrwinJEH.pdf

Dates for WW1: 7/28/1914-11/11/1918

Dates for WW2: 9/1/1939-9/2/1945

Dates for Great Depression: 10/29/1929 to 1939

I know when major historical events happened, thanks. Sorry if I did not state my case clearly enough.

What I was saying was the underlying currents in the economy and politics are similar to the ones that led to those 3 events separately, not necessarily in the causal order in which they happened.

Right, all three of these things were a direct result of the second industrial revolution, as was the rise of communism.

The first industrial revolution was punctuated with the American civil war. The second industrial revolution was punctuated with the great depression and World War 2.

Just imagine what the digital revolution is going to be punctuated with.

We are in for a hell of a bumpy ride.

Memes and shitposts?

Memes and shitposts were funny right up until they started motivating mass murders.

Good connection. The world wars can also be perceived as points where humanity invented new, more “wholesale” ways of murdering ourselves. Their end is also punctuated with the creating of the atomic bomb. We’ve just started to uncover the ways to use the internet as a weapon and haven’t invented any real countervailing forces to it.

The great depression was after one of those wars. I think you can make a case that the global economic and social excesses of the 1920s led to a hard crash, the rise of aggressive ideological movements, and, eventually, the second world war. The first world war was something else entirely, the last gasp of the old "Concert of Europe" balance of power stuff. After the first world war, the world was a completely different place and different rules applied.

The 20s weren't great economically in Europe. In Germany the 30s were better economically I'm afraid to say.

Weimar Germany had a bout of hyperinflation early on, but between 1924 and 1929, the country was stable and prosperous.

All of these things were the result of the second industrial revolution.

Back in 2008, just after the Lehman collapse had happened and when money-market funds had gone bellow 0 (I think in late October), I predicted that there was a very great chance to have a world war in the next decade because of that ongoing crisis.

Fortunately it looks like I was wrong, but it also looks that “liberal democracy” is on its way out in many former bastions of said democracy. I fear that a new nasty recession right now will throw us out directly into a war, we’re at the 1937-1938 moment when almost all of Europe had gone the wrong way in the previous decade (politically speaking).

War with whom over what exactly? Maybe it's just a failure of imagination on my part, but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate.

I don't know, just war.

> but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate.

Ten years ago I bet almost no-one was picturing the late-1980s anti-nuclear treaties going the way of the Dodo bird. Or a land war in Europe (Ukraine is indeed in Europe). Or German politicians being shot for their political beliefs. Or British politicians being shot for their political beliefs. Ten years ago I wasn't seeing US soldiers and their trucks almost every time I take the highway in order to visit my parents in the countryside (I live in an Eastern-European country and NATO member, a geo-political stone's thrown away from Russia). Ten years ago Russia wasn't testing a nuclear-fueled rocket.

How do any of those meaningfully point to a war though? Again a war between whom?

Assuming you're talking about the US pulling out of the INF treaty, that's not really a meaningful change. The Russians and various other countries were already largely ignoring it. Russia's territorial shenanigans are what really cemented the idea that we're not fighting a major super-power to super-power war ever again. The West has largely let it happen, and while I don't understand why, at this point it's hard to see why that would change. US troops have been in Europe for a long time. Whether you saw them more or less in the past, troop levels there haven't changed that much.

> US troops have been in Europe for a long time.

They haven't been in Romania, which is, like I said, a stone-throw away from Russia. And they started showing up after the start of the conflict in Ukraine.

> Assuming you're talking about the US pulling out of the INF treaty, that's not really a meaningful change. The Russians and various other countries were already largely ignoring it.

That's not my understanding of it, at least not when it involves Russia (China is another story).

> Russia's territorial shenanigans are what really cemented the idea that we're not fighting a major super-power to super-power war ever again

Not sure how that follows. When you have nuclear weapons that you can launch from anywhere at anytime you are a super-power. The US and Russia are 100% military super-powers because they can basically annihilate each other at a moment's notice. I'd add China to the list, probably the UK and France too (not sure if France has nuclear submarines, though, too lazy to check right now). Even though Israel has nuclear weapons I don't treat it as a military super-power because of its lack of nuclear submarines or IBCMs. The same goes for Pakistan and India.

> They haven't been in Romania, which is, like I said, a stone-throw away from Russia. And they started showing up after the start of the conflict in Ukraine.


They have been, in fact.

Not on the actual highways and not me having to surpass US military convoys more than once. Yeah, pre-2014 I used to see US soldiers quite often at the Bucharest international airport, they were on or off their trips to either Iraq or Afghanistan (we’re talking mostly 2007-2010) but sure as hell there weren’t US soldiers in the actual Romanian crop fields, like in here [1] . But feel free to hit me with Internet links, while I’m talking about stuff happening a hour drive’s away from where I’m writing this comment. And if it matters those US soldiers shouldn’t have ended up in those grain fields, it was an error of communication. In any case, I told my parents that were they to see US armed vehicles in their field they should just let them pass, no reason to make a fuss.


> What is happening, right now, is literally what happened in the Great Depression (with the concurrent reemergence of nationalism) and is what led to two back-to-back world wars

Note: I understand that "yield curve inversion" does not mean "recession, depression, war" is inevitable or likely - only that these things are indicators at best. That said and understood...

Either our society is the dumbest there is (in aggregate - but possibly in general, too - with small pockets of intelligence, just not enough - and they are under constant attack) - or "someone" (not saying an individual or a group - or even planned for that matter) is wanting us to "go to war" - which if the past is any example, could very well be - or turn into - "the final war" (hah - who am I kidding - any survivors would probably battle each other with sticks and stones).

It's like were either really, really stupid in some regard - or there is this almost innate need by some portion of the species (or at least our American society) that desires and needs mass death and tragedy on a worldwide scale. If either is true, it points to a vast failing of our own making.

The sad thing? I can see it, others see it or have seen it; heck, those who were leaders and/or have been in "large-scale combat" have seen it up close and personal and don't want it.

This isn't a new observation at all; it is thousands of years old: "War is Hell" is a recent colloquial form of the message, and nobody (sane?) wants it.

So why, why, why do we keep doing it? Seriously - why?

I'm not expecting an answer; the possibilities and such are vast, likely rooted in various philosophical reasonings, etc - but seriously - all we have to do is...stop. Stop doing it. Stop being...dumb.

Education, even from an early age, does not seem to work - or at least, it doesn't seem to work on everyone. Many internalize the message, the idea, that "violence is bad" - and try their very best to avoid it. The "reptilian brain" keeps trying to reassert itself - but with some minor effort, we can avoid the issue mostly.

I'm not sure what its going to take for it to really stop. The Star Trek universe was built on the idea that humans had to first go through a massively devastating war before they would finally stop. Nice idea, but I think even that wouldn't be enough. We seem to be a species that constantly performs a "tragedy of the commons" experiment - and ultimately this need for "war" won't be won until only 0 to 1 humans are left. Even with only a single human around, I'm sure it would find a way to war...

WW2 has transformed our civilization significantly: socially, technologically, etc. Maybe there's no rapid change without great shake. We tolerate our current system of things because it works short term, but it is no way eternal or stable, it will be changing, and it will adapt itself to new circumstances, like to lack of fresh water and other ecological disasters current system causes.

that great shake was millions of people dying. we should strive to take the social and technological advancement without it.

This is the best we can do. We aren't perfect but perfect is the enemy of good.

> The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted.

That hasn't been exhausted even in the slightest.

The Fed has the exact same tool at its disposal as it did in 2008: it controls the global reserve currency and can run an annual trillion dollar QE program for years as necessary, forcing the rest of the world to partially foot the bill of that QE program to the benefit of the US economy.

The Fed took rates to zero for seven years and utilized multiple QE rounds to reinflate the economy and asset prices. The same exact approach is at its disposal heading into the next recession.

Maybe I'm a crazy for taking the state of the fed funds rate, the budget deficit, and the Fed's balance sheet into account? We can print money, but so far the USD hasn't reflected any sort of consequence for that. They can do a QE program, but will other actors accept the implicit loss on their treasury holdings? I can think of one major player there that is a lot less likely to do so now.

The Fed can replace / deal with China's treasury holdings relatively easily at this point, especially given the strength of the dollar. While $15t in global paper is yielding nothing or worse, the US is still yielding something and is still largely regarded as entirely safe by investors. China is no longer a threat to the treasury market re selling, even though more aggressive selling on their part would definitely cause some real short-term turmoil. They can rock the boat, they can't tip it over and the Fed would stabilize things quickly in reaction.

Over the next ten years the public US debt will hit $32 trillion give or take (possibly closer to $35t; I'm expecting a +$3.5t deficit in just two years in the next recession), about 1.2x to 1.3x GDP at that point. China's share of that $32-$35 trillion will be a mere 3% or lower. By the day their position becomes less meaningful (at this point the US Government is running up enough new public debt to equal China's treasury holdings every year, and that's before the recession blows out the deficit).

What exactly is wrong with this comment for the kind of downvotes?

At personal level, I find adventure one of the most level headed and dispassionate commentators esp. about Finance/Business/Geopolitics.

The whole China treasure holdings argument is at the best paper tiger. The argument is debunked by every respectable finance commentator.

Curious question, because international government currency flows are still something that flumox me.

What are China's options if it sells US Treasuries? If it simply parks that money internally, what does that do?

What consequence would you expect? Inflation? The Fed would probably welcome inflation right now.

And, how does QE cause other players to lose their treasury holdings?

If you think the federal gov't is going to print money to get itself out of the debt, you'd assume at some point that the value of the USD would drop.

Treasury holdings are bonds denominated in USD. They are worth less relative to alternatives when the USD decreases versus those alternatives or yields rise (as you expect them to, in the event of inflation), just like any bond.

>The Fed would probably welcome inflation right now.

I feel like this while correct will look funny in the context of history. I believe inflation will explode in the next 5 years with near zero interest rates and the fed printing money for all the programs we hear about during the recent debates.

Inflation is a consequence of money spent foolishly.

The same arguments were made against the New Deal.

Time will tell whether recapitalizing the American educational system and/or cost-limiting health care is wise or foolish.

> Inflation is a consequence of money spent foolishly

No, it's a consequence of printing money as soon as the newly printed money gets out into the economy. The only reason the previous rounds of QE in the last decade didn't cause inflation was that practically all of it stayed in the banks' accounts at the Fed and never got loaned out, so it never actually got into the economy.

> The same arguments were made against the New Deal.

Yes, and they were valid then too. The New Deal didn't work; what restarted the US economy was World War II.

The New Deal allowed labor to capture the majority of surplus value created by the rapid wartime industrialization of America. We would not have our modern understanding of a middle class lifestyle had it not been for New Deal policy and the blood of organized labor shortly before and during wartime.

> The New Deal allowed labor to capture the majority of surplus value created by the rapid wartime industrialization of America

That's certainly how such policies were sold to the labor force, yes. But it's not what actually happened.

> We would not have our modern understanding of a middle class lifestyle had it not been for New Deal policy

To the extent that this is true, it means that our modern understanding of a middle class lifestyle is not what "middle class" meant at any previous time in human history. "Middle class" used to mean entrepreneurs--what today we would call small business owners. In other words, people who understood that the only way to make sure of the lifestyle they wanted was to manage their own business risks and not entrust them to anybody else.

Our modern understanding of "middle class" is what used to be called "wage slaves"--people who are content to let the leaders of the large organizations they work for take care of all the business risks, in exchange for a safe source of steady wages and benefits. But the leaders of the large corporations, unlike the "middle class" who worked for them, always understood that the steady wages and benefits were not "safe"--that as soon as the business realities changed (i.e., as soon as the huge new markets that opened up after WW II became saturated, which was happening by the mid-1960s to early 1970s), the large corporations would basically renege on all the promises they made to the labor force during the boom. Which is exactly what happened, and which amounted to whatever surplus value was in fact captured by labor being temporary. And the New Deal did absolutely nothing to prevent it.

