This post gives too much credit to the Trump administration, implying they knowingly lie with a grand strategy in mind. I don't think they see their falsehoods.
Musk believes he's cutting the deficit when he's not.
Trump sees tariffs as a powerful tool when they aren’t.
The economy isn’t ready to capitalize on AI, but Trump and his team likely don’t realize that.
As someone in AI, I know its value comes from training on internal data—90% of companies lack the data quality to make it work.
Trump isn’t trying to break the economy on purpose; he’s playing chicken, convinced Canada and Ukraine will blink first. He and his team believe they can thread the needle—but they can’t.
I believe that very soon, the private worries of business leaders and politicians will start to spill into the open much quicker and more aggressively than Trump anticipates. When that happens, how he reacts remains to be seen, but he certainly won't be able to maneuver like he is now.
I especially loved a post you had earlier on how we are misunderstanding our competitive position against China.
That We need to become better at building things people need and use vs digitization of everything. That In order to do that we need to continue our massive inflows of capital but perhaps utilize them better.
All 100% on point. That’s the kind of stuff we need more discussions on.
Totally agree, you see it with them saying tariffs are sike no there not. She also has quotes for the administration. My thinking is how can those people be trusted? Where is the data to back up there claim? I find it laughable that we take these people at there word without evidence.
I became a supporter after this post. There’s lots of creator commentary on this administration but not enough breakdown of the plan and vision. This provided me with some relief by understanding the administrations plan in more detail with references.
I also feel that this administration is trying to orchestrate a recession. The fear I have is once you unleash this shit storm, it will lead to more disorder and uncertainty with unanticipated consequences that can cause irreversible harm.
It is a good analysis but completely ignores that the stability of the last few decades comes from an unsustainable zirp and debt-fueled economy that has allowed conspicuous consumption.
There needs to be adjustments made and adjustments are generally not easy. The current path is unsustainable and the last 4 administrations had kicked the can down the road.
The current administration might have a right or wrong approach(we will find out sooner rather than later) but at least they are taking decisive action.
The other policy is deporting undocumented immigrants. With many of those working in blue collar jobs, construction, meat packing plants, agriculture, etc. The implication being that laid off US citizens will be desperate to take these jobs. I find that hard to believe. A recession like this also exposes hidden debt. The banking system could be threatened, bank failures occur, lots of potential unknown unknowns. But this group thinks they’re smarter than all the rest.
Thank you for attempting to make sense of the administration's policies. Frankly, I don't think the Trump team has any overarching strategy other than to keep the MAGA base energized and using continuous disruption to dominate the news cycle. The potential emergence of AGI (or whatever label is used to characterize the models that may emerge in the next 2-3 years) will be another source of disruption, especially in the entry level white collar labor market. I don't think the results are going to be good. Lots of very frustrated Gen Zers and millennials. Meanwhile, the "decoupling" of the American consumer from foreign sources of manufactured products (and agricultural produce), will drive up prices for many households that are already close to living "paycheck to paycheck". Trump will try to blame their hardship of the immigrants but at some point many of them will finally realize his plans will undermine both their financial wellbeing and health care.
Good post. This seems like a departure from Trump's first term and the populist rhetoric in general.
Based on Trump's first term, I never would have guessed he'd be interested in concepts like "taking our medicine" to "get to the other side" or whatever. It seemed like in his first term he just wanted to do whatever he could do at a given moment to juice the economy and leave the consequences for someone else down the road.
In this case it's also not quite clear what the "medicine" is. Obviously the deficit is too high, but if you would have told me 5 years ago that future Trump would be a deficit hawk I never would have believed it.
I don't get how semi-intentionally pushing the economy into a recession is better politically than just continuing to run high deficits and keeping the party going for a little longer.
I reread this post after the stock market declines on Monday. Wall Street commentators seem to view policy as if the Trump administration has intentional economic designs. I now believe that the economy is secondary or tertiary.
Where the administration does have designs are societal and cultural. Defund universities that are a breeding ground for woke culture; advance nativism and deportations towards a more homogeneous culture; pardon all Jan 6 participants to reinforce the base… Capture the Supreme Court and judicial branch in the first term.
These all follow the same steps as other nations that have fallen into autocracies. War can be a consequence. In this case there is no military war, but an economic war unlike anything we have seen before.
I hope I am wrong, but I despair that there will be significant financial hardship ahead.
As always, an incredibly thoughtful and incredibly well-written discussion about what could be happening and the “why behind the what”. Kyla is amazing.
