The FOMC released its latest monetary policy statement.  As was expected, the federal funds rate did not change and will stay in a range of 4.25% and 4.5%.

The sentence that is getting the most attention in the statement is the one that implies we are headed for stagflation – higher prices and reduced economic growth.

The sentence reads: “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

It wasn’t that long ago that Jerome Powell said that the Fed didn’t foresee stagflation as a problem, and he said that they didn’t really have a plan to deal with it.

Meanwhile, the Implementation Note states that the Fed will continue to reduce its balance sheet by $40 billion per month – $5 billion in Treasury securities and $35 billion in mortgage-backed securities.

It is still a complicated situation with a trend of lowering rates (temporarily on pause) and slight monetary deflation.

Powell vs. Trump

The fact that Powell and company aren’t lowering rates this time around and are continuing to reduce the balance sheet will only exacerbate the war of words between Powell and Trump.  Of course, Powell will be far more polite with his words.

Trump will blame a bad economy on Powell for not being ahead of the curve and lowering rates fast enough. Powell will blame Trump for imposing higher tariffs and making price inflation more persistent.

In a sense, they are both right, and they are both wrong.

Trump is right that rate cuts would boost the economy in the short run.  But it would just make the long-term pain that much worse.  It would be another kicking of the can down the road.

Powell is right that Trump’s tariffs will make some prices higher.  At the same time, it is the Fed that causes prices to go up virtually all the time.  Price inflation was a massive problem in 2022, and that didn’t have much, if anything, to do with tariffs.

We are in this bad position because of big spending politicians like Trump and central bankers like Powell who accommodate the deficit spending by creating money out of thin air.

They are both to blame, along with a lot of other people.  Trump is more to blame from his first term at this point (remember 2020?), but it’s not like he is getting spending under control now either.

1970s Stagflation Again?

It is impossible to predict the future, but I don’t think we are going to return to a version of the 1970s in the near term.

The Fed’s monetary policy at this point is much tighter than it was in the 1970s in general.  That’s not to say that the Fed can’t and won’t start ramping up the digital printing press again.

We are coming off of an inverted yield curve for almost two years (2023 and much of 2024).  The Fed is still deflating its balance sheet in the face of this.  This has recession written all over it.

But I don’t see the high price inflation like what happened in the 1970s.  It has come down since reaching a high of just over 9% in 2022.  I know there are arguments that it is understated, but I still don’t think it is anywhere near what it was in the 1970s when it was in the double digits.

With a recession, price inflation is likely to come down more.  Of course, this relief for the American consumer might be negated by the tariffs.  Still, when times get bad, expect demand for a lot of consumer products to go down.  Even with necessities like food, people will find cheaper alternatives.

If the Fed doesn’t go crazy with its money creation – and I know that is a big if – then expect price inflation to go down.  It doesn’t mean that prices will go down, but they should stop going higher as fast.

A recession is looking highly likely.  Powell is blaming Trump’s tariffs.  He will say that he wanted to lower rates sooner, but he just couldn’t do it because of the price pressures from the tariffs.

The next question is how the Fed will react once the recession hits.  It may depend on the severity and whether any major financial institutions are on the brink of failure.

Expect major economic trouble ahead, but not necessarily stagflation.  Maybe that will be later down the line.

There are some terms that I simply dislike because they conflate different things.  Globalism is one such term.

There are certainly others.  I have never liked to use the term austerity unless I give my own meaning behind it.  In economics, austerity is often used as a term to describe balanced budgets or at least less deficit spending.

The problem is that some people refer to austerity when they are talking about government spending cuts. Others refer to austerity when they are talking about the government raising more revenue (i.e., higher rates of taxation).

From a libertarian standpoint, these two things could not be more different.  Libertarians want lower taxes and lower spending.  If someone uses the term austerity and you don’t know if they mean spending cuts or tax increases, then they probably shouldn’t be using the term.

Free Trade or One-World Government?

I see people use the term globalism, and it isn’t always clear what they mean by it.  It is usually said in a negative context, but the definition can vary quite a bit depending on how it’s being used.

I have heard people criticize globalism coming out of Klaus Schwab and the World Economic Forum (WEF). The WEF wants to impose some kind of a one-world government on the people of the planet.  At the very least, they see themselves as the elite who should control what the masses do.  Libertarians would obviously oppose this type of globalism.

Now, with tariffs in the news, some people refer to globalism and simply mean free trade.  They think we have to defeat globalism by restricting trade between countries, and tariffs are one way to do that.  They see it as harmful that people are engaging in so much buying and selling with people from other countries.

For most libertarians, they see nothing wrong with global trade if it is done on a voluntary basis.  This makes us wealthier by increasing the division of labor.

So, when someone speaks against globalism, we have to ask: Which kind?  One-world government or free trade?  I am firmly against one and firmly in favor of the other.  Please don’t conflate the two.

If somebody writes or speaks about globalism, they better make it crystal clear what they are talking about.  Otherwise, I will doubt their communication skills, and I am not going to give credence to what is being said.

For me, it is generally better to avoid the term.