Was there much blood of organized labor spilled during wartime? I thought that it was a time of more or less labor peace.

Inflation is size of economy / money supply.

Printing more money doesn't inexorably produce inflation, for a lot of reasons. If the money printed is used unwisely, in ways that do not grow the economy, then it certainly does.

> Inflation is size of economy / money supply.

No, inflation is either an increase in the money supply (according to classical, i.e., pre-Keynesian, economics) or an increase in the average price level, often qualified to be the average price level of "wage goods" (according to Keynesian economics).

The underlying argument behind "size of economy/money supply" is that if the economy is growing (more precisely, if the rate of economic activity is growing), then increasing the money supply will not increase the average price level. In fact, if for whatever reason (and Keynesians have no trouble coming up with plausible-sounding reasons) you want the average price level to remain basically the same, you should print more money as the rate of economic activity increases.

While these are true statements, they ignore the fact that printing more money is economically equivalent to a wealth transfer from whoever does not get the newly printed money to whoever does get it (which under our current system is banks and other financial institutions). In other words, it's the same economically as a tax on ordinary people whose proceeds go to rich bankers and financiers. But it's much more palatable politically, which is why it's our current system. (The old system, before the Federal Reserve and other central banks gained power, was that when governments got in financial trouble they had to explicitly go to rich bankers and financiers and ask for bailouts, which was politically unpalatable, not to mention a huge pain for the rich bankers and financiers since people would see that they were effectively profiting from the economic woes of others. So the rich bankers and financiers got together and sold the politicians a system of central banks where all of this could be done under the radar so the ordinary taxpayers wouldn't see it and wouldn't complain about it.)

So, ignoring the digression into wealth transfer and central banking, we agree that...

> [inflation] is a consequence of printing money as soon as the newly printed money gets out into the economy

... is not a fully accurate statement?

> we agree that...

> > [inflation] is a consequence of printing money as soon as the newly printed money gets out into the economy

> ... is not a fully accurate statement?

If you are saying I should have added a qualifier "assuming the rate of economic activity stays constant", yes, that qualifier should be there (if we define "inflation" as "increase in the average price level"). But I don't agree that any qualifiers like whether or not the money gets spent "foolishly" or "unwisely" need to be there.

Also, our current measure of "rate of economic activity", GDP, is not independent of the money supply, because it measures "activity" in dollars. So the fact that US GDP is growing does not necessarily mean the real rate of economic activity is growing.

Absolutely, on the denomination unit. Foolishly and unwisely were concise proxies for economic impact.

My point was that simply increasing the money supply may or may not result in objective inflation over modest timescales.

It certainly usually does, because foolish things are more politically popular than effective things. But it doesn't have to be so.

That's a very roundabout way of saying if you don't spend money it won't enter the economy.

That's not what ethbro is saying.

If the money supply (times velocity) is X, and I print more money so that it's now 1.1X, if I spend the new 0.1X in a way that grows the economy by 10%, then printing the money wasn't inflationary. If I spend the 0.1X in ways that don't grow the economy, then it was inflationary.

Additionally, most of the corporations are cash rich right now and own much more of their own companies allowing them to both dip into those reserves and sell off more of their companies to stay strong through the recession. I'm not worried... he's not worried either: https://www.youtube.com/watch?v=NJodqhzqPKQ

Corporate cash is $1.8 trillion, but that's against $2 trillion of debt maturing in the next five years and $15 trillion total. I'm worried... he's probably worried as well https://www.bloomberg.com/news/articles/2019-05-09/corporate...

What can the chinese do exactly? Sell all their USD treasuries? Sure, but what do they do with the money then? The only other currency big enough to absorb those kind of flows is the euro which would spike the euro exchange rate with the dollar to extremely painful levels for the EU, probably causing a deep recession in the EU but doing nothing to the US.

> Sell all their USD treasuries?

Last I read they were only holding about 1 trillion in USD treasuries. Selling all of that would not inflict much damage on the US economy or government. If there's one superior skill the US Treasury and US Fed have it's selling/buying even more massive amounts of debt than that. Markets are used to it. So, a $1 trillion dollar bond sale event might hurt for a short while, but it wouldn't really be all that heavy.

> The Fed took rates to zero for seven years

And it can't do that as effectively again. Treasury bonds were at 8% back then, now they're at 4%.

IMO QE is insanely regressive because of most people's non participation in the financial system, and thus is a "supply side wolf in keynsian clothing". Looking at all the unprofitable startups and other investment vehicles of the current cycle, combined with uneven increases in productivity and tenuous shitty jobs being the bulk of job growth shows how we've clearly don't have the demand and the money isn't trickling down enough to make it.

With interest rates near zero, and the old monitarist avenues generally exhausted with this procyclic hangover, we have nothing left to do but the real ask fiscal shit jobs guarantee or UBI.

Hopefully people realize work sucks and it would be nice if computers were used to their full potential so we get UBI instead and then we can write expert systems and reduce meanial labor and other useful shit.

Oil prices are lower and the euro is looking good as a second reserve currency.

That's a big chunk of pie to remove without some turmoil.

If Brexit were behind us, no doubt. But that's a lot of uncertainty tainting the euro.


> So this will be worse that 2008.

2008 was bad because the collective banks of the US realized trillions in mortgages were money on the books that wasn't real and was never going to be real. The correction involved resetting said books and taking a few banks and a trillion dollars of US taxpayer money along the way.

What is the correction this time? All it would really be is a run on confidence in global financial markets. This has happened many, many times (and did happen in 2008 but it was a response to the insolvency of banks). It happened in 2000, it happened in 1993, it happened in 1980, etc.

If its just a correction in overvalued stocks, futures, and a contraction in loans and interest rates thats just a normal recession. We're due to have one, they happen all the time, and since there shouldn't be an influx of millions of displaced / homeless suddenly because this isn't the result of mass foreclosures on defaulting home loans it shouldn't be as disruptive this time. A lot of theoretical stock value gets wiped out, some people lose a lot of money, and then you get to start the cycle over again with rates back under 1% and the DOW down a a few thousand points from its current cresting highs.

It is very hard to speculate about future crises since often the causes are only obvious in hindsight...but...here I go speculating anyway :-)

Firstly, I totally agree with you on 2008 - bank failure driven recessions are always worse than regular recessions, so 2008 already takes a lead.

However, there is another aspect -- the 2008 crisis was controlled by a combination of controlling interest rates and other QE measures. We're now still in ZIRP (zero interest rate policy) so one of our key tools for combating a crisis is gone (it is like being at the bottom of the hill and realizing you are already on low gear.)

Of course, we have other QE as well as fiscal tools, but lowering rates wont be one of them.

I'm not convinced financial institutions access to capital has anything to do with the current economic malaise. The federal rates had little impact on the recovery, their perpetuation at 0% didn't seem to produce meaningful small business creation, and all the major companies have been spending the better part of the last 5 years doing stock buybacks and avoiding expansion and investment at all costs.

Dropping rates creates speculation of future economic growth that can make stocks go up and thus make the capital class happy their assets are accruing but it seems new business growth is fairly exclusively on the side of consumer demand pretty much this entire century. Increasing money supply isn't doing jack. If theres no money out there looking to buy goods and services you could be giving away money to banks with no meaningful economic benefit for it.

Europe has been in this kind of glut longer than the US has but its infecting the whole world - too few people have enough money to create the real demand that stimulates real economic growth. Theres only so many yachts a billionaire wants or so many summer homes a millionaire stakes. Wealth inequality is the driving force behind the slowdown and none of the forces that participate in shaping policy are aligned with the goal of fixing it.

Seems like maybe it wasn't the best idea to use a "one time use" tool to battle the recession since we know they come on a more of less predictable basis over the long term...

Or maybe we used the tool too long and should have started raising rates much sooner.

> 2008 was bad because the collective banks of the US realized trillions in mortgages were money on the books that wasn't real and was never going to be real.

Don't forget the Europeans. The 'prudent' Germans of Deutsche Bank were in the thick of it too:

* https://www.thelocal.de/20110415/34419

* https://www.reuters.com/article/us-deutschebank-suit-idUSBRE...

See also:

* https://en.wikipedia.org/wiki/List_of_writedowns_due_to_subp...

Good book on how things went down and my who is Crashed:

* https://en.wikipedia.org/wiki/Adam_Tooze#Books

> Good book on how things went down and my who is Crashed:

Incredible book. Tooze's interviews and lectures on the subject can only scratch the surface of what the book covers, but they are worth a listen too. I can recommend his appearance on the podcast Talking Politics:


> 2008 was bad because the collective banks of the US realized trillions in mortgages were money on the books that wasn't real and was never going to be real

An even larger amount of money was placed on bets on whether those mortgages were real, as opposed to the mortgages themselves.

There would be no "correction," as in revaluing what already exists - there would be a decline in economic productivity and efficiency. The problem isn't that the bank added one too many zeroes and corrected it, but that you broke your arm and now you're out of a job.

It certainly won't be worse than 2008. 2008 was a financial crisis, core parts of the banking system were suspect, nobody knew who they could trust or who was solvent and worse nobody had a clue how to solve it for a dangerously long period of time.

The financial system is not in that same position this time and as for China, China's growth is largely kept to china itself and guarded jealously, China did little or nothing to ease the 2008 financial crisis for the west.

Just my opinion but I think it will be worse than 2008 for normal people. Companies that are cash rich due to the tax cuts will use the recession as an excuse to execute deep labor cuts and boost their stock price. There is no longer a reason for executives to even pretend to care about employees as the one time bonus / stock buy backs after the tax cuts proved.

Wells Fargo has already proven that the same rules that were in place in 2008 that allowed those that caused the collapse to escape unpunished are still there.

Assuming the current administration is in power, government assistance programs will be greatly cut leading to desperation on the part of the nations 40% that cannot afford a $400 emergency.

Household debt, especially student loan debt is far above what it was when the 2008 recession hit making people even less prepared to handle a financial collapse. "Student loan debt hit $1.486 trillion, according to credit data from the New York Federal Reserve. By comparison, student loan at the height of the financial crisis was $611 billion and has been mostly rising since"

Assuming the ACA case makes it through the courts before the recession is over, health care will likely be stripped from millions of those worse equipped to handle it. Many of the homes that were affordable a decade ago have now been bought by mega renters and are rented out at high rates. People who lose their jobs will be unable to afford rents that are only increasing nation wide.

I think large companies and banks will weather it relatively well.

We will likely invade a middle eastern country to distract the proletariat.


We need Andrew Yang, or somebody else to pick up the UBI idea, now. There's no time to slow play this and do a bunch of studies. We have enough data, somebody just needs to do it.

I agree, I think we are reaching a tipping point where the economy so favors those with established wealth and corporations that UBI is going to become a necessity. It does not have to be a lot of money, just enough to provide people with a small cushion so they can take small risks to better themselves or afford the basics.

I think something overlooked by many is that without the small cushion of having family to fall back on if everything went bad or a nest egg, many of today's entrepreneurs would not exist. Risk for those whom failure means living on the street is generally avoided, especially for people with kids. A UBI would allow them to try and compete or at least live life without waking up terrified every day.

freedom dividend really is a more accurate and marketable term

> core parts of the banking system were suspect, nobody knew who they could trust

Serious question - how has that changed? It looks to me like since about 2009 banks have been trying very hard to get back to the same shenanigans they were pulling before 2008, and are mostly succeeding. They were given the message that, "Hey - you're too big to fail. Uncle Sam's got your back, and there will be no consequences for the people at the top. Do whatever you need to do!"

