For Posterity
Doug Noland
For Posterity.
He certainly wasted no time; hit the ground running – and swinging.
President Trump is setting the standard for swift execution of campaign promises.
And it’s refreshing to see the President of the United States available to field questions from the press.
There has been no shortage of vigor or fight in the first five days of what will undoubtedly be an historic four years.
January 20 – Wall Street Journal (Molly Ball):
“If he came in the first time unexpectedly, he returned as a conqueror.
And so Donald Trump stood in the Capitol’s marble rotunda, surrounded by the titans of power and industry, taking the reins of a government he is more determined than ever to bend to his singular will.
The newly sworn-in 47th president pulled no punches in his combative inaugural speech, decrying to their faces the ‘radical and corrupt establishment’ that he said had ‘extracted power and wealth from our citizens while the pillars of our society lay broken and seemingly in complete disrepair.’
He laid out a sweeping and disruptive agenda, vowing to liberate the country from its decadeslong malaise, restore its lofty ambitions and plant its flag on Mars.
In a tone at once subdued and defiant, he enumerated his grievances while pledging to pacify ‘a world that has been angry, violent and totally unpredictable.’”
January 20 – Financial Times (Molly Ball):
“Donald Trump promised a ‘golden age of America’, as he used his inaugural address to unveil sweeping moves to undo Joe Biden’s policies and reverse a ‘crisis of trust’ he said had engulfed the government.
The new president announced aggressive new steps to boost energy production and curb immigration as he vowed to quickly deliver on the populist and nationalist platform that swept him to victory…
Within hours of the speech, Trump rescinded dozens of Biden’s executive orders relating to everything from advancing racial equity and sanctioning extremist Israeli settlers in the West Bank, to strengthening Medicaid and promoting access to voting…
‘I was saved by God to make America great again,’ he said, in a speech that included echoes of his dystopian description of ‘American carnage’ in his first inaugural address in 2017.”
To offer context, I lean heavily on my macro analytical framework.
The world has reached the fraught “terminal phase” of a historic multi-decade super cycle.
A period of profound change: monumental technological advancement, policy experimentation, financial innovation, and economic development, with the Internet fundamentally altering social and political behavior.
An unprecedented global financial Bubble unleashed destabilizing wealth inequality – within and between households, communities, regions, and nations.
The Internet ensures that myriad injustices, real and perceived, are constantly in our face.
Misinformation, conspiracy theories and propaganda run amok.
And as traditional norms fade into oblivion, a void is filled by pernicious endeavors for sport and profit.
A jumbled “world order” is at risk of detonating.
Wars and the risk of catastrophic war.
Climate change, the risk of cataclysmic change, and now commonplace natural disasters.
Perceptions of the future have done a disorienting 180: From a tradition of optimism to gloom and foreboding.
Populations are worried.
People are angry and hankering to cast blame.
Mainly, there is a cloud of corrosive insecurity that has distorted how societies function.
Donald Trump and the populist MAGA movement will be studied for generations.
President Trump has a unique capacity to tap into anger, bitterness, and insecurity.
He is the master at pinpointing sources to blame for the injustices that so many are feeling: immigration; a dysfunctional federal government; the “establishment;” “deep state;” corruption; liberalism; cultural decay; a history of leadership unwilling to demand the world stop taking advantage of the United States; participation in global institutions and arrangements to the perceived detriment of our national interests.
At home and abroad, citizens (voters and otherwise) these days embrace “strongman” leadership.
Traditional leaders and parties, unable to allay fears and insecurities, are viewed as ineffective, often incompetent, and worse.
Extraordinary powers are surrendered to “strongmen” prepared to forcefully address grievance and injustice.
January 21 – Axios (Zachary Basu):
“President Trump moved to obliterate the outer bounds of executive power Monday, igniting a series of constitutional showdowns that could curtail — or enable — his vision for a maximalist second term.
Within hours of taking office, Trump dared the courts, Congress and his fragmented opposition to stand in the way of what could be his most enduring legacy: a radical expansion of presidential power.
He did so publicly and with a flourish — signing an initial batch of executive orders in front of a roaring crowd at Capitol One Arena, before returning to the White House.
There, Trump signed a barrage of executive orders, announced that Canada and Mexico are likely to face 25% tariffs beginning Feb. 1, and pardoned roughly 1,500 Jan. 6 defendants.