In the spirit of Occam’s Razor…..is it possible that there is a simpler (but not reassuring) explanation. Let’s start with the well documented premise that Trump is relatively unintelligent, low information, profoundly narcissistic cleptocrat and seeks retribution. He also needs to have someone to blame for anything—ALWAYS. Credit for good things is easier as he only credits himself. He has surrounded himself with people with similar characteristics who are not nearly the best. He is still driven by the anger (seething) that Obama embarrassed him. He is still humiliated by his legendary incompetence during his first term. He is still seething that Biden beat him and was able to do what he could not (see: perpetual “infrastructure weeks” while occupying the office of POTUS, good/great economies under Obama, Biden that he could not match). He needs to be a hero instead of carrying the baton as a good steward of the office. He has an understanding that chaos characterized by the psychology of “loss followed by relief” provides something positive. Small examples would be the tariffs that change by the hour followed by relief will attract attention that he craves and ironically being the savior from what he did. Bigger picture is as simple as he wants/needs to break the economy (and break it quickly) so that very VERY importantly blame it on Biden. Then, there will be lots of actions and our economy (as it tends to do) will recover from the depths despite them and not because of them. Guess who takes credit…..
Given his personal characteristics and decades of behavioral evidence, this might be the more likely (and unsettling) explanation. He hasn’t displayed evidence/capacity to play checkers much less multidimensional chess.
The method by which he is carrying this out would seem to be an overlapping Venn diagram of 1) the apprentice, 2) WWE/Vince McMahon and 3) an long time desire to be a NY mob boss.
It might in fact be a more simple (and accurate) lens for explaining pretty much everything.
Brilliant. Thank you for your research and your analysis! Questions: 1. So is the end game that all of the work these smashed federal agencies becomes privatized by the corporate class? 2. And, do you think Universal Basic Income is far behind?
Do you see a parallel here with the 80’s? Carter started the ball rolling with volker’s high interest rates and industry deregulation then Regan came and lowered taxes (Carter did too but Regan took them further).
Similar thing happening here to tamp down inflation (it’s down but still feels like it’s got steam left.) Elon is basically a heat shield, like Volker, for Trump.
Not agreeing with his tactics but if you’re looking at using the levers of executive power, he is taking an axe to public spending then using tariffs as a tool to decrease demand similarly.
Great piece! I agree that this is a possible motivation for the backwards policy being seen along with other reasons mentioned such as nationalism and anti-intellectualism. If it is true, it reveals a scale of hubris that is disastrously huge. If the administration thinks it can perform a nose-dive economically and then regain control to soar to new heights, it widely underestimates the spillovers of bad policy and needed momentum from recovery policy.
But as Kyla also mentions that the pain from the downturn will be distributed in an unequal fashion; the recovery, though, can be more directed. No need for being careful if you won’t be hurt in the long run.
As you said, that's a lot of speculation. Are we actually heading towards a recession? Sure, we may be, but are we, based on data, not on what sounds logical? I would love to answer that, but it is tough.
Again, you take it for granted that there is a solid plan based on deep understanding and you speculate what it might be. That's the one thing I highly doubt. How about actions just based on ideology? If it does not make sense, perhaps because there is none? Speculation is entertaining, and yours even more so, but at this state of the world, I prefer an approach of "what do we know and what don't we know" as a start of exploring how the near future might unfold in order to have an idea how to position. So yes, we do see a lot of re-positioning, as everybody tries to determine where we are, and I wish we had better answers to that. Which means both sides of every aspect must be looked at.
Since you quoted Germany, let me add some background. Fiscal spending is extreme and the current plans are simply finding ways around reasonable debt restrictions. They do not address any structural issue that led to the current situation. Social systems are collapsing bit by bit, and more debt and higher taxes are the universal band-aid to cure fractures. Three years recession now. The 500 billions for military you quoted are joined by 400 billions for infrastructure, yet the major barrier there is not money, it is project planning in an environment of extreme federalism and bureaucracy. If the call is to spend money, like last time they will dump it is in low risk projects that are easy to plan in order to show money is being used. That's bicycle lanes instead of bridges. Trump is a welcome reason for the debt extension that was refused before. Superficially, things looks like you quoted, but under the hood the situation is very different. It's greed for the benefits of fiscal spending, no more. The debt plans are not joined by plans of major structural changes.
Very perceptive and helpful analysis. Trump is a first order thinker, and has complete power, a terrible situation for the rest of us. I'm slowly building my cash situation.
This post gives too much credit to the Trump administration, implying they knowingly lie with a grand strategy in mind. I don't think they see their falsehoods.
Musk believes he's cutting the deficit when he's not.
Trump sees tariffs as a powerful tool when they aren’t.
The economy isn’t ready to capitalize on AI, but Trump and his team likely don’t realize that.
As someone in AI, I know its value comes from training on internal data—90% of companies lack the data quality to make it work.