The incentives still aren’t great, it’s true. But a lot of things are better. The Volcker rule discourages investment banks from making big directional bets with shareholder money, and the Fed stress tests force them to regularly consider and mitigate downside risks. Both of these things are gameable but at the same time have real effects.

Also, like, Lehman Brothers collapsed in 2008, and Bear Stearns and Merrill Lynch both got sold at fire sale prices. Shareholders don’t want those risks, and even if managers are too insulated from financial consequences of a collapse they probably care about reputational risks as well.

The structural deficits in the US economy are financed - at low rates, at least - by trade deficits and currency surpluses with our trade partners. Recent tax policy changes have drastically increased the size of the US budget deficit. This was probably going to come to a head at some point anyway for a lot of reasons, but I disagree with you this won't be as bad as 2008.

I'm in the "worse than 2008" camp, mostly due to the reasons the OP gives. Another consideration is that our current expansion has been a very long one, and the longer an expansion goes on, the more fraudulent cruft accumulates, the cruft beings things like assets not marked to actual market value, money-losing businesses subsidized in various ways, and sometimes outright Madoff-like fraud. This cruft appears financially viable from the outside but collapses when stressed, and nobody really knows how much of it is out there.

There isn't anything like the housing bubble right now. There's nothing that really allows people who shouldn't be able to borrow lots of money to borrow lots of money like housing did last time.

What you're describing is just the normal stuff that happens in all recessions.

And as much as we had a long boom, we also had quite a long painful recovery from 2008, it wasn't the same as normal recovery which explains why it's been so long since the last recession.

There's the looming student debt crisis, which is absolutely allowing lots of people to borrow money they shouldn't be able to get. People are graduating college well into six figures of debt with nearly worthless degrees that pay little more than minimum wage. Even worse, the government guarantees that debt is not dischargeable in bankruptcy, leaving no way out for the underwater borrowers.

The student loan thing is more of a big weight dragging on the middle class. It’s not like anything is going to implode — the debt isn’t dischargeable. Instead, it’s just going to drag on and on for decades, preventing the lower classes from building wealth or having kids. (In many ways, that’s a lot worse)

I used to think VCs and startups were the next bubble, but the ridiculous investments seemed to be rarer these days. (though I still think many so called unicorns are overvalued)

> There isn't anything like the housing bubble right now.

What do you think about the carbon bubble?

How is it a bubble?

What about student loans?

> money-losing businesses subsidized in various ways

Whaaaat, noooo, we don't have any of those...

Ray Dalio's model asserts that 2008 was the end of a 75-100 year cycle - the collapse and then reflation of the long term debt cycle. And that the upcoming recession (whenever it happens) is more about short-term debt cycles, that happen every 8-10 years.

That doesn't mean a recession can't be really bad, though. Particularly when our normal tools for handling recessions are constrained, like interest rates already being low.

We're also still dealing with the greater inequality effects from the 2008 debt monetization, which is partly (according to that model) responsible for the greater populism political effects of that (like Trump's election, who ran as a populist in 2016).

much worse than 2008 how? Global debt markets nearly collapsed and the single largest investment of american consumers crashed. You are making a really bold claim there and it looks like cheap catastrophizing.

If you read Ray Dalio, he seems think think the next recession will be a "debt supercycle" which could be worse than 2008. (this could be him plugging his hedge fund, but he's semi retired, and really has no more money needed to make personally) Note also that recessions have been growing longer each cycle. IMHO it's related to the bottom 99% having been getting paid smaller and smaller portions of wealth, and so a base resiliency of economies become weaker each cycle.

It's hard to follow his reasoning sometimes. Sometimes it seems like he's saying that we already went through the debt supercycle, or the end of the long-term debt cycle and we've already gone through the reflation period.

But other times it sounds like he's saying the real "big one" is still about to happen, rather than just another recession.

I haven't ever seen anything from him that says we've gone through it already - he cagey about exactly when (and that's the correct view imo) the next big recession hits, but I see him trying to lay groundwork to allow a few paradigm shifts in how governments have to take on new financial tools if we want to stay stable - e.g. helicopter money. You could get his "Big Debt Crisis" book (I got the free pdf on rollout), that lays out the case in detail with data.

He's referred to 2008 as the end of the long-term debt cycle, and the ten years since then as the reflation period.

I don't think he saw 2008 as the end as much as it was the start of the end game - the debts have definitely come to any sort of deleveraging beautiful or ugly, and certainly no resolution of the fundamental inequality the Dalio was identifying as a root concern.

40% chance of recession according to Dalio before 2020:


> If you read Ray Dalio ...

Where does he publish his stuff?


Big Debt Crisis is an interesting read if you have an interest in his economic outlook. Still a free pdf I see..

I think the next recession will be modest compared to 2008, comparatively shallow in all regards (including job losses). The recovery is going to involve drawn-out weak economic performance, elaborate growth stagnation, that will frustrate central banks as they attempt to stimulate and reinflate. We'll see aggressive front-run Fed & global central bank action. As opposed to 2007-2009, which frequently saw the Fed running from behind to catch up to a very severe implosion. The Fed regularly utilizing QE programs the last time around was quite novel. This time it'll be used very early on and aggressively as a normalized tool of fighting a recession (for better or worse).

The recession will be weak, the recovery will be weak. The repeating behavior and stacking debt is resulting in lower dynamism in all regards. We've already seen all of this: Japan showed us exactly how it works, why (government debt), and how it cycles toward increased stagnation, perma low rates and low inflationary pressure.

The overly dramatic doom predictions are merely making the perceived easy call, and piggyback riding on what happened in 2008. A repeat, much less something worse, is not what we're going to see at all.

It would not be worse than 2008. since what happen in 2008 is known, by definition it is already prepared for and backed into global risk assessments.

It can only get worse if there is something that was NOT present in 2008 will manifest itself.

A parallel recession in China, for example.

Sure. But this might also be baked in.

In 2008, you had a major failure (within days) of Lehaman Brothers and some major financial institutions, all were a complete surprise.

A recession in china (controlled recession) might actually be a good thing overall.

> you need sell all these products to somebody.

I've heard that the US mostly sells stuff to itself, i.e., trade is a relatively small component of its GDP. I haven't looked into it, yet, though.

There is an old adage "When the US Sneezes, the world catches cold" so recession was hit other countries specially China more badly than the US.

Which would indicate that US will have a massive amount of leverage to renegotiate trade

I get your general sentiment. I'm just not sure why everyone keeps using the iPhone example. China's value-add part in the iPhone building process is about 1%. Having iPhone built with China's manufacturing efficiency is a lot more about Apple's bottom line (as demonstrated by its ability to lobby Trump to delay the tariffs until after the holiday sales) than China.

It isn't about the iPhone though, but rather it is used as a generic example of the type of product built in China that is exported internationally. Being involved in that sector, there have been cracks forming ever since the first round of tariffs were implemented. None of my Chinese vendors are particularly busy, and I'm getting more cold messages than ever from vendors in China. My vendors outside of China are all talking about how they are growing. I was visiting a manufacturer in SEA at the end of May and they had at least 3 or 4 containers full of machines they had just received to open up a new section of factory.

> investment community's realization this might not be true

Took them a while to see what everyone else can see in plain daylight...

To be fair, many industries have incentive to predict good markets.

Automotive, luxury, finance, etc... None of these benefit from recessions.

These people need to sell you, that you will have a job tomorrow.

and that it would be a trade war the US would lose because of the directionality of the trade

I expect the US to lose the trade war simply because China will have the fortitude to outlast it, but why would the direction of trade favor China in the trade war? Shouldn't China have more to lose due to being a net exporter?

Yeah China definitely has more to lose. The US will win if it goes on for long enough, but it's like chopping off your hand in order to chop off another guy's arm. You're technically winning, but you're also inflicting enormous pain on yourself.

I also agree that in reality China has more ability to withstand pain and the US will blink first if it comes down to it.

Not that I'm confident or knowledgable enough to put money on any of this, but I believe it's assumed that the US has a privileged position in the world because of its relative stability (the US infrastructure wasn't ravaged during the World Wars) and has the world's Reserve Currency. If things were more "equatable" the US would have a less privileged position. That also means any losses will be difficult or impossible to get back.

> ...thought that they could model him as a rational actor

That's more optimistic than 'let's assume spherical cow in vacuum'

> the thought has always been that the president was using a high leverage negotiating strategy

Whose thought? The people who didn't know that trump was an incompetent nutjob?

Regardless of the man himself, historically the "deep state" (for lack of a better phrase) has so much inertia that radical changes (even if desired) by the White House end up moderated.

I think it's more correct to say that people are realizing that the old order under the president is gradually eroding and its moderating effects are weakening, which adds compounding risks (directly in the trade war stuff but also hidden ones that may be lurking as that erratic behavior starts more directly impacting all aspects of US policy).

"federal government" is probably a better term than "deep state" unless you're intentionally trying to be inflammatory...

I think the rational definition of Deep State is just the government “lifers” who stay in significant spheres of influence for most of their career. I.e. key defense, intelligence, financial, etc positions.

The problem is that "Deep State" is a loaded term. You could very well argue that the N-word is a historically accurate (and Latin) way to describe African Americans.

Instead of using "Deep State", it might be better to say "Agency Directors", if you wanted to use neutral language. "Deep State" is loaded. Of course, its more popular these days to value-signal which side of an argument you're on, rather than appearing neutral...

In any effect, the people who use the word "Deep State" wish to imply that government workers have their own agendas. In my experience however, government workers overwhelmingly just want to do a good job with the task they've been assigned (much like any other human who are tasked with a job).

The second sentence in your post is so alarmingly inappropriate that I can't focus on anything else.

Why is it offensive. What is the word for the color black in Spanish? Does the color black have a negative connotation? Or did racist cultural attitudes turn what was a neutral term in to a highly charged weapon of oppression.

I think the OPs point was “deep state” has a deliberate, highly charged, negative connotation.

Don’t conflate the horrible reality of racism with the historical origin of a racial insult. The OP is merely using it as an example to illustrate how terms acquire meaning through time and social norms. Not excuse their existence.

The N word is simply the Latin word for black. It was probably used a lot by Latin, and maybe medieval age scholars to describe lots of things in a non-racist way. The issue is that MODERN racists have decided that the N-word is an insult to a subset of the community. As such, the N-word has become an insult.

My point is that words have meaning based on who uses the word. The N-word is used by racists and is now avoided by polite society (unless you wish to explicitly label yourself a racist)

"Deep State" is used by conspiracy theorists who wish to destroy government workers and their positions. Its a phrase that should be avoided unless you wish to paint yourself a conspiracy theorist.

So you don’t have to play ball in order to be cycled from public sector to private sector to high level government positions along with the attendant corporate lobbying to Congress on approving various government positions?

It’s a pipeline and someone has their hands on the valves.

I don't quite understand what you're trying to say. Could you elaborate?

For instance, in Washington DC there is certainly a pipeline from public to private to high level to lobbying to etc., but I think what the +parent posters is referring to encompasses the scientists at the EPA and the USDA, the doctors and nurses and managers at the VA, etc etc. They tend to get a job there after a bit of moving around and then stay 40 years. There is no trading out to private sector -- they generally get a gov't job because of a combined desire for altruism and good benefits and stability -- and the vast majority would never even be offered, much less accept, a lobbying position.

