Chaos Is Bad for Business
Ignorance, megalomania and the economic future
What no one - not even Krugman - seems to understand, is that President Musk wants to make deals with Russia, not because they would be good for America, but because they would be good for President Musk.
They're confusing and confounding the business world? Sure. If they make a few billion...
S E E D E D C O N T E N T
Early this month Donald Trump announced that he was about to impose 25 percent tariffs on Canada and Mexico. Then he put them on pause for 30 days. So are they on again next week? Yesterday he insisted that they are. But will they really happen? Nobody knows.
Trump is also threatening a trade war with the European Union, which he says "was formed to screw the United States." (It was actually created with America's blessing, because we saw it as a force for peace and democracy.) Will he follow through on his threat? Nobody knows.
The legislation currently providing the federal government with the money it needs to stay open will expire on March 14, and it's by no means clear that Republicans have the votes to continue that funding. So will the U.S. government shut down? Nobody knows (although betting markets say that there's a better than even chance that it will.)
The real possibility of a general shutdown aside, will DOGE's efforts to fire large numbers of federal workers — half the staff of the Social Security Administration! — cripple essential government services? Nobody knows.
Most alarming of all, if it's real: People within the administration appear to be floating the idea of restructuring U.S. debt via a "Mar-a-Lago Accord" that would force investors holding Treasury bills — short-term debt — to exchange them for 100-year bonds. This would effectively be a default on U.S. debt. Since the whole world financial system rests on the perceived safety of U.S. Treasuries, which are universally accepted as collateral for many transactions, such a move would threaten global economic chaos. But is the administration serious about this idea? Nobody knows.
In short, there's now an incredible amount of uncertainty about U.S. policies, policies that have a huge impact on both individual Americans and U.S. business. And this isn't uncertainty about what will happen over the next few years, it's acute uncertainty about what will happen in the next few weeks and months.
Where is this uncertainty coming from? That's easy: The U.S. government is currently under the control of a deeply ignorant, vengeful megalomaniac with zero impulse control. And it's not just Elon Musk: Trump shares the same characteristics.
If you don't believe me about the ignorance, look at the way Trump is hyping the possibilities of U.S. investment in Russia. Even if there weren't issues involved with doing business in a country where people who displease the dictator have a tendency to fall out of windows, does Trump realize that the European Union, which he is insulting and threatening with trade war, has 9 times Russia's GDP? Which business relationship is more worth cultivating?
And if you think I'm overstating the megalomania thing, look, if you can stand it, at the AI-generated video about the future of Gaza Trump shared on Truth Social:
Still, why does the craziness and erratic behavior matter? Uncertainty is a fact of life; predictions are hard, especially about the future. But the radical policy uncertainty we're now facing takes things to another level, making it increasingly impossible for consumers and businesses to make long-term or even medium-term plans.
And that can't be good for the economy.
Imagine yourself as the CEO of a U.S. company considering a range of possible investments, whose likely profitability depends on future federal policy. For example, some factories will be worth building if America honors the free trade pact with Canada and Mexico Trump himself signed in 2020, a minor revision of a free trade pact that took effect in 1994.
But those factories won't be worth building if Trump rips up that agreement and imposes high tariffs at both our northern and southern borders. Instead, you'll want to make defensive investments, designed to limit the damage of being cut off from Mexican and Canadian customers and suppliers.
So which investments will you make? A likely answer is, "None of them." The rational thing, surely, is to hold off on big spending until, one hopes, there's more clarity about policy.
Just to be clear, I'm not predicting an imminent recession. I don't have a good track record on that front; but then, nobody does. And I still think that the biggest risks from Trumponomics involve the inflationary impact of tariffs and deportations.
But both consumer and business surveys are showing increased anxiety about the economy's trend. Both major surveys of consumer sentiment, from the University of Michigan and the Conference Board, have slumped. S&P Global's latest business survey found that
Optimism about the coming year slumped to its lowest since December 2022, except for last September, when business was unsettled by uncertainty ahead of the Presidential election. The deterioration in February was primarily a reflection of increased uncertainty about the business environment, especially in relation to federal government policies …
And business economists like Neil Dutta are starting to take the possibility of recession seriously.
