What does a TRUMP presidency look like?

[Syt]

Meanwhile, in the before-times of 2024:

https://www.independent.co.uk/news/world/americas/us-politics/trump-press-conference-stock-market-crash-harris-b2597318.html

Trump warns of 1929-style crash if Harris wins – just as Fox News ticker shows stock market at near-record high
Republican presidential nominee warns of coming financial disaster but is directly contradicted by Fox News's showing of on-screen data

In his latest rambling press conference, Donald Trump warned that the US would plunge into a 1929-style stock market crash if his Democratic presidential rival Kamala Harris wins in November – only to have his argument undermined by an awkwardly-timed Fox News ticker showing up on screen.

The former president laid into the vice president on Thursday in front of a handpicked group of reporters at his luxury golf resort in Bedminster, New Jersey, hitting her over inflation and the economy.

"We are going to have a crash and we're going to have a crash like a 1929 crash if she gets in," the Republican nominee warned, referring to the Great Depression.

"You saw a gentleman yesterday who got up, one of the top analysts in the world, frankly, and said that if Trump isn't elected he predicts, and he's predicting you have a stock market crash like 1929."

Trump's address was being broadcast live by several channels, including Fox News, which routinely runs a ticker carrying the latest stock prices on screen.

At the precise moment that he made his apocalyptic forecast, the Fox News ticker revealed that the Dow Jones Industrial Average was actually in rude health at 40,563.06, up 554.67 points or 1.39 per cent.

With the near-record high level directly contradicting his argument, eagle-eyed viewers were quick to mock the former president on social media.

Others meanwhile accused the channel of quickly dropping the ticker from the screen to help Trump in his line of attack.

There were a host of false things that Donald Trump said during his hour-long news conference Thursday that have gotten attention.

A glaring example is his helicopter emergency landing story, which has not stood up to scrutiny.

But there was so much more. A team of NPR reporters and editors reviewed the transcript of his news conference and found at least 162 misstatements, exaggerations and outright lies in 64 minutes. That's more than two a minute. It's a stunning number for anyone – and even more problematic for a person running to lead the free world.

During his speech, Trump stood alongside a display table lined with instant coffee cans and boxes of Cheerios, Wheaties, Froot Loops and Cinnamon Toast and packets of bacon, intended to illustrate the rising cost of living on American consumers.

But he failed to allude to the props and instead resorted to his usual personal broadsides against Harris – whom he said he felt "entitled" to attack because she had called him and his running mate JD Vance "weird" – and hsi familiar obsessions including wind turbines killing innocent birds and Hillary Clinton's 2016 emails.

Trump did return to the economy to accuse Harris of being part of an administration that had allowed "beyond the number of 100 per cent" of newly-created jobs in the US to go to migrants – a false statistic.

Trump has repeatedly warned of an imminent stock market crash should he lose in November, doing so earlier this week during his rally in North Carolina and in a Truth Social post on August 5.

Conversely, he has also sought to take credit for any major market gains or sudden bounces – something he did outside of his New York hush money trial on May 10.

In January, Trump created an outcry by telling Mike Lindell's TV venture that he hoped any coming crash would happen before the election for the sake of his own political legacy.

"When there's a crash, I hope it's going to be during the next 12 months because I don't want to be Herbert Hoover," he told the pillow magnate.

"The one president – I just don't want to be Herbert Hoover."

Responding to Trump's economic attacks and this week's "Kamalanomics" campaign attempting to tie Democrats to the inflation Biden's administration has had to contend with in the wake of the Covid-19 pandemic, the Harris War Room social media account pointed out that the stock market is "up over 14,000 points (and an all time record high) since the Biden-Harris inauguration" in January 2021.

Here's the long NPR fact checker for those interested, not gonna post all that here.
https://www.npr.org/2024/08/11/nx-s1-5070566/trump-news-conference

[Razgovory]

Yes, but the dollar's role as a reserve currency is a different kind of public good.