Trump isn’t trying to break the economy on purpose; he’s playing chicken, convinced Canada and Ukraine will blink first. He and his team believe they can thread the needle—but they can’t.
I believe that very soon, the private worries of business leaders and politicians will start to spill into the open much quicker and more aggressively than Trump anticipates. When that happens, how he reacts remains to be seen, but he certainly won't be able to maneuver like he is now.
Yes, I mention it's very speculative. Thank you for these additional notes, I agree the path will change
No thank you!! Everything you write and create is so well done. We need more of it not less!! Keep up the great work! You are a star!!!
I especially loved a post you had earlier on how we are misunderstanding our competitive position against China.
That We need to become better at building things people need and use vs digitization of everything. That In order to do that we need to continue our massive inflows of capital but perhaps utilize them better.
All 100% on point. That’s the kind of stuff we need more discussions on.
I agree with you, Dhruv.
Totally agree, you see it with them saying tariffs are sike no there not. She also has quotes for the administration. My thinking is how can those people be trusted? Where is the data to back up there claim? I find it laughable that we take these people at there word without evidence.
I became a supporter after this post. There’s lots of creator commentary on this administration but not enough breakdown of the plan and vision. This provided me with some relief by understanding the administrations plan in more detail with references.
Trump has cost America its reputation, globally. Full stop.
Economic hardship for the American people is going to be the natural consequence of his foolishness.
I also feel that this administration is trying to orchestrate a recession. The fear I have is once you unleash this shit storm, it will lead to more disorder and uncertainty with unanticipated consequences that can cause irreversible harm.
Thanks for this Kyla.
It is a good analysis but completely ignores that the stability of the last few decades comes from an unsustainable zirp and debt-fueled economy that has allowed conspicuous consumption.
There needs to be adjustments made and adjustments are generally not easy. The current path is unsustainable and the last 4 administrations had kicked the can down the road.
The current administration might have a right or wrong approach(we will find out sooner rather than later) but at least they are taking decisive action.
The other policy is deporting undocumented immigrants. With many of those working in blue collar jobs, construction, meat packing plants, agriculture, etc. The implication being that laid off US citizens will be desperate to take these jobs. I find that hard to believe. A recession like this also exposes hidden debt. The banking system could be threatened, bank failures occur, lots of potential unknown unknowns. But this group thinks they’re smarter than all the rest.
Thank you for attempting to make sense of the administration's policies. Frankly, I don't think the Trump team has any overarching strategy other than to keep the MAGA base energized and using continuous disruption to dominate the news cycle. The potential emergence of AGI (or whatever label is used to characterize the models that may emerge in the next 2-3 years) will be another source of disruption, especially in the entry level white collar labor market. I don't think the results are going to be good. Lots of very frustrated Gen Zers and millennials. Meanwhile, the "decoupling" of the American consumer from foreign sources of manufactured products (and agricultural produce), will drive up prices for many households that are already close to living "paycheck to paycheck". Trump will try to blame their hardship of the immigrants but at some point many of them will finally realize his plans will undermine both their financial wellbeing and health care.
Good post. This seems like a departure from Trump's first term and the populist rhetoric in general.
Based on Trump's first term, I never would have guessed he'd be interested in concepts like "taking our medicine" to "get to the other side" or whatever. It seemed like in his first term he just wanted to do whatever he could do at a given moment to juice the economy and leave the consequences for someone else down the road.
In this case it's also not quite clear what the "medicine" is. Obviously the deficit is too high, but if you would have told me 5 years ago that future Trump would be a deficit hawk I never would have believed it.
I don't get how semi-intentionally pushing the economy into a recession is better politically than just continuing to run high deficits and keeping the party going for a little longer.
Debt Crisis. The party is over.
As an aside, I don’t see how all of the horrors described in this article are much different than what Europe has been living through since the GFC.
I reread this post after the stock market declines on Monday. Wall Street commentators seem to view policy as if the Trump administration has intentional economic designs. I now believe that the economy is secondary or tertiary.
Where the administration does have designs are societal and cultural. Defund universities that are a breeding ground for woke culture; advance nativism and deportations towards a more homogeneous culture; pardon all Jan 6 participants to reinforce the base… Capture the Supreme Court and judicial branch in the first term.
These all follow the same steps as other nations that have fallen into autocracies. War can be a consequence. In this case there is no military war, but an economic war unlike anything we have seen before.
I hope I am wrong, but I despair that there will be significant financial hardship ahead.
As always, an incredibly thoughtful and incredibly well-written discussion about what could be happening and the “why behind the what”. Kyla is amazing.