You should know that none of this will show up in "hard" economic data any time soon. Next week we'll be getting employment numbers for February, but these data actually reflect the "employer pay period that includes the 12 th of the month" — that is, they will be data from early February, just a few weeks into Trump's presidency, far too soon to show any effects of his policies. There are some indications that consumers are already pulling back, but we won't see the effects of businesses cutting back on investments for at least a few months.
But having ignorant men with poor impulse control running things has to be bad for business. And you really have to question the judgment of people — including, alas, many voters — who imagined otherwise.
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Is there anybody in his cabinet or other advisors who knows anything about economics?
Considering MAGA are always trying to shut down government, NO!
There's Peter Navarro. He was recruited during Trump I, by Jarod Kushner, who saw his name on an anti-China book on Amazon.com.
That's expertise in MAGAland.
Notice the author leaves out the reason for the tariffs and the reason they were delayed? That's because if they state those reasons it won't allow the false narrative to work.
With a decreased government work force that frees up money. With wasteful spending cut that frees up money. Those things alone frees up enough money to keep the government working. And allows them to keep working toward a more streamlined and effective workforce instead of what we've seen the past few decades.
It is easy. Just take a look at those who have been crying since the 2016 election. Even today, almost a decade later, these same people are still crying, still trying to invent new hoaxes and manufactured "crisis situations". On the plus side, for the past decade they've failed.
And this after calling the USMCA the greatest trade deal ever. Guess Trump's bombast is all it really is.
Or, what economists refer to as The Flat Earth School Of Economics!
Did Paul Krugman sleep through the last two decades of the 20th century? Did Krugman miss the Rust Belt? No, Krugman was a beneficiary of the middleman parasitic economy created by Clinton neoliberals.
Tariffs with Canada and Mexico won't alter decisions to build factories for those markets in the US. Our export trade is dominated by minerals, agricultural products, some fossil fuels, but not manufactured goods. Our biggest manufactured exports are military goods. The United States is not a major global trader for civilian manufactured goods. Investment decisions in the US are guided more by tax liabilities and depreciation. That's the legacy of the parasitic Clinton neoliberal economy.
These dire business forecasts are being made by business wizards who cannot compete with Indonesian palm oil. Being forced to use soy oil would cut their parasitic profit by at least 0.1 pct and they wouldn't be able to cheat American farmers. The biggest risks posed by tariffs and government shutdowns are to the neoliberal middleman economy. The palm oil traders would suffer if their supply was cut off. We buy our iPhones from China, folks, so that these business wizards can game the tax code and scam stock investors. The neoliberal rich cannot get richer without taxpayer money.
Tariffs raise concerns with consumers because they fear the supply of goods will be shut off. Consumers see what is on the shelves. Consumers know that Krugman-style business leaders are not competing on the shelves of Walmart. Consumers know that heavy industry in the United States died during the last two decades of the 20th century. Consumers know that the United States cannot compete with Vietnam on the shelves of the local Dollar Store. Krugman should know. Krugman was there. Krugman shares responsibility for destroying the industrial base of the US economy.
So, Paul Krugman only delivers bad economic advice to protect his own, personal parasitic gravy train. Krugman is not worried about national security. Krugman is not worried about resilience and sustainability. Krugman doesn't care about the future. Krugman advocates the parasitic neoliberal economic of middlemen who exploit those who produce.
Some?
Actually our single largest export is fossil fuels-- gas and oil.
In the interest of accuracy, we mustn't leave out manufacturing!
The US car market size was valued at around $4.35 billion in 2023. The market is expected to grow in the coming years.
Yep-- that billions, not millions!
That accuracy should also point out that our monthly trade deficit for goods AND services is more than 10 times the market size for US cars.
... and also one of our major imports. We import heavy crude from Canada while we export light crude elsewhere.
But who needs international trade?
In those deals, there's a buyer and a seller. And of course both would have to agree to a deal for it to happen. Meaning? Both sides see the deals as advantageous (otherwise they wouldn't agree to do them).