The world benefits in the sense that it is convenient to have a commonly accepted reserve currency that facilitates trade and investment flows.  But it is also a detriment in that it makes other countries vulnerable to US financial sanctions and because it reduces a degree of economic autonomy.

It's not hard to imagine a world with competing reserve currencies or currency blocs - it's what we had during the period before WWII and after sterling lost its dominance.  I don't think that would be unwelcome at all for many if not most other nations, and especially China, Russia, and the EU.  I don't think there will be many takers for the "deal" of paying the US for the dubious right to be subjected to the dollar's "exorbitant privilege"

The US provision of international security is a different kind of public good in that it was truly welcomed and valued by many of its intended recipients. That public good was not provided by the US out of a pure spirit of generosity, however. It was provided out of calculated self-interest and the US got value in return.

It is possible to argue that the US could fairly get more in return for its public security good provision, whether in the form of greater allied defense spending or other forms of "burden sharing."  However, it is Economics 101 that it is very hard to raise the price of a good if you simultaneously destroy its market value.  The problem for Trump is that in three months he has radically reduced the perceived value of American security provision, particularly to Canada and the EU.  Trash the value of your good --> watch as the price buyers are willing to pay declines.

Qui tacet consentire videtur

I only disagreed with one sentence in the article.

Who is quite looks at consent?

[Admiral Yi]

Who is quite looks at consent?

Translated as silence implies consent.

[Syt]

[Sheilbh]

Some seem inspired by the strict regime in Singapore. "They're doing well economically without freedoms for the general populace!"

I think in relation to Musk specifically, Chnia's the inspiration of an authoritarian regime that is very tolerant of (certain forms of) capital.

I'll be in Singapore in a couple of weeks (and separately am speaking to a recruiter about a job there ) - but I think there's a really interesting book to be written in how the idea of Singapore and Lee Kuan Yew travels. For example, I've always been very dismissive of MBS and the Gulf projects - and I think I've got that wrong. Don't know if it'll be enough to set those states up sustainably forever but I think those projects are significant and important. Perhaps more significant - I can't help but think that this is maybe the only really effective post-war development model: Singapore, the Asian Tigers, China, Rwanda? It's why I think we desperately need a "Western" or "democratic" model or theory of development but I don't think we have one beyond "be an Eastern European former Communist state and join the EU"

And where it gets really interesting is that in some ways I don't think it's just the right. I think fundamentally in the US especially but in the West more broadly, there is a crisis of legitimacy (I think that's the root cause of a lot of problems). In the US I think it's most extreme in views of Congress (which has allowed the Presidency and courts to grow in importance) but I think more broadly there is a loss of faith in the capacity of politics and our institutions to deliver or govern effectively.

It's why ends matter as well as means because while I think it was perhaps intended as a book for a Harris administration not the current moment, I have a lot of sympathy with the Ezra Klein and Derek Thompson Abundance/"supply-side liberalism" argument - I think Starmer's actually heading in a similar direction (if a little ponderously). I worry that it won't work because I think the missing piece is state capacity. But while there may be similarities and it may be a little DOGE-y, I think their goals (and mine) which would be vastly different. It is a diagnosis of sclerosis in some ways in order to deliver more public goods, better public services, better, cheaper amenities for people are fundamentally different from a diagnosis of waste and graft to gut USAID etc.

So with Singapore, in particular, the authoritarian side of the regime supports their economic growth there's other angles - especially of relevance for that "output legitimacy" style analysis. For example they are really good at building infrastructure quickly and relatively cheaply. 90% of land is owned by the state and through the Housing Development Board they build housing which is designed to be affordable for the average Singaporean (citizen or permanent resident - both difficult to acquire) - well-paid foreigners are expected to live in more expensive, private luxury condos. They pay civil servants and politicians a massive salary, but also have very strict (and strongly enforced) anti-corruption laws on things like taking gifts. Bits of these ideas are ones you'll regularly hear from left or liberal types.