Source: family in such positions, who just want to examine and regulate the wastewater output of cheese factories in the heartland and go home after a good day's work. Said member was forced out of their job recently due to politics -- not "business-friendly" enough.

You do realize I’m replying to a post about how the more relevant term is “Agency Directors”?

Now you’re replying to me about high-level HR decisions biasing the processes of government agencies. I don’t think there is anything to elaborate?

The "real" N-word is also similar to or identical to today's equivalents in Germanic languages (e.g. German, Dutch).

Also in Dutch you can't use the equivalent anymore. People of color take offense by it.

They have always taken offense to it, we just used to not care.

It has a totally different meaning, but one that makes it much more common ('no but', iirc), so I had quite a surprise arriving at a Mandarin lesson one day!

At least in German it's not used anymore, since it sounds similar enough to the English version everybody knows.

Right, sorry, I live in a German-speaking place so I'm aware. I was just trying to add that this form of it is far from unique to English and Latin.

It's a term meant to slander professionals and imply that we should constantly rotate in the current political favorites into positions for which they are not qualified.

Alternatively we should allow career professionals to act as a dampener on the will of the people when it does not align with their own views.

What exactly are you asserting? I get that you're reiterating the Trump talking point about "Deep State" nonsense, but the majority of people in this nation have voted for Democratic candidates in the last several elections, including both 2016 and 2018. If anything, the electoral college and gerrymandering are what dampen the will of the people.

The outcome of the electoral college is de facto the will of the people.

Similarly, any unelected bureaucrat working in the executive branch that pursues their personal agenda or tries to slow progress on the plans of the duly elected executive is de facto going against said will of the people.

So let’s get what you’re saying: the will of the people is reflected in the person who got less votes winning, because of archaic rules created by ancient oligarchs?

That is cognitive dissonance of the highest order.

agree or disagree with the actual existence, but this definition ignores politically active people in politically important and politically connected non-governmental institutions e.g. media, finance, think tanks, unions, etc, which i think is implied by at least some when using this term..

Not really most of the senior civil service are political appointees in the USA.

"Deep state" is a conspiracy theorist level term for some underground, underhanded Hoover/FBI style group that doesn't exist or is really just career officials, most of whom have left the administration especially the state department. This has left a massive shortage in expertise and qualified or cleared workers slowing down how the government can handle ongoing processes/projects and new issues like the many foreign policy blunders and embarrassments Trump and his often unqualified appointees have made.

The trade war is one such blunder that no responsible and informed person thought would do any good long term but was spun as a hard core negotiation tactic. Tariffs are import taxes charged mostly to residents and businesses in the home country or passed to the consumer by the importing firm. This short term harms everyone but could be the straw that pushes a close deal to be ratified. Unfortunately, we didn't have a close deal beyond the TPP and this wasn't a cooperative negotiation but one of necessity framed as USA vs China.

It was never a smart move and was recommended against by nearly all experts or those with experience in the matter and we have reached the logical conclusion of such policies to find that there is no deep state outside of conspiracy forums and our economic outlook and foreign policy is a dumpster fire as Trump is not rational but likely narcissistic and mislead or misinformed by his staff to ignore reality such as the looming economic crisis.

hell, or even just good ole 'institutionalism'. "Deep state" sure does imply conspiracies afoot, and it's hardly such a thing. really it's just plain ole bureaucracy

Yikes, this whole thread is so provincial.

Yes, the US president is an economic imbecile, but $50 billion dollars in tariffs is a drop in the ocean of the $100 trillion global bond market.

This is a much, much bigger deal than US politics or a US trade war.

Interest rates are negative on $15 trillion worth of debt. All German government bonds have negative rates, all the way out to 30 years.

Policymakers don't like to say the word "deflation" out loud, because even talking about it could make it happen.

But when the economy softens, and central banks have no more ammunition left to stimulate the economy, deflation could be the terrifying result.

Negative long-term rates are what you would expect in a deflationary economy. And, yes, you can have a deflationary economy even while some prices are increasing.

Humans are susceptible to narratives and trends. Even if the total dollar amount is low if every business cuts spending by 10% “just to be careful in case things get bad” because they here a narrative that the trade war will reduce demand...their collective action will create a recession.

How does deflation affect all the stock buybacks happening? Under these conditions, are stocks a good place to keep your cash?

Deep state is very much a thing: https://billmoyers.com/2014/02/21/anatomy-of-the-deep-state/

Dismissing it as a thing and calling it plain ole bureaucracy is quite a naive worldview.

Bureaucracy does moderate the effects of political leaders in exactly the ways the markets expected. It's extreme to ascribe a "worldview," no less a "naive" one, and it's a failure to appreciate context that you'd cite Bill Moyers' usage of the term when most people here know we're talking about Breitbart's usage. They each describe very different processes, institutional actors, etc., and yes, Breitbart's usage is often coterminous with the administrative state. Bureaucracy.

Excellent response.

You're right - I was responding to an imagined position in an unrelated / irrelevant political context, whereas a more careful reading makes it clear what we're discussing here is the moderating effects of bureaucracy.

My apologies for adding noise instead of considering contributions more carefully!

Or "civil service"

There is no such thing in the Constitution. “The executive Power shall be vested in a President of the United States of America.“ Contrast France’s Constitution, where there is a President (Title II) separate from the Government (Title III). To the extent there is a civil service trying to be independent of the President, “deep stars” is a colorful but not altogether inaccurate term.

"For the purpose of this title— (1) the “civil service” consists of all appointive positions in the executive, judicial, and legislative branches of the Government of the United States, except positions in the uniformed services;"

5 U.S. Code § 2101. Civil service; armed forces; uniformed services

That statute uses the term only as a descriptor for employment-related statutory provisions. It obviously cannot create an executive-branch "civil service" independent and autonomous from the President, when the Constitution expressly vests all executive power in the office of the President.

I imagine that what they meant to refer to is what we remember as "the bureaucracy" (the system of career policy-makers), but that term now has the connotations of inefficiency etc.

Inefficiency alone is enough to be an effective damper of extreme change.

And "deep state" brings out the lunatics.

True story:

Someone who is part of the supposed DC government told me straight up that he is a lunatic.

Also the inertia caused by having 52 states all with different laws probably has made for more of an impact.

52? When did we get two more?

Puerto Rico and the District of Columbia, perhaps? (Arguably both should have better seats at the table.)

Well there’s Wallobama and North Missifornia.

It's accurate. The Federal government in theory answers to the President or at least Congress. But the comment was discussing people in the government who work directly and quietly against government policy, to 'moderate' it. The notion of civil servants found many layers down the hierarchy who have their own agenda and ignore orders from the top is the notion of the deep state.

I don't think that's quite right.

If you're a civil servant in a department, you've worked there for years, you know why things are done the way they are, you know the pitfalls and the edge cases, you know the stake holders etc, etc, etc.

Some politician gets elected on a pledge to, eg, change the side of the road people drive on. Simple right? Set a date for next month as the switch over date, send a letter telling everyone, simple.

Except lane markings need changing, signs need changing, and most of those aren't directly under your control. Insurers are up in arms because all the cars are set up for driving on one side of the road. Some disability group is sueing because a proper safety study wasn't done, engineers can't guarantee that going on the off ramps and off the on ramps is safe, because they were never designed for that and theres 10000 other assumptions that were made on the basis of driving on one side of the road that are now invalidated, and its your job to point that out to your new boss.

Not exactly, the "deep state" implies a co-ordinated organisation.

I think what people have (I hope) learned in the past few years is that intertia is based on all participants respecting basic norms of political interaction. But if you let a participant in who doesn't respect those and has no concern for consequences, things can change very quickly for the worse.

I think the better phrase is simply "bureaucracy".

Sure, or "institutional memory/inertia". Or "policy debt".

Or "the normative power of the factual".

When you finally fire (or force out by constructive dismissal) the last person stopping you from driving off the cliff, those precious seconds of freefall are not quite long enough to formulate a viable cliff-bottom recovery plan.

I have always wondered if the "deep state" is just effectively a synonym for the US Constitution. Everyone working in the government has sworn an oath to the Constitution, not to Trump. Any perception of coordinated efforts unaligned with Trump could just be effects due to the masses in the government operating according to the Constitution.

Especially if you observe inertia and radical changes by the White House ending up moderated. That's by design and it's in the Constitution... and it's called "checks and balances".

Trade is one area where the president can act independently and assertively regardless of any 'deep state' (if such a thing even exists). So this trade war was initiated by Trump and his inner circle of advisors. The trade war is not the only thing impacting the yield curve inversion, but it is a real factor.

>the "deep state" (for lack of a better phrase)

The deep state AKA someone watched Yes, Minister and wrote an American adaptation.

It's not so easy to distinguish the drunken master from the drunk. They walk the same.

Nicely put, but a real drunken master doesn't get repeatedly decked. Look at trump's financial record, that should have been quite enough (6 bankruptcies was it?)

Those who were fooled, were fooled because they chose to be.

Why should the number of bankruptcies matter if the person is still rich? It shows that they are using it as a tool, which might inform us we need to consider how bankruptcies work, but that doesn't make someone incompetent. If you want to see someone who is incompetent with money, look at lottery winners who within 5 years end up worse than before they won.

1) There's little proof he was rich when he was running for President, he may well have been indebted to foreign powers at the time. The "under audit" story is clearly BS, what was he hiding?

2) His wealth was not created by himself, at any rate. He lied and said he inherited a small loan of a million, when in fact it was at least 2 orders of magnitude more than that. His father was the real smart businessman and his career has largely been failure upon failure.

3) He basically did win the lottery of being born to a wealthy father and squandered it all. How much did he squander is very hard to say when he himself covers up the details.

So yes, he is incompetent with money and business. He is competent with power, intimidation, and getting his way. That may have worked in the small pond of the 2016 election, but that is about the only place the man's been successful.

Is he still rich? The fact that he still hasn't released his taxes raises a lot of questions.

Mark Cuban speculated that he wasn't a billionaire, and maybe not even a 500-millionaire. He talked big and pushed the brand, because that's all he had.

His main claim to fame, nearest I can tell, is a mix of poorly run real estate, reality TV, schlepping shit tier steaks, and his online university that got sued out of existence.

He was all but done for before The Apprentice success. That allowed him to parlay his name into a few successful licensing agreements, which salvaged what would have otherwise been a complete collapse.

I mean, 500 million is still pretty damn rich in my books. Sure he inherited it all, and has poorly managed the rest, but he is still rich by any normal person's metrics.

The Russians bailed him out and he’s been in their pocket ever since. In this particular case, that’s why the number of bankruptcies matter.

In general, I agree with you.

Not sure why you're being downvoted, because you are correct. The president's repeated bankruptcies and inability to get a bank loan forced him to get funding from Russian oligarchs through Deutsche bank's private equity arm: https://www.wsj.com/articles/banks-give-documents-possibly-l...

There's a good Planet Money podcast on it as well: https://www.npr.org/2019/05/22/725893104/episode-914-trump-a...

It is also why the Trump family has preemptively sued Deutsche bank in an attempt to seal records and obstruct any investigation.

How rich is he really? There is a lot of evidence that he has a long history of inflating his wealth and achievements. Combine this with his refusal to disclose financial info and I think that provides plenty of reason to doubt his current claims.

Other tools he's used include hiring undocumented immigrants for construction and then not paying them and refusing to pay contractors that worked on his buildings. He maintains his wealth by making deals and then refusing to pay when the bill comes. The bankruptcies are just a part of this pattern of behaviour.

It's a bit different when someone is repeatedly bailed out by a richer parent.

How's that different than being repeatedly bailed out with VC money?