Trump also commuted the sentences of 14 Oath Keepers and Proud Boys convicted of seditious conspiracy— an extraordinary act of clemency for far-right extremists who sought to overthrow the government on Jan. 6.”
The Economist:
“Welcome to Donald Trump’s Imperial Presidency.”
We’re witnessing an inordinate concentration of power challenge our system of checks and balances and the separation of powers between our three branches of government.
One individual to almost singularly determine tariffs and U.S. trade policy; to declare a national energy emergency; to negotiate the fate of Tic Tok; to repudiate the 14th Amendment; to terminate U.S. involvement in the Paris Agreement and World Health Organization; to suspend participation in the Global Tax Deal; to repeal climate change initiatives; to quash government DEI programs; to ban federal officials from compelling social media companies to combat disinformation, etc.
I think most of us are open to some much-needed “disruption” in Washington.
Immigration, over-regulation, and the “deep state” provide easy, appealing targets.
The President’s base is absolutely giddy.
Problems solved; commonsense, finally.
But it’s a complex, hostile and alarmingly uncertain world.
Not amenable to quick solutions, the greatest risks facing our nation - and the world - demand deep analysis, long-term planning and strategy, difficult decisions, sacrifice, and steadfast resolve through thick and thin.
Fixation on the “enemy from within” sucks oxygen from the identification of, and preparation for, more threatening enemies and risks.
An increasingly fraught geopolitical backdrop creates a non-negligible and growing risk of “WWIII.”
A strategic focus demands resolve to buttress our allies and alliances, rather than the instant gratification of extracting trade concessions from our circle of like-minded partners.
And I fear myriad consequences from disavowing climate science and abandoning American global leadership on such a monumental and pressing issue.
President Trump is a strong leader.
Great leadership can require pulling a nation into undertakings and challenges its population might not fully appreciate it needs to pursue.
With speculative marketplaces notoriously focused on the immediate, risk markets took the spectacle of Trump exercising unparallel power all in stride.
At least for week one, the President and Wall Street had a deal: no tariff directives, with markets revering the jubilant coronation of our nation’s 47th President.
In general, markets afford President Trump incredible leeway, confident that he understands the risks to his agenda posed by market instability.
January 19 – Financial Times:
“Dealmaking, deregulation and threats to global trade are expected to dominate the conversation among executives gathering in Davos this week, as Donald Trump’s return to the White House shifts the focus of business leaders away from social issues towards growth…
The incoming US president… has promised to sign dozens of executive orders upon taking office, including moves to increase US energy production and cut red tape.
‘It is all about growth’, said Simon Freakley, chief executive of consultancy AlixPartners.
‘Every investor worships at the altar of growth, every CEO serves at the altar of growth and is thinking about how to drive growth in this environment.’”
The Trump administration is unleashing a comprehensive pro-growth agenda.
Manufacture in the U.S. or we’ll tariff you.
“Drill, baby, drill.”
Dismantle regulations across industries that had constrained investment.
Crush climate-related initiatives.
Lean on the banks and Wall Street to finance whatever.
Ride the wave.
January 21 – Bloomberg (Craig Stirling):
“President Donald Trump faces a host of headwinds that could thwart his ability to generate a boom for the US economy, according to Harvard University Professor Ken Rogoff…
The former chief economist of the International Monetary Fund said the policies promised this time around are less likely to help growth compared to his first term in the White House.
‘Every campaign promise practically is something counter productive — I mean you can go to the tariffs, social security being not taxed, and on and on and on,’ Rogoff told…
Bloomberg... ‘It’s less obvious that he has the same room to run with his policies.
And when he came interest rates were zero.
Now they’re not…
If we’re just looking at policies, the things that he did in the first term I think on the whole were constructive for the economy — deregulation, the tax cuts, getting rid of the state and local deduction…
He has a lot of constraints that he didn’t face the first time.
So I don’t think you can expect quite the boom we got the last time.’”
The President does face various headwinds.
For now, his pro-growth agenda also enjoys powerful hurricane-force tailwinds that were mere gentle summer breezes in early 2017.
Importantly, financial conditions are meaningfully looser today.
For example, high yield spreads to Treasuries traded at 390 in January 2017, versus this week’s 256 bps (within three bps of lows back to June ’07).
Total Non-Financial Debt (NFD) expanded $2.003 TN during 2016.