[The Minsky Moment]

If Bill Ackman didn't think it was "foreseeable" that Trump would impose tariffs, or that Trump would be swayed from a course of action by an appeal to "economic rationality", then he has no business running money.

[crazy canuck]

People like Ackman must have thought they could control him.  No lessons were learned from the first time.

[HVC]

If Bill Ackman didn't think it was "foreseeable" that Trump would impose tariffs, or that Trump would be swayed from a course of action by an appeal to "economic rationality", then he has no business running money.

The conservatives thought the could control hitler and the tech bros thought they could control Trump. Not the first puppet to rise up and cause issues for their supposed handlers.

[The Minsky Moment]

Meh, this criticism is more silly than the policy.  So what if values happen to cancel out?  Unless one parameter is by definition the inverse of another, omitting the two Greek letters would be the blunder.

With the full benefit of hindsight, the criticism is sound.  It appears that the elasticity of import prices (or "pass through") with respect to tariffs in this formula was selected to be 0.25 just so it would cancel out the price elasticity of import demand.

The citation supporting the value of this parameter is "(Cavallo et al, 2021)".  The paper is not fully cited at the end of the USTR explanation, but it is clearly a reference to Alberto Cavallo, Gita Gopinath, Brent Neiman, and Jenny Tang,  Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy, published in the March 2021 AER:  https://www.hbs.edu/ris/Publication%20Files/aeri.20190536_7e3e09a3-dc15-4bae-b042-c6519f7e1ef5.pdf

One of the authors (Neiman) wrote a NYT op-ed Monday stating the article calculates the pass-through at 0.95, not 0.25.  That is confirmed in the third paragraph of the article which states that: "Controlling for sectoral inflation rates, our regressions suggest that a 20 percent tariff, for example, would be associated with a 1.1 percent decline in the ex-tariff price and an 18.9 percent increase in the total price paid by the US importer."

If the correct pass-through it used, then the tariff calculations would decline by almost four times (3.78 based on the above).  I.e. most of the calculated tariffs would decline to under the 10% baseline and even the highest ones would be under 20%.

Thus one of two things are true:

1) Trump's USTR is so incompetent that in calculating rates for what is likely the largest tax policy change in absolute terms in world history - impacting on over $3 trillion in commercial flows - they made basic math errors that would cause a 6th grader to flunk a grade school math test.

2) USTR deliberately used a false parameter to cancel out the elasticity terms and in the process massively juice the tariff calculation.

[mongers]

......

Thus one of two things are true:

1) Trump's USTR is so incompetent that in calculating rates for what is likely the largest tax policy change in absolute terms in world history - impacting on over $3 trillion in commercial flows - they made basic math errors that would cause a 6th grader to flunk a grade school math test.

2) USTR deliberately used a false parameter to cancel out the elasticity terms and in the process massively juice the tariff calculation.

Brains or egos the size of planets, you decide which they have.

[crazy canuck]

Meh, this criticism is more silly than the policy.  So what if values happen to cancel out?  Unless one parameter is by definition the inverse of another, omitting the two Greek letters would be the blunder.

With the full benefit of hindsight, the criticism is sound.  It appears that the elasticity of import prices (or "pass through") with respect to tariffs in this formula was selected to be 0.25 just so it would cancel out the price elasticity of import demand.

The citation supporting the value of this parameter is "(Cavallo et al, 2021)".  The paper is not fully cited at the end of the USTR explanation, but it is clearly a reference to Alberto Cavallo, Gita Gopinath, Brent Neiman, and Jenny Tang,  Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy, published in the March 2021 AER:  https://www.hbs.edu/ris/Publication%20Files/aeri.20190536_7e3e09a3-dc15-4bae-b042-c6519f7e1ef5.pdf

One of the authors (Neiman) wrote a NYT op-ed Monday stating the article calculates the pass-through at 0.95, not 0.25.  That is confirmed in the third paragraph of the article which states that: "Controlling for sectoral inflation rates, our regressions suggest that a 20 percent tariff, for example, would be associated with a 1.1 percent decline in the ex-tariff price and an 18.9 percent increase in the total price paid by the US importer."