Nepotism vs. Meritocracy (or at least a rationalized investment)

The VC game seems a bit more... suspect than to clearly label it as a meritocracy. Particularly for serially bankrupt founders.

VC firms still rationalize it though. Also, how many serial bankrupt founders keep getting investments from the same VC?

I don't think anyone's claiming that's something to aspire to either.

He used it as a tool, the companies became bankrupt, he got rich.

I imagine he will get rich even if U.S. goes through a bankrupcy.

He didn’t “get” rich. He was born rich. He would have much more money today if he had passively invested it. The man is a managerial train wreck that’s been consistently burning untold wealth for 30+ years.

Much of what he has left was gotten by repeatedly breaking the law, and somehow only ending up with civil liability instead of criminal convictions.

Now he is actively wrecking the US economy and has somehow bullied the GOP into going along with it.

> He didn’t “get” rich. He was born rich.

"If you want to be a Millionaire, start with a billion dollars and launch a new airline." -- https://en.wikiquote.org/wiki/Richard_Branson

If you start with a lot you can deplete much of it before you have only a little.

"Somehow bullied" = the GOP is terrified of going against him, because his rabid base will drum anyone out of office who can be shown to be anti-Trump. After all, politicians' jobs are dependent on them getting elected.

I agree with you that passive investment would have got the same gains, but it's much easier to see in hindsight, it was not that easy to see beforehand.

He made money by burning other people and companies, but he came out quite well from it.

Not being able to actively beat the market has been known since about 1973:

* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

Bogle started Vanguard in 1975:

* https://en.wikipedia.org/wiki/The_Vanguard_Group

* https://en.wikipedia.org/wiki/Index_fund#Origins

"Known", yes, though probably not widely so. As I understand it, passive investing was generally considered a bad or at least risky idea at the time Vanguard was created.

He started 500 businesses, 6 went bankrupt.

It takes $100 and thirty minutes to start a business so that metric is useless. If anything, that many shell corps is suspect for money laundering, not business prowess.

Money laundering? Creating a corporation or LLC for each property is standard practice in the real estate business.

> ... usually, every investment property should be owned by a separate limited liability company that owns only one property and that is not engaged in any other business activity. The reason is simple: to maximize asset protection.


And you really shouldn't go throwing around spurious accusations like that without any evidence.

>Creating a corporation or LLC for each property is standard practice in the real estate business.

So which is it? He started 500 businesses, or he has a few businesses that are made up of multiple properties.

I have friends with a few dozen rental properties, all in separate LLCs. I wouldn't say they "started 50 businesses".

You can't have it both ways; those 6 bankruptcies are just properties too.

So with your wording you should say Trump owned 500 properties and 6 of them lost money. And like any real estate investor, when the properties lost money, Trump gave those 6 properties to the creditors.

But I think my wording is more accurate. Your friend's rental properties may not be individual businesses, but Trump Tower or the Taj Mahal are.

Trump Tower and Taj Mahal are real businesses. But most of trumps "businesses" aren't. They are just shell companies to hold assets.

The vast majority of his businesses have no customers, and no regular income. They aren't intended to make a profit--they're intended to protect an asset from the bankruptcy of his real businesses. There was never any chance that they would need to go bankrupt, so he gets no credit for them not going bankrupt.

> The vast majority of his businesses have no customers, and no regular income.

Where do you get this? Is this just more BS with no evidence, like the money laundering accusation?

I haven't seen a complete list, but even Wikipedia has a list with a lot of businesses:


> they're intended to protect an asset from the bankruptcy of his real businesses

Even if you were right about Trump's businesses, corporations don't work like that. The stock can be taken in bankruptcy so they don't protect assets inside the corp from bankruptcy of the holder. They only protect assets outside the corp from bankruptcy of the corp.

Assuming Trump still is fairly rich (even if it's a much smaller rich than Trump would like to project), the fact remains that he is just not a very good businessman, and that he has held onto whatever money he does have in spite of his business acumen, not because of it.

Put another way, if I were given $100M by my dad back in the 40+ years ago, and managed to grow it to, say, $500M by today, that would be nice, but I wouldn't consider myself "good with money". And it looks like the real figure for Trump may be north of $400M[0], which makes even $1B -- if he has that today -- look not all that impressive.

We're talking about the US President here, someone we should feel comfortable with influencing/managing the fate of trillions of dollars. Trump is not that guy.

[0] https://www.nytimes.com/interactive/2018/10/02/us/politics/d...

Citation needed, and by that I mean his tax returns and financial statements.

The public at large does not know how much Trump is worth because he won't disclose much of anything.

If you want to play that game, then citation needed that he went bankrupt and I only take his tax returns and financial statements.

See how this level of discussion of not just demanding a citation, but then limiting what citations you accept to an extremely small set of documents isn't constructive?

> If you want to play that game, then citation needed that he went bankrupt

It's a reasonable question, but 1 minute googling got this report https://www.buzzfeednews.com/article/kendalltaggart/here-are... with 3 of them viz.

    The Trump Taj Mahal Casino

    Trump’s Plaza

    The Trump Castle
Are these at least sufficient to convince you?

You missed the part where I was (sarcastically) demanding the proof in a specific form that I know the reader doesn't have. It is one thing to say [citation needed]. It is quite another to say [citiation needed and by that I mean his tax returns and financial statements].

Here's the original question "The public at large does not know how much Trump is worth because he won't disclose much of anything"

What evidence in your view, other than his his tax returns and financial statements, is there to show his wealth? Because that's fundamentally what's being requested. I don't think those exact documents are needed if there are good alternatives. Suggest some alternatives.

You are quoting only half of the post, particularly the half I wasn't responding to. Try quoting the other half. Also my claim is that he is rich, not some exact measure or level of wealth.

>What evidence in your view, other than his his tax returns and financial statements, is there to show his wealth?

You really think that you need tax returns to prove he is currently wealthy? Is that a consistent standard you apply to everyone? When someone says that Bill Gates is rich, do you request the same level of documentation before you believe it? Are you doubting the relevance of other indicators of wealth such as lifestyle and property holdings?

You're being obtuse. Original comment:

> The public at large does not know how much Trump is worth

So this is about HOW MUCH he is worth. Hence the request for docs quantifying it.

Then I say

> Suggest some alternatives

And you just snowjob with questions in return. I asked a question. Please answer it by stating what publicly available docs will show trump's wealth.

> Are you doubting the relevance of other indicators of wealth such as lifestyle and property holdings?


We want to know how much so as to judge his competency at business. Please answer, what public documents will show his wealth.

Also why are you so willing to assume he is a competent businessman without actual, audited financial evidence to back up his claims?

I presume he became less rich by becoming bankrupt rather than more?

If he could have been richer by not being bankrupt then that would indicate competence to me.

Also daddy gave him $435 million IIRC. If everyone on HN had got that I suspect most of us would have done better.

Why should the number of bankruptcies matter if the person is still rich?

Because money laundering is illegal?

> Why should the number of bankruptcies matter if the person is still rich?


Did Trump ever put more effort into anything in his campaign and Presidency than he put into preventing his tax returns from getting out?

Even if he is a lot poorer than he claims, he is still rich compared to what we normally consider rich vs poor. I'm not sure why we would suddenly change the baseline in this particular case.

If you want to claim he isn't as rich as he claims, then then I'm not disputing that at all (I haven't a clue), but to claim he isn't rich does not align with existing evidence without fiddling with how we define rich and poor in ways we don't otherwise fiddle with such definitions.

The whole thread follows from a comment that the number of bankruptcies doesn't matter if he's rich. The point is not that he's rich. It's whether he's increased or decreased the fortune he was given. If he's given $413 million and now has less than that, he's not a good business man. Since we are blocked from all his finances, we don't know where he stands now, but the multiple bankruptcies and NYTimes investigation suggests he's not accumulated wealth more than spent it. https://www.nytimes.com/2018/10/02/us/politics/donald-trump-...

Whether or not he is rich tells you little unless you subtract out the effect of all of his inherited wealth.

Having, say $300 million sounds like a lot. But if you inherited $700 million (as Trump likely did), having only $300 left today is a catastrophic failure.

Because he's a grifter who profits from other peoples losses.

just 6 bankruptcies? that is pretty good rate for the number of businesses he started.

There are strategic bankruptcies..

Serious question: how do these work, and can you actually make money off. or can you only limit cash losses with them?

Only as a last ditch attempt to preserve some business assets and wipe out debt, after exhausting all other options to raise cash, improve sales, refinance, issue equity, restructure, or other normal business operations to keep the company operating.

And no, those six bankruptcies were not strategic, they were failures to operate a business. One bankruptcy is strategic, two a coincidence, six a signal of incompetence. The sheer number of shell corps he's founded and thousands of civil court cases points to exploiting investors through shady practices.

One strategy might be to start with a number of business entities; move "troubled assets" of all entities into a single entity and have that entity declare bankruptcy.

You have multiple businesses, and sell assets between them... then bankrupt the lame ones.

Example: Business 1 buys a $1M piece of equipment with 30% down and 70% credit. After a couple years, and knowing that Business 1 is not that profitable anyway, the machine is sold to Business 2 for $150k, even though it's probably worth $700k still.

Business 2 makes $550k profit on the books. Business 1 files bankruptcy. The creditor loses their $250k outstanding loan. If the same owners own both businesses, they come out massively ahead.

Rinse / repeat with dozens (or hundreds) of businesses, some automated workflows and depreciation tables, credit line hacking, etc.

Can't the bankruptcy trustees come after the owner when they see that the machine was sold far below value? They do something similar in personal bankruptcy.

Selling things below value is pretty typical in a liquidation/bankruptcy scenario, though.

Yeah but there are limits. If I'm about to go bankrupt and I sell my $700k house to my brother for $150k, the trustee isn't going to let me get away with that.

Those limits are dynamic based on connections / how many white shoe lawyers you are willing to fund.

An established real estate family will have plenty of room to shuffle assets and credit lines around in a favorable way within those limits... for a generation or two.

Trump has created 515 businesses and only 11 of them failed. That's a 98.64% success rate. He has a better track record than Elon Musk by an order of magnitude.

By "businesses" do you perhaps mean "shell corporations"? :)

Citation? In what business did he see more success than Elon Musk?

Citation? What 515 businesses did he create?

Ah, now nwalker85's comment makes more sense although it is patently false. A more accurate assessment is that Trump has been associated with 515 business entities. The vast majority of those entities are shell corporations or LLCs meant to (as the name implies) limit liability.

He did not create 515 for-profit businesses.

How many of those are real businesses? If all the company does is hold a single asset, such as a private plane, or only has other Trump org companies as customers then it isn't a real business. I'll bet most of those companies exist solely to limit liability or for tax reasons.

Nope. Life is not a movie. There are no drunken masters. Being president isn’t a kungfu movie, even though Trump voters probably think it is.

Right now it's a reality TV show. But, one day, a bright shining star will make it into a Kung Fu movie. And I believe! #JackieChan2024

right. exactly. after China buys the US, Jackie Chan becomes president.

Worse than incompetent, he's enormously impulsive.


WRT making billions of dollars, clearly he didn't. WRT getting elected, he got 3mil fewer votes than his opponent, so you can thank the dysfunction of the EC. WRT to the votes he did get, it's pretty obvious- people dumber than he is, who are apparently blind to seeing his completely obvious con artist act and voting for him, that's how. By completely obvious I mean, the-sky-is-blue, 1+1=2 obvious.

That's how obvious it is that he's a bullshitter and a useful idiot for a lot of shitty people, and has no idea how anything works, and basically has the intellect and integrity of a first grader. Downvote me all you want everyone, but that's the truth. Every downvote I will take with great, great pride. If you voted for him, you're even dumber (or more selfish, if you think of him as your own useful idiot) than he is.