In the spirit of Occam’s Razor…..is it possible that there is a simpler (but not reassuring) explanation. Let’s start with the well documented premise that Trump is relatively unintelligent, low information, profoundly narcissistic cleptocrat and seeks retribution. He also needs to have someone to blame for anything—ALWAYS. Credit for good things is easier as he only credits himself. He has surrounded himself with people with similar characteristics who are not nearly the best. He is still driven by the anger (seething) that Obama embarrassed him. He is still humiliated by his legendary incompetence during his first term. He is still seething that Biden beat him and was able to do what he could not (see: perpetual “infrastructure weeks” while occupying the office of POTUS, good/great economies under Obama, Biden that he could not match). He needs to be a hero instead of carrying the baton as a good steward of the office. He has an understanding that chaos characterized by the psychology of “loss followed by relief” provides something positive. Small examples would be the tariffs that change by the hour followed by relief will attract attention that he craves and ironically being the savior from what he did. Bigger picture is as simple as he wants/needs to break the economy (and break it quickly) so that very VERY importantly blame it on Biden. Then, there will be lots of actions and our economy (as it tends to do) will recover from the depths despite them and not because of them. Guess who takes credit…..
Given his personal characteristics and decades of behavioral evidence, this might be the more likely (and unsettling) explanation. He hasn’t displayed evidence/capacity to play checkers much less multidimensional chess.
The method by which he is carrying this out would seem to be an overlapping Venn diagram of 1) the apprentice, 2) WWE/Vince McMahon and 3) an long time desire to be a NY mob boss.
It might in fact be a more simple (and accurate) lens for explaining pretty much everything.
Brilliant. Thank you for your research and your analysis! Questions: 1. So is the end game that all of the work these smashed federal agencies becomes privatized by the corporate class? 2. And, do you think Universal Basic Income is far behind?
Do you see a parallel here with the 80’s? Carter started the ball rolling with volker’s high interest rates and industry deregulation then Regan came and lowered taxes (Carter did too but Regan took them further).
Similar thing happening here to tamp down inflation (it’s down but still feels like it’s got steam left.) Elon is basically a heat shield, like Volker, for Trump.
Not agreeing with his tactics but if you’re looking at using the levers of executive power, he is taking an axe to public spending then using tariffs as a tool to decrease demand similarly.
Agree. Stephen Miran's paper from which I try to highlight some aspects (https://musingsfromitaly.substack.com/p/trying-to-decipher-trump-20-using?r=g1reo) & Scott Bessent appear to be in sync to promote this quick dip in the markets to force various outcomes.
Great piece! I agree that this is a possible motivation for the backwards policy being seen along with other reasons mentioned such as nationalism and anti-intellectualism. If it is true, it reveals a scale of hubris that is disastrously huge. If the administration thinks it can perform a nose-dive economically and then regain control to soar to new heights, it widely underestimates the spillovers of bad policy and needed momentum from recovery policy.
But as Kyla also mentions that the pain from the downturn will be distributed in an unequal fashion; the recovery, though, can be more directed. No need for being careful if you won’t be hurt in the long run.
As you said, that's a lot of speculation. Are we actually heading towards a recession? Sure, we may be, but are we, based on data, not on what sounds logical? I would love to answer that, but it is tough.
Again, you take it for granted that there is a solid plan based on deep understanding and you speculate what it might be. That's the one thing I highly doubt. How about actions just based on ideology? If it does not make sense, perhaps because there is none? Speculation is entertaining, and yours even more so, but at this state of the world, I prefer an approach of "what do we know and what don't we know" as a start of exploring how the near future might unfold in order to have an idea how to position. So yes, we do see a lot of re-positioning, as everybody tries to determine where we are, and I wish we had better answers to that. Which means both sides of every aspect must be looked at.
Since you quoted Germany, let me add some background. Fiscal spending is extreme and the current plans are simply finding ways around reasonable debt restrictions. They do not address any structural issue that led to the current situation. Social systems are collapsing bit by bit, and more debt and higher taxes are the universal band-aid to cure fractures. Three years recession now. The 500 billions for military you quoted are joined by 400 billions for infrastructure, yet the major barrier there is not money, it is project planning in an environment of extreme federalism and bureaucracy. If the call is to spend money, like last time they will dump it is in low risk projects that are easy to plan in order to show money is being used. That's bicycle lanes instead of bridges. Trump is a welcome reason for the debt extension that was refused before. Superficially, things looks like you quoted, but under the hood the situation is very different. It's greed for the benefits of fiscal spending, no more. The debt plans are not joined by plans of major structural changes.
Very perceptive and helpful analysis. Trump is a first order thinker, and has complete power, a terrible situation for the rest of us. I'm slowly building my cash situation.