1/14 DELIGHT IN THE ABSURD
What are TRUMP’s tariffs about?
Trade deficits being felt in the U.S. credit structure—it's as simple as that.
What are TRUMP’s tariffs about?
Trade deficits being felt in the U.S. credit structure—it's as simple as that.
2/14 When a Nixon-Volcker prohibition on G7 countries prevented the sale of excess USD acquired in trade into commodities within the G7, you ended up with a currency that was constantly overvalued in trade—an imbalance characterized by massive overconsumption versus production.
3/14 When Bessent and TRUMP impose very high tariffs, they are essentially cutting the purchasing power of Americans on foreign goods and services—cutting consumption, which also reduces income for exporters. But why?
4/14 So basically, the message is simple: the current administration recognizes it can’t continue because the deficits have strained the credit structure of the U.S pushing the curve much higher than it should in a “normal” slow economy. Kenneth Rogoff has tried to explain why.
5/14 And as Jacques Rueff predicted, this game of double-counting FX as reserves would continue only for as long as the credit structure could tolerate it. 
6/14 So how do you make the deficit felt in the credit structure of the U.S.?
You perform an external drain.
Juglar discussed the mechanics of that:
China is performing an external drain by not recycling its excess USD into USTs...
You perform an external drain.
Juglar discussed the mechanics of that:
China is performing an external drain by not recycling its excess USD into USTs...
https://x.com/GraphCall/status/1928949934893527457
7/14 ... but instead into the BRI, gold and silver in yuan, commodities in yuan at Qianhai—what have you.
8/14 That affects the credit structure of the U.S. by pushing the USD down versus commodities and the yield curve up, and Bessent and TRUMP respond by cutting U.S. citizen spending via tariffs.
9/14 Now, what is interesting is that at the start of the 1980s Bretton Woods II era, you could find consumer finance companies for a pittance.
10/ But now that it’s ending, consumer lending, unsecured consumer lending, and securitization businesses like $CVNA, $AFRM, $UPST, and $SOFI trading at stratospheric levels—while single-B junk credit spreads have just bounced off lows not seen since the 2006 "crazy town" days.
12/14 On the other hand, you have e-retailers in China—very slick operations—trading at single-digit earnings with double-digit growth, a fiscal stimulus unseen since the GFC, and an external drain and settlement in local currency that naturally continues to boost the purchasing…
13/14 …power of the Chinese people.
And some believe (due to PLTR-sponsored propaganda) that the purchasing power of Chinese people over the last 30 years has fallen in absolute terms. Those people, we can agree, are living in a propaganda inspired absurdistan.
And some believe (due to PLTR-sponsored propaganda) that the purchasing power of Chinese people over the last 30 years has fallen in absolute terms. Those people, we can agree, are living in a propaganda inspired absurdistan.
14/14 It seems that investing is finding delight in the absurd.
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