Thread by @anders_aslund

Rarely has a financial crisis been so easy to predict, because it is caused by the US president:
1. Tariffs drastically reduce shipping to the US.
2. Complete uncertainty minimizes investment in the US.
3. The world seeing US madness sells $,
4. & sells US treasuries. /1

This scenario is obvious to anybody who has dealt with emerging economies crisis.
The US economic problems are political, an almighty president, who is as aggressive as ignorant, & his insistence of being surrounded by obedient servants who dare not tell him the truth. /2

The natural outcome of this standard emerging economies crisis is:
1. The demand for US treasuries will dry up (=higher market rates).
2. The US government will be forced to slash its budget deficit from 6.5% of GDP ($2 trillion) to zero. /3

3. Since the US public expenditures are minimal, the US will be forced to raise taxes. Who can pay? The very rich. The US had a maximum federal income tax from World War II to 1962 of 91%. It might not rise that high, but rise it will.

4. Meanwhile stock prices will collapse. My guess is that the current market capitalization will halve (no confidence in US economic policy and very high valuation).
Trump has killed US exceptionalism with his blatant hate of foreigners who have kept US $ & stocks overvalued. /5

5. The consequences are likely to be radical. The billionaires will probably lose.
Bradford Delong wrote a wonderful article pointing out that the US hardly bred any billionaires from 1930-1980 because of high income taxes & strict regulations.
We are likely to return to that. /6