If the correct pass-through it used, then the tariff calculations would decline by almost four times (3.78 based on the above).  I.e. most of the calculated tariffs would decline to under the 10% baseline and even the highest ones would be under 20%.

Thus one of two things are true:

1) Trump's USTR is so incompetent that in calculating rates for what is likely the largest tax policy change in absolute terms in world history - impacting on over $3 trillion in commercial flows - they made basic math errors that would cause a 6th grader to flunk a grade school math test.

2) USTR deliberately used a false parameter to cancel out the elasticity terms and in the process massively juice the tariff calculation.

There is third option that is more likely.  They used AI to do the calculation.  The clue is in the NYTimes piece.  The author described how they had referred to two circumstances where the pass through was only 25% but the paper went on to describe why that number was not reliable.  But someone (read AI) just picked out the 25% number.

[Zanza]

China escalated and raised their tariffs by 50% as well.

The EU passed a small initial set of tariffs to respond only to the steel & aluminium tariffs. More to come.

[Crazy_Ivan80]

China escalated and raised their tariffs by 50% as well.

The EU passed a small initial set of tariffs to respond only to the steel & aluminium tariffs. More to come.

With Hungary dissenting, again. Hunexit needed.

[Sheilbh]

If Bill Ackman didn't think it was "foreseeable" that Trump would impose tariffs, or that Trump would be swayed from a course of action by an appeal to "economic rationality", then he has no business running money.

I agree.

I think I flagged at the time but Jamie Dimon's comments at Davos about Trump were, I think, significant. In 2016 - for want of a better word - professionals and Wall Street were united in a bit of panic about Trump. I think in 2024 Wall Street were broadly pretty pro-Trump, professionals still weren't (and in law firms and academia are being disciplined by the state).

To slightly disagree with CC I think that was based on a misreading of Trump based on his first term which was that he wasn't very effective. I've said before but I think if Trump lost again in 2024 you'd probably characterise a lot of the politics of the last decade as running through Mitch McConnell. Trump spoke a lot in his first term but wasn't able to "do" much. Instead his record ultimately was broadly classic, long-standing Republican projects - judges, tax cuts, more oil and gas and a more hawkish foreign policy (as I say Trump said lethal aid to Ukraine and sanctioned Russia more than Obama). A lot of that was in spite or through Trump rather than because of him.

I think Wall Street thought it would be more of the same - which strikes me as just really, really bad analysis. The key difference is that Trump actually consolidated his control over the GOP post January 6 and also that the intellectual apparatus around the GOP (movement conservatism, think tanks, magazines) all moved like sunflowers to follow the dominant power in the party. There was concerted efforts to recruit a cadre of people who knew what working for Trump would be like and were signed up to deliver (and shape) what Trump wanted. There is a big difference between 2024 and 2016 and I think it's that the MAGA right have spent the last 4-8 years party building. It is insane to me that people who are, in part, paid to analyse risks and make economic decisions weren't paying attention to that or just didn't think it mattered.

So in my view it's less that no lessons were learned from the first term and more than they thought only the lessons learned in the first term mattered. There was no perception of change and I think is a significantly different administration than Trump 1 stuffed with establishment figures and relatively mainstream Republicans. Even the level of churn feels lower because people know what they're signing up for on day one. First as farce, then as tragedy.

[Valmy]

China escalated and raised their tariffs by 50% as well.

The EU passed a small initial set of tariffs to respond only to the steel & aluminium tariffs. More to come.

With Hungary dissenting, again. Hunexit needed.

Hungary is happy to be tariffed by us and not respond? LOL.

Every day I wake up wondering if this insane shit is really happening. Everything is so surreal. Sending innocent Marylanders to El Salvadorian torture prisons without charge and somehow this requires the Supreme Court to intervene...and just to say he can stay there for some reason. And destroying the world economy and our future. For no reason.

All because we decided to elect an obviously incompetent and dangerous lunatic after just barely staving off disaster the first time.