Tuesday, June 3, 2025
This was the question Paul Krugman asked yesterday. I’ve always liked Paul because he’s a serious fact based economist. That’s why he won a Nobel prize in economics. What he says is spot on. Yesterday, he asked the above question and what he meant was, “are we serious about being a country?” because our leaders sure aren’t acting like it. What did he mean? Where’s the evidence? Hum?
As Paul usually does he presents evidence. Data to support his claim. Weird, I know.
Okay so where to begin? Start with the dollar. Paul pointed out that when interest rates on U.S. Treasuries go up, typically, so does the value of the dollar. This indicates faith in the idea that the U.S. will cover its debts. That it won’t default. However, in the most recent data this is not what is happening. Treasury rates have gone up and the value of the dollar has gone down. This indicates a lack of faith in the U.S. dollar.
He points to Mexico. They had a similar crisis where interest rates went up in that country and the peso went down. This indicates a lack of faith in the government to act responsibly, something we associate with third world countries. But now that lack of faith has come to our shores.
Why might there be this lack of faith? The U.S. has never defaulted and Paul points out that we have the money to cover our debts. But, he asks, do we have the political will to do so? And do we have the competency? He points out that Trump enacted his tariffs on “Liberation Day.” It was obvious that there was no plan. Why, for example, would you declare a huge tariff on China without stockpiling the rare earth minerals they provide? Why also did the Liberation Day plan slap tariffs on islands that had no residents, only penguins? The economic markets reacted as the administration had been told they would – by tanking.
So the administration backed off those tariffs and enacted new ones, all with the same lack of planning as before. The China tariff policy was the work of Peter Navarro. He’s been advocating putting tariffs on China for years. Peter is not an economist, and I dare say, not very smart. In his books on the subject he quotes what he says is an economist and expert on tariffing China, turns out it’s a person that doesn’t exist. The name of the fictitious person is none other than Peter Navarro but with the last name being a rearrangement the letters of his last name – Ron Vara.
The one thing that Trump seemed to actually contribute to this reckless and stupid stuff was to make sure Russia was not tariffed. There’s a lot we still don’t know about Trump and Russia. This goes back to his first campaign where a server in Trump Tower – NYC was directly connected to a Russian server. Which raises the question now, as it did then, “Who is Trump working for?”
Then there is the budget bill. It will give huge tax breaks to the very wealthy while destroying the social safety net for everyone else, and it will explode the deficit. Paul asks again, “Does this look like a responsible government?”
And then there’s Elon Musk and his drug use. His behavior has been hugely harmful to the functioning of this government and has already resulted in hundreds of thousands of deaths around the world, For what? Well, we can speculate, but Krugman’s assessment is that he’s surprised more capital hasn’t left our shores. He thinks that people can’t believe how mush our country has changed economically. He thinks that those folks are clinging to the belief that an adult will enter the room. They are in for a rude shock.