I have had a lifelong problem with constantly doubting my own perceptions about things, and always thinking that I can never be 100% certain about anything, and being hypervigilant about my own potential sources of bias and irrationality and unreliable information, but multiple years into this thing I have no choice but to admit that everything I wrote above is just plain true. It's not rocket science, it's not brain surgery, it's not even grade school arithmetic. It's OBVIOUS, and if someone doesn't see it after all these years they either don't pay attention or are as bad or worse than he is. Or they're literally children who are just that sheltered and naive about other people and the world and how it works.

You might want to consider the idea that people who disagree with you politically might in fact not be dumb, but just have views that differ from yours.

Just a thought.

Philosophical question - why is that important to know? What added value is discovered by realizing your opponent's conclusion is not based off of bad facts or faulty reasoning, but different values?

Practical answer - how you engage is radically different.

My math prof likened it to the axiomatic frameworks: if a person has bad facts or faulty reasoning, but your core axioms (values) are similar, you are more likely to come to a point of mutual agreement or at least understanding. If your values (axioms) are radically different, chances are your entire frameworks are different and possibly incompatible. You'll be talking past each other, discussing methods while in fact your goals and assumptions are completely different.

Philosophical answer - depends on your philosophy and how you feel about philosophical zombie - i.e. is it only outward results or internal causes that make a difference to you.

Thanks. I'm also toying with the idea that it means that realizing it's about values could possibly engender greater respect for the other's conclusions. Because at least then the person isn't "wrong".

Although maybe that's only true if you find their values tolerable. Otherwise I suppose the advantage is in knowing you'll have to start strategizing if the conclusions from their values are incompatible with yours.

Either way it does seem valuable to know the other person's complete reasoning, just trying to quantify as many reasons why as possible.

How can you fully defend/understand your own beliefs if you don't fully understand your opponents beliefs?

It's pretty arrogant to assume there is only one way to look at things - your way.

That is interesting, how does understanding your opponents beliefs make you more fully able to understand your own beliefs? I would think it possible to fully understand one's own argument about something, without understanding all possible counterarguments.

Because seeing the world differently is different from being malevolent.

If someone is acting malevolently, then you can rationalize basically anything with regards to hurting them or their well-being.

If someone just views the world differently, you will be annoyed by them, but probably not able to rationalize to yourself that they should not exist.

It makes you more persuasive. You can align your arguments to their values.

What if they have no values/their views are not based in anything rational or rooted in fact?

I think the part after your slash is a different case than them having correct facts and reasoning, just with different values. In your after-slash case they are "wrong". You're looking at how to have them accept facts and correct their reasoning.

The first part is interesting, but ultimately, if their conclusions were based only on facts and reasoning, their conclusions would only be limited to the area of facts, "is" statements. They would not be able to derive ought/should statements. (If you believe in Hume's Guillotine.)

Not the OP, but while I'll agree with your sentiment in general, it's a bit straw man argument in this particular case.

I'm generally of liberal persuasion. I did not agree with almost anything that our Canadian previous conservative prime minister did... but I respected him. I thought he was intelligent, effective, and thoughtful. I didn't like that he was effective and productive about things I disagreed with, but I'd shake his hand and I can imagine having a thoughtful conversation and learning something, even if my mind may or may not be changed.

On the other hand, in theory, I "agree" with many of the things Michael Moore for example is fighting for. But I do not respect him, and I cannot watch more than 2 minutes of his programs before wanting to yell at the TV. Certainly, I wouldn't elect him. He is a propagandist, he cherry picks data, and presents a skewed picture. Ann Coulter or Glenn Beck or Michael Moore or Al Franken (the pundit; he may or may not have been more honest as a politician, but his prior books were awful) - it's not a matter of how much I agree with them, but that I find them all fundamentally dishonest.

Which brings us to Trump - my biggest concern is not that I disagree with him (which I do). It's that I have no respect for his mental faculties, honesty, abilities, consistency, beliefs, values, thoughtfulness, or any of the characteristics some of us believe a head of state should have. Further, I think not only is he doing a disfavour for those who disagree with him, I think he's doing a disfavour for those who agree with him / voted for him.

At the end of the day, I may disagree with somebody about what's the best colour to paint the room; I may disagree with somebody on what the best way to fix a education system is, or even what its goals should be; I may disagree on budget priorities, on a country's role in the world, and so on. There's fascinating discussion, debate and learning to be had with people of opposing opinions.

But if somebody wants to buy a bridge somebody's selling them, enroll in a cult, or jump out of an airplane without a parachute thinking it'll end well for them, dunno... I don't think it's in the "difference of opinion" category :|

I now doubt IQ, values, beliefs are even a factor.

A relation of mine went from studying marine biology to full on fundie. Creationism, climate denial, etc. Huge Trump supporter too, of course.

Can any one explain to me how a one time scientist now doubts evolution?

Intelligence amplifies a person's ability to construct a narrative that feels like a good fit to lived experience.

Complicated plot. It's all interconnected...

It's a belief system that is naturally selected for, for one thing.

How many liberal atheists do you know with 4+ kids, versus conservatives?

Ah yes, the Idiocracy[1] effect.

[1] https://en.wikipedia.org/wiki/Idiocracy

is being a genetic dead end really all that smart though?

Species evolve into local optima all the time. Clonal reproduction is a common evolutionary dead end.

OP is talking about a public figure, not an ideology or policy.

WRT to the votes he did get, it's pretty obvious- people dumber than he is, who are apparently blind to seeing his completely obvious con artist act and voting for him, that's how.

Talking about people's opinions of an individual, not of a policy...

> people dumber than he is, who are apparently blind to seeing his completely obvious con artist act and voting for him, that's how.

Or, you know, people who didn't want to see Supreme Court seats go to the extreme left for the rest of their lives.

> it's pretty obvious- people dumber than he is, who are apparently blind to seeing his completely obvious con artist act and voting for him, that's how.

Bay area engineer here. Did Google for a few years, did a B2B startup, acquired by FANG, now lead a team of 30. Good relationships with family and physically fit.

I voted for Trump. Statistically, I'm not dumb.

Can you talk a bit about how you came to that choice?

I've noticed that that a few acquaintances with the same trend... they like to take risks and optimize locally rather than globally. Not dumb but just narrow focused like most of us in technical areas.

> he got 3mil fewer votes than his opponent, so you can thank the dysfunction of the EC

Why is the electoral college dysfunctional when it goes against the popular vote, even though it's designed to be able to do so? This has happened several times before without issue.

Not all Trump voters are "people dumber than he is". That's a ridiculous generalization and little more than morally-superior posturing. People are much more complicated with their choices then you may believe.

TL;DR : Trump is a 'mixed bag' but for right wingers the cost-benefit analysis surpassed that of Hillary Clinton, even though there were heavy costs.

I'm not sure we should be delving into politics on hacker news. But if it's okay for the goose, allow the gander to retort.

I hear you expressing your frustration and believe me I am fully aware that many Americans are very frustrated. Especially people on the left who have suffered a series of depressing defeats. On an emotional level, I'm worried and empathetic.

I think you are correctly recognizing certain behavioral characteristics of Trump that are unpleasant and possibly harmful such as lies, bragging, and narcissistic behavior. Many (probably most) people on the right who voted for him also see those characteristics. They are as you say "completely obvious." It is not that people on the right are "blind." So the question is why did they vote for him anyway? Why wouldn't these characteristics rule him out?

Your conclusion is that they are (if not blind) dumb. That might be true for some people, but it cannot possibly explain it for everybody. Take myself for example. I have had my IQ tested three times, and the lowest value was 147. I would say that objectively speaking I am not dumb. I must qualify this with the fact that I was a child all three times so there was a correction factor involved which would not apply now, so my IQ is probably lower today. I hate to put this paragraph in because it sounds like bragging, but I need evidence to demonstrate my point.

Here is part of the answer to the mystery we are presented with:

  1) Trump did in fact do very well in business, contrary to various articles that argue he would have done better in the S&P500.
     Their calculations are off because they don't value his business as a going concern, did not apply top tax rates to the
     dividends, and often picked the market bottom which is unfair as nobody can time the market. The methodology was flawed
     because it is a sector comparison (stocks to real estate). The conclusion is flawed because it presumes being on par with
     the S&P500 is what "any idiot could do in an index fund" but the proper conclusion is "being on par with the very best
     companies" because it's not sharing in someone else's created wealth, it's actually creating the wealth.
     EDIT: I forgot to add, they completely ignored expenses.
  2) Trump's lies are mostly inconsequential bragging. Everyone can see through them. Successful deception would actually be
     damaging, but unsuccessful "first grader stuff" isn't damaging because we can all see through it.  We know full well why
     he lies in most cases (narcissism or negotiation, in both cases we are okay with it). Also, we like that he just says what
     he thinks openly rather than being careful with his words which makes us suspicious of dececptions that we might not be able
     to detect.
  3) He has openly promised things that right-wingers want and have been pounding the table about for generations.  And we believed
     he was serious about it and wouldn't let politics or being politically correctness get in the way.  We were right, he didn't.
     He just storms ahead damn-the-torpedoes, ignoring the news, ignoring the 'game'.  Most republicans would have restrained
     themselves based on political chicanery.  Right-wingers love it and left wingers hate it because he is "unmitigated."
I'm going to stop there because I don't want to write a diatribe.

> Take myself for example. I have had my IQ tested three times, and the lowest value was 147. I would say that objectively speaking I am not dumb. I must qualify this with the fact that I was a child all three times so there was a correction factor involved which would not apply now, so my IQ is probably lower today.

What you say is a great explanation, and makes sense, but then you go on about IQ as if it means something?

Thanks for the first part of your comment. I assume you are arguing that being "dumb" is not coorelated with IQ because IQ isn't meaningful. If so, I politely disagree but I'm not motivated to take on that argument.

If your enemy is incompetent and he eludes you are every turn, what does that make you?

Somebody who focused on making progress alongside professionals instead of "winning fights" at taxpayers' expense.

My question is what is the point of the trade war. What does trump get from initiating/escalating it, or who is directing him to do it. Seems to be a net negative for all sectors of the economy.

As Paul Krugman says, "What looks like raw ignorance and prejudice is, in fact, raw ignorance and prejudice".

I’m no fan of the President, but Paul Krugman’s rants have gone from heated to just bizarre at this point. Shows that even Noble laureate’s aren’t immune from going off the rails.

Do you think it's more likely that a Nobel laureate has gone off the rails, or that they are using the same skills and knowledge that got them a Nobel to analyze the current situation?

Being an expert in economics doesn’t mean you’re an expert in everything.

And Krugman’s articles of late seem not be rooted in logical, rationale thought but rather leading with ideology and emotions.

He wouldn’t be the first to have gone off the rails. With genius often comes instability and mental illness.

Paul Krugman also said the internet was a fad, why is he worth quoting?

Besides the batting average comment, he said that in 1998 for a particular reason:

> First, look at the whole piece. It was a thing for the Times magazine's 100th anniversary, written as if by someone looking back from 2098, so the point was to be fun and provocative, not to engage in careful forecasting; I mean, there are lines in there about St. Petersburg having more skyscrapers than New York, which was not a prediction, just a thought-provoker.

* https://www.businessinsider.com/paul-krugman-responds-to-int...

That was the year Apple was still on the ropes (Microsoft's investment was in 1997), Google was just kicked off by a $100K cheque by Bechtolsheim, Amazon was four years old, and Facebook didn't even exist.