NFD likely surpassed $3.5 TN last year.
The $587 billion fiscal deficit was less than a third of fiscal 2024.
Today’s unique market environment is dominated by historically powerful forces (“inflationary biases”) that hardly registered in January 2017, including “basis trade” speculative leverage, AI, “private Credit,” and manic speculative excess (i.e., stocks, crypto and leveraged lending).
January 22 – Bloomberg (Cliff Venzon and Andreo Calonzo):
“President Donald Trump announced a joint venture to fund AI infrastructure worth billions of dollars with the leaders of Softbank, OpenAI, and Oracle.
$500 Billion Goal: Trump was joined by Softbank’s Masayoshi Son, OpenAI’s Sam Altman, and Oracle’s Larry Ellison.
The joint venture will deploy $100 billion ‘immediately’ with a goal of increasing to ‘at least’ $500 billion in AI projects, including data centers and physical campuses, Son said.
Companies including Microsoft and Nvidia are also expected to participate.
‘We’re starting off with tremendous investment coming into our country at levels that nobody’s really ever seen before,’ Trump said…”
January 22 – Bloomberg (Jackie Davalos and Shirin Ghaffary):
“Over the past two years, the Biden administration struck a careful balance on artificial intelligence.
The White House took steps to ensure the US stayed ahead of China in developing the technology while also trying to address some of AI’s many potential risks.
In his first 24 hours back in Washington, Donald Trump sent a different message to the AI community: Just build.
On Monday, Trump rescinded Biden’s sweeping executive order on AI.
The move immediately halted the implementation of key safety and transparency requirements for AI developers.
Some tech leaders attending the World Economic Forum in Davos praised his approach.
Other experts warned against an AI world with fewer guardrails.”
The runaway AI Bubble is in no need of extraneous pumping out of Washington, though it’s obviously too big and consequential not to be opportunistically embraced by the new administration (ditto, to a lesser degree, crypto).
“In a rare break with Trump, Musk… poured cold water on the project, writing:
‘They don’t actually have the money’” (from the FT).
Musk’s comment raises interesting issues.
First, we’re witnessing an extraordinarily high-stakes arms race.
Trillions will be spent, and there will be ghastly roadkill (investors, speculators, companies, lenders, industries, nations).
A Trump initiative with his AI archenemy, which could expand to a half trillion dollars, must trigger a spike in Elon’s stress hormones.
Second, with the Wall Street debt machine (certainly including “subprime” “private-Credit”) running white hot, players in the space today basically enjoy unlimited access to finance.
January 21 – Wall Street Journal (Vicky Ge Huang and Caitlin Ostroff):
“The crypto industry eagerly awaited Donald Trump’s return to the White House.
Now, it’s reeling after the president and first lady launched a pair of meme coins.
Dubbed $TRUMP and $MELANIA, the tokens have no economic purpose—their value is largely based on the popularity of internet memes.
The market cap of the president’s coin has soared to $8.4 billion since Friday night’s launch, while the first lady’s token is worth about $800 million, according to CoinMarketCap.
By selling coins known for their speculative nature and extreme volatility, the president has undermined the credibility that the industry has worked hard to build in recent years, some crypto executives and investors say.
They also point to the brazen conflict of interest: Trump benefits directly from the sale of the tokens while setting the policy that affects how markets are valued and regulated.”
The Donald and Melania pre-inauguration crypto “meme coins” evoked the memory of George W. Bush’s assessment of President Trump's first Inaugural Address: “That’s some weird shit.”
As someone deeply concerned by our nation’s fateful obsession with speculating and gambling, the President and First Lady introducing their own “coins” must signal peak speculative Bubble.
Pottersville.
President Trump spent Friday surveying the damage caused by devastating natural disasters in North Carolina and California.
For a Bubble economy that already enjoys a notable head of steam, massive climate-relating rebuilding and spending further elevate overheating risks.
Moreover, the unfolding AI spending boom is poised to be highly destabilizing.
Meta Platforms Friday announced plans for $65 billion of AI-related spending this year, 27% ahead of analyst expectations – including a new data center “so large that it would cover a significant part of Manhattan.”
Zuckerberg: “This is a massive effort…”
Others, certainly including the fellow “oligarchy” and nations globally, all plan their own massive efforts.
Ensuring sufficient energy, cooling, and communications infrastructure will require more massive efforts.
