I'm not necessarily surprised, but I am disappointed by the vast expression of economic illiteracy and the belief in obviously false narratives that I see in the wake of the Trumpian trade policy. Here's a redacted quote of today's Z-man post.
Last week, Trump stunned the world by following through on what he has been promising since he came down the escalator in 2015. This set off the Great Trump Stock Market Crash, which promises to continue this week as the rest of the world responds to the new world order. The yesterday men and the crazies are sure this is the Great Depression, because their history of the world starts in the 1930s. It is a stylized history, such that every modern event can be jammed into the 1930s, the 1960s, or the 1980s. Since they are sure Trump is secretly Hitler, this must be the 1930s—even though we have witnessed many stock market corrections in the last thirty years. The COVID crash, the mortgage bubble, and the dot-com bubble are easy examples.
In reality, what we are seeing is the long-overdue return to normalcy, where American economic policy is aimed at benefiting the American people, rather than abstract concepts from economics departments. If Canada has tariffs on American goods, then the United States should have tariffs on Canadian goods—unless it can be shown that the American people benefit in some way from the imbalance. The same is true for every other country in the world.
Of course, the reality is that the market isn't the economy, and isn't the only indicator of its health. As many have pointed out, not only is this a correction to normalcy, but jobs have come back significantly more than expected and projected. Wall Street may be struggling, but that's only fair, because Main Street is finally rebounding after decades of being stifled to prop up Wall Street.
One of the weird things about decades of American trade policy is that it has created the same sense of entitlement as government racial policy. Just as nonwhites think they are entitled to be near white people without conditions, the world thinks it has a right to access the American market without conditions. This is most obvious in Europe, which has taken this lopsided arrangement for granted. They have also assumed they are entitled to American defense, while doing nothing in return.
The logic behind this arrangement has always been nonsense—but people love to believe in nonsense, especially their own. We see this with the free trade crowd, who are claiming tariffs will only harm the American people. If that were true, then the rest of the world should have been miserable for the last thirty years. Further, if that were true, then the rest of the world now has a chance to usher in a golden age for their people by eliminating their tariffs instead of raising them.
As he says, and I'll not quote this part, the reduction in the scope of the government, and in the tax burden on the American people is integral to this process as well. Main Street, i.e., regular Americans, have been subsidizing Wall Street and the globalists for decades. This is the scope of the realignment. So yeah, Wall Street will take a hit. But the only people who should really fear that are people who make their money in unproductive, globalist investments. Mitt Romney's income is at risk. Mine isn't.
More important are the changes in how we think and talk about the economy. For the longest time, the economy has been treated as a god. Americans were expected to tolerate anything to please it. If the economy demanded Haitian cannibals in your town, you had to accept it. If the economy demanded that the quality of your hand tools decline, you just lived with it. If the economy required you to work two jobs to make ends meet, then you did it. The economy was a remorseless god.
This sort of thinking makes sense to an alien overclass that sees the United States as an opportunity to be exploited. It does not make sense if the ruling elite feels a connection and obligation to the people. Shifting from the old transactional model of economics to a nationalistic model requires a new language. Simply pointing at a graph that trends upward is no longer enough. The political class will now have to possess some economic literacy.
Bingo!
In the end, Bessent is correct. America cannot continue to create credit in the financial system and borrow trillions to hire government workers. We either have an orderly transition back to a normal economy, or we have a disorderly transition. The name for that is collapse—and that is vastly worse than a stock market correction. This is the reason the economic elites are backing this move. They know that the people who suffer the most from failure are the elites.
And bingo again!
If Trump hadn't come along and eased the transition, the current trend would have simply led to a Soviet-style collapse and the anarchy that followed... at best. At worst, it would have been more like a Roman-style collapse where the Romans essentially ceased to exist entirely, their impoverished and decidedly smaller in numbers mixed descendants emerging many generations later as something else. Arguably, either of those could still happen. But the fact that Trump has shoved the Overton window wide open on these kinds of topics makes both of them less likely then they had been even a year or so ago.
UPDATE: And a brief quote from today's post (the next day) because it reads like an extension of the same topic.
The reason regular people feel so much economic angst, despite the appearance of material prosperity, is that we have reached the end of the line for this model, where costs are socialized but profits are privatized. If you look closely, you will see this dynamic everywhere. The offset to those cheap products at big-box stores is the collapse of American manufacturing, and the social capital that came with it. The offset to cheap labor via immigration has been stagnant wages and emergency rooms that resemble Tijuana bus stops. The offset to a rising stock market is endless financial insecurity. The hidden costs have accumulated to the point where they can no longer be ignored.
The reason Trump is trying to usher in a new economic model is that the old one, the financialized economy, is running out of places to hide the costs of endless credit creation and the auctioning off of social capital. It is not just that we cannot borrow more money. It is that we cannot continue to socialize the costs of creating more credit money. Just as critically, we can no longer tolerate an oligarchy built on privatizing the profits of this system.