Give it a rest, it's been over twenty years:

> I must have tossed it off quickly (at the time I was mainly focused on the Asian financial crisis!), then later conflated it in my memory with the NYT piece. Anyway, I was clearly trying to be provocative, and got it wrong, which happens to all of us sometimes.

* https://www.snopes.com/fact-check/paul-krugman-internets-eff...

How wise were you when you were twenty years younger than you are now? Sheesh.

Because his batting average, while not perfect, is still pretty good.

Krugman has looked like an arrogant idiot at times. There's a video of him talking about cryptocurrencies. I've no problem with people thinking crypto is silly, but he was spouting opinions while clearly not having any idea what a cryptocurrency was.

Come on this guy is the president of the US people need to stop calling him ignorant and dumb just because they don't like aspects of his persona (racist/greedy/cunning/divisive). He is surrounded by aides and business people giving him information and trying to forward their own agendas. He's not just sitting there thinking "wouldn't it be fun to start a trade war to look tough".

I respect Krugman as an economist but not as a political pundit, he needs to dig harder than resorting to the age old "don't ascribe to malice what can be explained by stupidity". There is already some simple logic (trade war = tough = re elected) behind the decision, I just believe there is more to the story that we don't see.

Would it have been wrong to call King George III mad?

Perhaps not, but then, he wasn't elected in spite of everybody in the media saying he was stupid and would never win.

So now you keep saying he's stupid, and doesn't know what he's doing. I'll just keep reminding myself that he managed to get himself elected.

We don't live in medieval times. Trump is not a good human being, I don't like him one bit, but he's sane (I would go as far as to call him cunning) and democratically elected.

Comparing him to insane kings from the 18th century just gets people to chuckle and move on, sweeping deeper critical thought under the rug.

To call him stupid or mad ends any line of further inquiry into why he does the things he does, and that to my mind is very, very dangerous.

I don't think that sane, cunning, or democratically elected are the same as intelligent.

You're splitting hairs and I'm not sure what your point is.

He's sane/rational. He has motives for most of his actions from what I've observerd. I'm asking what the motive is behind his initiation and escalation of the trade war with China.

I'm not arguing that it's an intelligent thing to do, or that Trump is intelligent. I'm asking what his motive is. If he was irrational I would concede that perhaps there is no motive because he's disconnected from reality.

I think it is a power play. He likes to feel powerful, and he thinks of it as a negotiating tactic. He is a bully and likes to try and push people around. I honestly don't think he much considers the ramifications going forward on a global scale. It is more of a personal slight: "The Chinese are really screwing us over, I'll show them!"

> democratically elected.

If this were true, he wouldn't be POTUS.

At best, you could say he was "elected according to the rules, procedures and processes of our democratic republic form of government, as defined by our Constitution".

That would be a fairly true statement.

It would also probably be a true statement to say that our Electoral College failed us in their primary purpose, which should be to assure that the POTUS which is elected nominally will serve the interest of all constituents, and not just some of them.

POTUS #43 could be said to have served all the citizens of the USA, even if they didn't agree with his policies; the same certainly cannot be said of this POTUS, not IMHO.

> At best, you could say he was "elected according to the rules, procedures and processes of our democratic republic form of government, as defined by our Constitution".

What, exactly, should "democratically elected" mean if not that exact sentence?

The issue with the majority

> Come on this guy is the president of the US people need to stop calling him ignorant and dumb just because they don't like aspects of his persona (racist/greedy/cunning/divisive).

I don't consider him ignorant and dumb because I don't like aspects of his persona. I consider him ignorant and dumb because every time he opens his mouth or types something on twitter - what comes out is generally ignorant and dumb, assuming it is composed of actual words.

Misspellings are one thing - if that were the extent of things, I could probably just chuckle, even if I vehemently disagreed otherwise. It's more than that. It's often a stumbling incoherency to the messages, almost as if he's speaking in some form of "stream of consciousness" - just saying whatever is coming to his mind - and it is composed of very simplistic words and phrasing, at best.

Worse - he's been shown to literally lie within a single sentence or paragraph (most of the time, it takes him hours or days to go from one "truth" to something 180 degrees opposite). He either doesn't know he does it (bad enough), or he has two independent personalities warring inside his mind (worse), or he knows and just doesn't give a f--k (worst, imho) - for all we know, it could be the trifecta.

None of this points to him being a leader of or for anyone or anything, let alone somebody who should have his person anywhere near our nuclear arsenal.


Something else that is interesting - and I know its completely anecdotal and probably not really true.

But - it has often been noted that being POTUS tends (or seems to) age a person. They go in looking spry and hale, and exit - well, chastened, and visibly older. Even after only a single term.

Should Trump make it through his term (possible) - and/or should he get another term (I atheist pray not - but who really knows?) - note how he looks afterwards. Right now, he doesn't really look any different than when he started. Maybe that's bias on my part, but I really don't think being POTUS has changed him in the "usual manner" that we have seen of past POTUS's.

This itself should be a concern, if there is any truth to the concept. It either means he's not actually doing the incredibly hard and difficult work of being POTUS, or the usual stress of being POTUS - all the concerns for the welfare of the citizens and the country, and more - do not and have not meant anything to him; ie - he doesn't care, and that hasn't translated to stress that would affect bodily changes. Or - he's a sociopath who revels in the issues, and wants more. Any of these possibilities should be worrisome to the electorate.

Or, he already went through it in business and came mentally prepared for the pressure.

You don’t think the men who have been President haven’t been through stressful situations before their time in office? Bush, Governor of Texas, Clinton, Governor of Arkansas, Bush, World War 2 Veteran and Director of the CIA, Reagan, Governor of California, Carter, Governor of Georgia. Despite those experiences, all to a T came out of office looking worse for wear.

I'm not talking about stress in general, but specific stressful situations. International relations, for example.

> What does trump get from initiating/escalating it

Kudos from his base, enhances his "tough guy" image, helps his 2020 campaign.

I've heard that argument but it's wrecking parts of the ag sector, hurting manufacturing (big parts of his base), and will probably push all consumer prices up. I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense.

But I don't think it's that simple, he's clearly a coin operated guy so which coin is operating him to escalate this trade war?

>I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense.

His base really can't put 2 and 2 together. You seem to think it's obvious that tariffs will cause prices to rise, but you seriously underestimate just how stupid these people are.

They're not stupid, for the most part. They just have a different set of priorities.

Many of the individuals supporting the trade war and tariffs know that it's causing them problems, but as far as they're concerned it's worth it to stop China from "screwing them over" or "taking advantage of them". This is not, in fact, an unusual thing- people are are frequently willing to take some personal pain to punish what they believe is wrongdoing or failure to adhere to social norms.

I happen to be on the side that believes the tariffs and trade war are doing more harm than good, but labeling those who disagree as stupid is exactly the sort of thing that leads to resentment, failure to communicate, and polarization, none of which are valuable.

>This is not, in fact, an unusual thing- people are are frequently willing to take some personal pain to punish what they believe is wrongdoing or failure to adhere to social norms.

I would even go as far to say, it might be a case of them believing that they are taking short-term losses to come out ahead of this in the long-term. Whether it will turn out this way in reality, we will see, but that line of thinking actually does make sense.

"Having a different set of priorities" is just another way of saying someone is stupid or irrational. This base is supporting someone who is not acting in their best interests, because yes, their best interests are not a priority.

There's even a term for this in economics, called Animosity, which leads to economic imbalance: https://en.wikipedia.org/wiki/Economic_discrimination#Animos...

There's also a term for it, called Reciprocal altruism, which is in many ways, the basis and foundation of human society.

Economic discrimination, for purposes of animosity, is the opposite of reciprocal altruism.

I have heard the term reciprocal altruism to also cover events such as the following scenario:

A country exists with a racial divide, let's say blue/green.

A blue person abuses a green person.

The green person does not fight back, and takes the abuse, knowing they are powerless in the society.

A different blue person, blue person #2, attacks the original blue person. This puts bp#2 at legal and physical risk, even though they were never under any threat of subjugation or abuse from the original attacker.

Blue person #2 would be said to have acted in a form of reciprocal altruism for the green person. This type of behavior is often seen, even in situations where BP#2 has little or nothing to personally gain, was never at any risk, and could potentially receive large negative consequences personally for their actions.

Clearly blue person #2 was also acting in a manner of animosity, that (more generalized) could or not be considered discrimination, economic or otherwise.

If your explanation requires assuming that both very powerful politicians and their supports, constituting tens of millions of people, are all incompetent, then perhaps you need to consider an explanation that doesn't require such assumptions.

I'm not assuming the politicians are incompetent. Usually, they aren't, they're just working towards different goals then their constituents or what they promised them.

If you really think the average voter is competent at economic matters, I have a bridge to sell you...

The explanation is much worse. Guess one single issue that matters to his base, no matter what.

I agree with both your reasoning and your sentiment, but I just want to point out, that it's not quite that obvious...


> 1 In 4 Americans Thinks The Sun Goes Around The Earth, Survey Says

i.e. about as much as voted for each of Trump/Clinton in the last election (which also taught us, amongst other things, that surveys are not to be trusted...)

> His base really can't put 2 and 2 together. You seem to think it's obvious that tariffs will cause prices to rise, but you seriously underestimate just how stupid these people are.

I don't think they are stupid. But they are gullible and have been brainwashed. Their world view has been warped into something that just is not based in reality anymore ("invasions", "climate change doesn't exist", etc). This is not unlike what happens to people who get suckered into joining a cult...

So when Trump keeps saying that "China pays for the tariffs" - which is an obvious and outright lie because American consumers pay for them, it is a straight up tax on consumption - his base believes it. And somehow they don't - won't - put 2 and 2 together and connect the rising prices with the tariffs, because that would invalidate their worldview.

All the money in the world will not help you if you have no secure homeland for your children and grandchildren. You can not have security when the means of production of a state is located outside of the control the citizens of that state. Tariffs are a small step towards re-establishing local control over the means of production.

No country in the world is self-sufficient; that's why we invented something called "trade" thousands of years ago. There's plenty of countries (small ones) that make almost nothing, and rely on a few key industries to hold up the economy, while getting the rest through trade.

>I don't think they are stupid. But they are gullible and have been brainwashed.

Isn't that just another way of saying someone is stupid? I'd say a serious lack of critical thinking skills qualifies as "stupidity".

My personal take on this: if a person claims to be too smart to be brainwashed themselves, then they are probably not as smart as they think they are.

Kinda reminds me of the people who say that they aren't susceptible to advertisement.

Everyone is susceptible to brainwashing. It's also called "indoctrination". Smarter people (or people with better critical thinking skills) are less susceptible. But no one is immune; if people hear the same thing over and over again, eventually it'll influence them.

Maybe his coin? The real estate markets crashed. Now, I don't want to blame the real estate markets, because I always made a lot of money in bad markets. I love bad markets. You can do very well in a bad market

Kopeks and rubles are most likely.

So your argument that China has been engaging in free trade with the US up to this point and we have no valid concerns?

I would have guessed that it's an attempt to make other US-friendly countries (Vietnam, Phillipines, India, etc) relatively more attractive as places to set up factories, to move that manufacturing base out of China and reduce their geopolitical influence.

The other--more suspicious and dismissed as conspiratorial--benefactor of of this trade war Russia and the bolstering of Russian industries. America is importing a lot of Russian steel [1] and aluminum [2], and Russia is been ready to fill the food gap for China that they used to get from the US [3].

[1] https://www.bloomberg.com/news/articles/2017-10-25/under-tru...

[2] https://time.com/5651345/rusal-investment-braidy-kentucky/

[3] https://www.scmp.com/news/china/diplomacy/article/3013549/ru...