The Treasury market was eerily subdued all week.
Trading within a narrow range of 13 bps, 10-year yields ended the week a basis point lower.
The currencies were anything but subdued.
“Trump Unleashed Surprise Global Rally by Backing off Key Promise.”
Markets positioned for aggressive day one tariff directives were caught off guard.
Emerging market currencies in particular were squeezed sharply higher.
The Dollar Index dropped 1.7%, the largest weekly decline since November 2023.
With so much at stake, bond investors will want to keep their cool.
The big question is how long they can hold out.
The bond market has the capacity to curb the President’s seemingly unchecked power.
Bond “vigilantes” are not drinking the pro-growth Kool-Aid.
They’re instead staring anxiously at an overheating economy, massive debt issuance as far as the eye can see, and a highly levered marketplace.
Bonds are in a tough spot.
The longer market yields readily accommodate intense demand for borrowings, the higher yields will have to rise to arrest the boom.
January 24 – New York Times (Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Edmund Lee):
“President Trump had just dodged a softball question from Bank of America’s Brian Moynihan, and instead went after him, accusing the lending giant of routinely debanking many of his supporters, a hot-button issue among conservatives.
‘Brian got whacked,’ was how one prominent executive described the frosty exchange...
It didn’t seem to diminish the bullish mood that’s hung over Davos all week, as executives here celebrated Trump’s low-tax, low-regulation policy agenda.
But it was another reminder — as if business leaders needed one — that Trump has thrown out the old rules of engagement between Washington and C-suites.”
Perhaps mere coincidence, but earlier in the week BofA’s CEO had made on-target – and surely unappreciated by the new administration – comments suggesting the Fed might need to factor in Trump’s growth agenda in its policy thinking (I’m reminded of Musk’s “The Fed is absurdly overstaffed” tweet a few days after the Fed’s December 18th hawkish pivot).
January 21 – Yahoo Finance (Brian Sozzi):
“The Federal Reserve now needs to be on Trump watch if it wants to engineer the proper dose of monetary policy, according to Bank of America chief Brian Moynihan.
‘They’ve got a new administration with a new set of fiscal policies, and the monetary policy has to respond to that,’ the BofA chair and CEO told Yahoo Finance…
Moynihan added: ‘We are not a central bank-led economy.
We’re actually a private sector-led economy, of which the government supports, of which the central bank responds to, and they have to think of what stimulus they’re going to respond to.’”
The C-suite must stay in line.
Bishops in line. Disloyalty not tolerated.
“Kill the chicken to show the monkey.”
Disaffected first-term cabinet members under various serious threats lose security detail.
And Jay Powell may enjoy job security for now, but challenges are about to turn more exacting.
January 23 – Bloomberg (Skylar Woodhouse):
“President Donald Trump questioned Federal Reserve Chair Jerome Powell’s decision-making on interest rates and said he planned to speak to the central bank chief ‘at the right time.’
‘I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,’ Trump said, in an apparent reference to Powell, while speaking to reporters from the Oval Office…
‘If I disagree, I will let it be known.’”
January 23 – Reuters (Echo Wang, Marwa Rashad and Trevor Hunnicutt):
“U.S. President Donald Trump demanded OPEC lower oil prices and the world drop interest rates in a speech to global business and political leaders and warned them they will face tariffs if they make their products anywhere but the U.S.
‘I’ll demand that interest rates drop immediately.
And likewise, they should be dropping all over the world,’ Trump said via video to the World Economic Forum…
‘I'm also going to ask Saudi Arabia and OPEC to bring down the cost of oil.’”
January 24 – Financial Times (Richard Milne, Gideon Rachman and James Politi):
“Donald Trump insisted he was serious in his determination to take over Greenland in a fiery telephone call with Denmark’s prime minister…
The US president spoke to Mette Frederiksen, the Danish premier, for 45 minutes last week…
Frederiksen said she had emphasised that the vast Arctic island — an autonomous part of the kingdom of Denmark — was not for sale, while noting America’s ‘big interest’ in it.
Five current and former senior European officials briefed on the call said the conversation had gone very badly…
Trump had been aggressive and confrontational following the Danish prime minister’s comments that the island was not for sale, despite her offer of more co-operation on military bases and mineral exploitation.
‘It was horrendous,’ said one of the people.
Another added: ‘He was very firm.
It was a cold shower.
