Trump is bankrupting America

What we are seeing right now in the US is nothing less than capital flight. It traditionally marks the beginnings of a financial crisis and an economic crisis that is already underway. Normally, it only occurs in poor third-world countries. But these are not normal times, and Trump is not a normal president.

Meanwhile, his MAGA basis still believe they can see something brilliant behind what is going on here. They think the falling dollar will boost exports. Cutting interest rates is the next step in this inspired plan by the great bumbler-in-chief who hopes to thereby reduce the national debt. What they and their orange-haired leader don’t realize is that, at least until now, the US has only had two big privileges: virtually unlimited borrowing power and the ability to create longterm value from credit. These privileges are based on the role of the dollar as a reserve currency and on the confidence that investments in US assets are guaranteed.

This horrible excuse for a president is voluntarily giving up these core competencies of the US system. This is by far the most foolish financial and economic behaviour in US economic history. It is even more stupid than his experiments with tariffs – because it simply ignores basic facts of life. This, in turn, has triggered capital flight from the United States which should not have occured at all, according to the economists.

What the wizards on the business desks of all our leading newspapers and magazines, and the news desks of our leading TV talk shows, aren’t telling you: The US debt can no longer be called „foreign debt“. The US does not owe its debt to „the Chinese“. Those who still believe this overlook the fact that the US debt has been undergoing a massive restructuring.

The claim that „foreigners“ could call in US loans is simply idiotic. Instead, the massive movement in the capital and currency markets is being generated by the sum of all investors. And that means that the Americans themselves are no longer lending their president money, but are instead moving it abroad themselves. If further proof were needed, just look at the consumer confidence indices, which are also falling sharply.

Hoping that this delusive plan will lead to more foreign investment in the US is the epitome of wishful thinking. What Trump has unleashed instead is a disinvestment programme at all levels.

This president is known to lie, but he can’t lie to the capital markets, and apparently he can’t even lie to his own people when it comes to money.

This all looks very much like the beginning of the worst since the Black Friday of 1929. The the central bank will now have to launch a long-term programme of buying government bonds in order to get a grip on the interest rate markets. It will also have to deal with the free fall of the dollar and capital flight, which will be difficult to combine, because that’s exactly what doesn’t work with low interest rates!

All this will be in vain without a clear public commitment from Trump to do nothing but credibly change policy. This appears highly unlikely, given his record of crass boo-boos as a businessman and a politician. Instead of sacking his cabal of washouts and windbags, putting in place professionals and letting them do their work, he is actively enforcing a policy – if this deluded shambles of an economic strategy really deserves the name – that gives amateurs leading roles in policy making. And thanks to his buddies in Congress, there is no longer a functioning democratic control body to provide checks and balances to the system.

In addition,  Trump has also triggered the de-listing of US supply chains. This can probably not be stopped in time. Unfortunately, the damage will not be offset by any gain. As with any crisis, there will be opportunities. Unfortunately, the conditions for Europe are worse than for many others. We should be honest and not expect to make a profit from this disaster. It is about minimising the damage and strategically repositioning ourselves to reap the benefits in the long term.

You can’t save your way out of a crisis, and we can only hope we will be able to minimise the inevitable harm. The United States has an intellectual problem in the form of Donald Trump. Europeans must now address their own intellectual problems. They must invest in Europe and define this as a strategic goal, not as a simple cost-benefit optimisation. Those who replace complex goals with simplistic ones will be unable to achieve any goal at all.