It seems to be aimed at bringing about a wealth transfer from the investor and management classes to the working classes - if global supply chains are forced to shorten, the value of unskilled labour locally will go up even if the economy as a whole loses.

There are two things China has been doing for years that the WTO hasn't put an end to. The stated goals of the trade war include stopping those, which I can - as anything but a fan of anything to do with Trump - actually agree need to stop. I'm far from certain the scale and breadth of tariffs involved are necessary to stop them, but I agree those two practices need to stop.

One of those is outright IP theft. One especially egregious form of that is by OEM manufacturers in China getting specs from foreign firms in the US and Europe then manufacturing knockoffs under their own brand name on the same lines as the ones they're making under contract. China has agreed to curtail this in their industries. Another form of outright IP theft is paying industrial spies to go to other countries and leak government and corporate documents back to China in an elaborate espionage system.

Another practice which China has already announced it is ending (and may have ended without the trade war eventually anyway) is forcing foreign companies to form foreign/domestic partnerships with Chinese companies in exchange for access to manufacture or sell goods in China. Often this involved cross-licensing agreements for IP, meaning companies like AMD had to license their patents and copyrights to Chinese companies or but shut out of the market.

Navarro said it best [0]:

Stop stealing our intellectual property

Stop forcing technology transfers

Stop hacking our computers and steal our trade secrets

Stop dumping into our markets and putting our companies out of business

Stop their state-owned enterprises from heavy subsidies

Stop the fentanyl

Stop the currency manipulation

[0] https://www.foxbusiness.com/economy/trumps-china-tariffs-not...

I'm not sure we can blame our fentanyl problems on China any more than our cocaine problems on Colombia or our heroin problems on Mexico.

Currency control comes with being a sovereign nation. Our government and the Federal Reserve in the US issue more or less new money into the economy and raise or lower interest rates to control the strength of the US dollar all the time.

I'm not sure dumping is a real problem for most products. Ones that are dumped are often cheaper in the first place because of the other problems, because it's easy to sell cheap when you didn't pay for research, development, design, or industrial engineering for the product. Other dumped products are often such low quality that they could be driven out of the market with consumer rights laws and lemon laws.

The rest I can agree are real issues.

The vast majority of fentanyl on the US black market is synthesized in 'clandestine' labs in China and shipped directly from there to dealers in the US via the post.

Why is this different than the cocaine or heroin supply chain? Or why did mention this as a response to:

> I'm not sure we can blame our fentanyl problems on China any more than our cocaine problems on Colombia or our heroin problems on Mexico.

I'm not sure how a trade war on legal goods with one current producer of an untracked import addresses the demand for the drug or the domestic dealers. Buyers change suppliers all the time. And you're not putting a tariff on what's shipped clandestinely from clandestine labs.

China has been dragging its feet for years when it comes to banning fentanyl analogues when in the past they were quick to literally execute their citizens for manufacturing legal highs a decade ago.

The scale of the operations suggest that the state is involved. It used to be the case that actual clandestine labs would produce a kilogram or drum of illicit substances here and there, which is what happens in some Canadian labs. However, we're regularly intercepting unprecedented amounts of fentanyl analogues from China.

There's literally no where else in the world where both the manufacturing ability and severe lack of accountability both exist to produce novel fentanyl analogues in excess.

Also, China is selling thousands of doses of fentanyl to individual American kids online, so there's that, too.

Well, at that scale tariffs on other things could be used as a cudgel to encourage enforcement on the Chinese facilities by China, sure. There would still be some fentanyl available, and opioid users are fairly flexible with the specific opioids they use. Heroin, oxycontin, hydrocodone, codeine, and such tend to come from elsewhere. As one lab in China shuts down, another in China could pop up. Or in Nigeria, or in Pakistan, or in Venezuela.

I lived in Missouri before we had to sign for psuedoephedrine. Trust me when I say busting a lab here and there doesn't stop production. Reports I've read say you can invest $4,000 to easily make a kilo of fentanyl and after cutting and distribution it's worth $1,500,000 ( such as https://www.gangsterismout.com/p/fentanyl-w18.html ). Carfentanyl is supposed to be basically as easy to make and about 100x as powerful. This leads me to believe no state sponsorship is required to quickly ramp up production. If you can sell a $4k investment for over a hundred million dollars, you can ramp up quite quickly for your next several thousand kilos.

One of the things he campaigned on in 2016 was bringing manufacturing jobs back to the US for low-skilled workers. I can see that being a third thing this could possibly help.

It's possible, but tariffs against only China won't do much of that. There are loads of countries with relatively low wages that already supply things to US markets. India, Vietnam, Bangladesh, Pakistan, Mexico, Malaysia, Indonesia, and Thailand from the top of my head produce lots of things in US stores. Much of it is lower tech stuff like produce or textiles, but the shipping and investment pathways are already there. A threat of general tariffs on some goods might do more for that, but that would involve Taiwan, South Korea, Japan, and Europe for electronics, appliances, and automobiles.

Countries don't only impose import tariffs when trade wars get really ugly, either. Imagine all of OPEC hitting the US with export tariffs in their countries. Or imagine Mexico, Germany, Japan, and South Korea charging export tariffs on their car manufacturing for exports to the US. A 10% or 20% export tariff costs the consumer the same as an import tariff of the same amount, but the money goes to the exporting country's government, which if they want they can use to subsidize the industry being taxed. The target country can't credibly accuse you of dumping if you're intentionally charging them more than everyone else.

The US does a lot of outsourcing of parts and subassemblies. Then US companies import those to make into other products or assemble them into more complex systems. Those import costs go up under tariffs, and much of the demand goes down for the finished product when there are tit-for-tat tariffs to sell those overseas. Meanwhile if some country neither party is in a trade war with starts buying the parts and doing the final assembly, they can undercut US manufacturers' prices because they have lower taxes in place on those products.

It would take years to move all the vertical supply chains into the US and to do so would be extremely expensive. The low-cost labor from overseas would likely be replaced with factories with a much higher level of automation to keep the costs down. That's going to provide more professional jobs and highly skilled technical jobs and fewer low-skilled and trades jobs than people might like to imagine. All the while, the resources to build those new factories is higher from the tariffs unless we're building it all with domestic parts. There is no training program in place of which I'm aware to teach coal miners and steel mill workers to assemble things like motherboards and flat panel displays, either, which means the labor costs for those things is much higher than just the wages if those jobs aren't automated away.

The tariffs include raw materials. What happens to the existing manufacturers that can no longer make a profit because the steel and aluminum that they've been buying costs more now?

These are good points. Not sure why Trump would care about the first one, but could see how enough businesspeople were leaning on him to get the second point done. This seems like the most likely explanation to me as well (opening China to further foreign investment by accelerating the country's slowdown in growth).

I see at least three things: it was his election promise, he preempts the imminent cyclic recession, he gains leverage on federal reserve and transnational corps. Agriculture problem seems to be preceding the trade war. For instance the soybeans sales to China are down because the protein content is down in the US soybeans.

You can't import(buy) more than you export(sell) forever and hope to still be rich

That's a very simplistic view of economics. The US is the world's largest market for just about everything. It creates enough wealth domestically that its citizens can afford to buy from other countries without bankrupting themselves or the nation. Read up on GDP, fractional banking, stock issuance, sovereign debt, oil as a commodity, and reserve currency.

Even if that's true, is a trade war (which seems to be hurting some of our exports anyway…) the way to fix the trade balance?

Tariff money is supposed to subsidize the industries harmed by the tariff. There is an inequality in goods in which the US has a major advantage. To put it simply, it's much easier for us to grow soy than it is for China to replicate our technology. Furthermore, the Chinese economy is not doing nearly as well as the US which means we are in a position of power at the moment. It is extremely important that the US minimizes its trade deficit even if it's a dose of medicine for the consumer that they don't initially like. They will like it when jobs move back to the US or even Mexico that were once overseas.

People wonder where all this wealth inequality is coming from when it's as plain as day. The inequality is coming from the fact that large companies are taking jobs that were performed domestically, and shipping them overseas where there are less regulations and cheaper labor. They then sell that same good at the same price to the domestic consumer who no longer has that job. Do that with enough industries and only the people who actually own the company stand to come out on top. That is why the middle class is shrinking.

> a dose of medicine for the consumer

seems like there's a risk of:

higher labor and materials costs leading to higher prices, leading to lower sales, leading to reduced revenue, leading to workforce reductions, leading to lower sales, leading to reduced revenue, leading to workforce reductions...

ie a basic recession spiral.

An efficient market prevents any sort of death spiral. The objective of a tariff, just like the objective of regulation, is to encourage/discourage a certain practice but that doesn't mean there aren't ways around them if they become overly burdensome. For example, when environmental regulations become too burdensome, outsource the job to a place where those regulations aren't present. This is why environmental laws can easily put American companies at an extreme disadvantage and should be carefully considered. A lot of the higher costs you are worried about are self-inflicted because of all the ridiculous overhead required to run a business now a days.

You are making the error people always make with personalities like Trump.

Assertive alpha signaling and mammalian dominance gestures tell the parts of our brain that haven't changed since we were small tree rats that "this person knows what they're talking about, trust them, follow them." These parts of the brain are primitive and emotional and can easily override the rational mind. This is why charisma tends to beat substance even with audiences that really do know better.

Trump is assertiveness and dominance gestures and nothing else. There is no "there" there. He has no special understanding, no strategy other than "assert dominance" which all he knows how to do, and no plan.

Our only salvation in this is that many of the leaders of other nations are similarly empty.

>This is why charisma tends to beat substance even when the audience really ought to know better.

Exactly, and this is why the Democrats keep losing elections. They just can't wrap their heads around this simple fact that you stated here. They keep thinking that if they pick candidates who can go on at length about policy, that voters will love this and not care about charisma, so they pick the most uncharismatic candidates they can find. Obama proved the DNC wrong when he "stole" the nomination from Hillary in the 2008 primaries, and showed that a candidate with a lot of charisma was what was needed to win the election.

The only thing less rational than the markets are voters.

This has been known for hundreds of years- "Gorgias" even asserts that an ignorant person who speaks well will always beat an uncharismatic expert in popularity.

Insider trading?

I wonder how the investors will model Matteo Salvini’s actions once he grabs full power in Italy. Afaik he had proposed a practically speaking parallel currency to the Euro a couple of months ago, which if it were to become true would practically kill the European currency. Italy is also too big to fail for the UE and they have one of the largest debs in the developed world (compared to GDP), not exactly the same as Japan’s but pretty consistent nonetheless.

Don't consider us Europeansdead too quickly. A lot of Italians will unite against another «brexit» disaster.

I think his thought is to force an economic downturn in 2019 and then release the tension going into 2020 to have a smooth economy once the elections are due

> it would be a trade war the US would lose

well, not just the US. China also loses, the whole world economy basically goes down too.

Yield curve inversion is way bigger than the trade war. Also the trade war directionality favors the USA.

Yield curve inversion is the symptom, not the cause.

What is the reasoning behind "The trade war directionality favors the USA"?

USA has a huge trade deficit with China. Chinese economy is much more dependent on the USA buying their goods than the other way around. They've already devalued their currency in order to stay competitive to American buyers, so in a sense they are directly paying for the tariffs.

Does this mean we can blame the stock market drop on the orange haired man in the office?

Or debt cycles exist.


> What we are seeing is the investment community's realization this might not be true.

As Rick Wilson says... "Everything Trump Touches Dies".

I doubt the trade war has anything to do with that. That United States has been growing above potential for a long time, and that Europe has been unable to grow for many years, and that China has exhausted it's growth engines, have very little to do with threats of tariffs on a few electronics and grains.

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