Before, it was hard to take it seriously.
But I do think it is serious, and potentially very dangerous.’
‘The intent was very clear.
They want it.
The Danes are now in crisis mode’…
Another said: ‘The Danes are utterly freaked out by this.’
A former Danish official added: ‘It was a very tough conversation.
He threatened specific measures against Denmark such as targeted tariffs.’”
A few Friday evening headlines from the Financial Times:
“The Big Read: Trump’s New Economic War.”
“Marco Rubio Demands Immediate Halt to Virtually All US Foreign Aid.”
“Mexico and Canada Forge United Front in Face of Donald Trump’s Tariff Threats.”
The world may have a penchant for strongman leadership, but it’s surely in no mood to be bullied by Donald Trump.
It would be fascinating to monitor international communications between governments.
Will there be movement toward forging a more united front?
I recall President Trump arguing that “trade wars are easy to win.”
Risk is mounting for trade wars, where everyone loses.
Obviously, President Trump won’t immediately negotiate an end to the Ukraine war.
January 22 – Reuters (David Lawder and Daphne Psaledakis):
“U.S. President Donald Trump said… he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine, and added that these could also be applied to ‘other participating countries.’
In a post on Truth Social, Trump modified comments he made on Tuesday that he would likely impose sanctions against Russia if President Vladimir Putin refused to negotiate an end to the nearly three-year conflict.
‘If we don't make a ‘deal,’ and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries,’ Trump said.”
Does the President really believe sanctions would force Putin to the negotiating table?
With Trump poised to pull the plug on additional Ukrainian military aid, the Russian dictator might instead have his sights on Kiev.
And it doesn’t help the situation that there’s growing discord among NATO countries.
Why would Putin not seek to exploit this weakness?
January 22 – Bloomberg (Foster Wong):
“Chinese leader Xi Jinping hailed his country’s ties with Russia during a video call with Vladimir Putin a day after Donald Trump’s inauguration as US president, signaling a resolve to deepen their alliance.
Xi said he’s willing to work with his Russian counterpart to take bilateral relations to new heights, vowing to leverage the resilience and stability of the ties to respond to ‘external uncertainties’…”
January 24 – Bloomberg:
“President Donald Trump said he’d prefer not to have to impose tariffs on China, his latest dovish remark toward the world’s second-biggest economy even as he continues to threaten sweeping action.
‘We have one very big power over China, and that’s tariffs, and they don’t want them,’ the US leader told… Sean Hannity…
‘And I’d rather not have to use it.
But it’s a tremendous power over China.’”
Global markets rallied Friday after President Trump’s “rather not” place tariffs on China comment.
Don’t expect Trump tariff threats to pack much of a punch with Beijing either.
I’ll assume a united Russia/China front resolved to foil Trump bullying.
Will Xi Jinping see an opportunity to further ratchet up pressure on Taiwan?
What about mounting Iran nuke risk?
Our nation faces threatening adversaries in an unstable world.
Burdened by overconfidence, the President’s hubris on the international front is especially unsettling.
Unfortunately, it will require so many things going right – tremendous luck – for this to be the start of some American “golden age.”
January 21 – Reuters (David Brunnstrom, Michael Martina and Daphne Psaledakis):
“During his first term in office, U.S. President Donald Trump applied his particular brand of diplomacy with Washington’s adversaries, publicly befriending Russia and North Korea while separately piling pressure on China and Iran.
This time he faces a different kind of challenge: a more united group of U.S. antagonists who have drawn closer following Russia's 2022 invasion of Ukraine.
Trump… has vowed to end Russia’s war in Ukraine, curb Iran’s nuclear program and counter China while building up the U.S. military.”
January 21 – Financial Times (Andy Bounds, Laura Dubois, Ben Hall and Laura Pitel):
“European Commission president Ursula von der Leyen has warned that the world economy has ‘started fracturing along new lines’ after Donald Trump threatened sweeping tariffs on the bloc…
Von der Leyen said it was in ‘no one’s interest to break the bonds in the global economy’…
She cautioned against a ‘race to the bottom’ on global trade…
Germany’s Green vice-chancellor Robert Habeck warned that tariffs would push up inflation and promote geopolitical divisions, saying he woke up on Tuesday with a ‘queasy feeling in the pit of my stomach’…
He urged Europe not to ‘let ourselves be pushed around’ by the US."
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