When Trump announced massive tariff increases on his so-called Liberation Day, there was instant feedback in the form of a big downturn in stocks.  It was likely this feedback from investors that gave us some relief after that.

The good news about the tariffs is that most Americans are already feeling the pinch (to put it mildly) of higher prices.  When you enact a policy that instantly causes 401k plans to drop by 10% or more, it tends to make those people against that policy.

If we get significantly higher prices down the road after enacting this policy (if that’s what you want to call it), then the average American who isn’t a diehard Trump supporter is probably going to blame the tariff policy.

Even though Trump tends to thrive on conflict, he is also somewhat of a populist.  If the majority of Americans are blaming his tariffs for their worsening economic situation, it is likely that Trump will have to reverse course.  He will probably do it in Trumpian fashion where he somehow declares victory even though it was just a stupid and unnecessary move.

When there were vaccine mandates in 2021 and 2022, it wasn’t clear if the people not willing to take the vaccines could win that battle because it was a minority of people.  There was a lot more concern there.

If you are against the higher tariffs and worry that they will worsen your standard of living, you have good reason.  But the good news is that you will have a majority of people on your side because most Americans are tired of paying continually higher prices.  Plus, those who have investments don’t like to see their net worth go down along with the higher cost of living.

The Chinese Call

While Trump put a pause on the much higher tariffs for most countries, the Chinese officials decided to call Trump’s bluff.  Sure, the Chinese are also temporarily hurting their own people by enacting their own import taxes, but they have likely just had enough of the bullying by the American government.

Whenever there is a problem in America, it has become fashionable to blame either Russia or China.

It’s interesting that Trump (and the Biden blob before him) insist on sanctioning Russia for the war in Ukraine.  This means that they won’t allow products to be sold to Russia.  In other words, it is like Russia putting a massive tariff on American goods.  Yet, Trump and company see this as a punishment for Russia.

If it is a punishment for Russia, why does Trump see it as a good thing to impose sanctions on his own country?

With the extraordinarily high tariffs on China, it is essentially like have sanctions at this point by both countries, with certain exceptions.

What About Shortages?

While there has been much focus on the stock market and what will happen with the tariffs, there hasn’t been a lot of discussion about the possibility of shortages, at least in the corporate media.

China is a major trading partner of the United States, or at least it was.  Trump keeps talking about making a deal now, but Chinese officials are playing hardball.  They are basically saying that Trump has to lower the tariffs before they will come to the table and talk.

In the meantime, this is an absolute nightmare for businesses, but especially businesses that rely on imports from China.  Trade has essentially been halted with over a billion people.

There is a decent chance that we could see major supply shortages.

Think about being a business that sells a product made in China.  Let’s say you sell book shelves that are made in China.  With the massive tariffs, you would have to more than double your price to consumers just to stay profitable.  It doesn’t make sense to import book shelves from China with these massive taxes.

Ok, you may say, but an American company can step in and make book shelves.  Well, first of all, it takes time to make this decision and actually implement the process.

But why would a company even start producing book shelves if they couldn’t compete before?  For all they know, Trump might make a deal with China next week and bring tariffs back to where they were three months ago.  Then the Chinese would ramp up production again and start shipping out book shelves.  All of a sudden, the American company that decided to start making book shelves is no longer profitable again with this product.

Think about this same example with thousands of products including toys, furniture, clothing, home décor, cleaning products, and healthcare equipment.  It is hard to imagine that there won’t be major disruptions at the very least.

Remember Toilet Paper

Remember 2020 when panic struck (because of the fearmongers in government and the establishment media).  Just as the lockdowns came, we also started to get shortages.  There were some shortages with meats and vegetables.  Of course, the big one that most people remember is toilet paper.

There was a run on toilet paper, and it still isn’t really clear why.  Once word got out that there was a shortage of toilet paper, it caused a vicious cycle of higher demand.  It was common to go to the store and see empty shelves where the toilet paper is sold.  If a new shipment came in, it was usually gone within hours, especially with word getting out on social media.

If we have major shortages in the near future, it is hard to say what it will be.  It would seem probable that it is something that previously came from China, but even with that we aren’t certain.  Some of the products listed above are common things imported from China, but we really don’t know where it will hit hardest.  The best you can do is prepare with extra things that you know you will need.

The Amazing Government Interference and the Amazing Marketplace

I have long said that it is amazing how much poorer we are because of government interference.  But it is also amazing how well the marketplace responds and is still able to thrive in spite of the interference.  We still somehow get advancing technology even with all of the taxes and regulations.

That is the good news and bad news here.

The tariffs are going to make us a lot poorer than we otherwise would have been.  And I say that with the opinion that we were already facing a recession with or without tariffs.  The higher prices are a real thing that make our lives harder.  If we have significant supply shortages, it will make life even harder.

The good news is that entrepreneurs are very resilient with all of the difficulties thrown at them.  If these tariffs last a while and we see supply shortages, the market will eventually respond.  At some price, businesses will provide what is in high demand, or at least provide possible substitutes.

Americans will mostly survive these higher tariffs, but it will make life more difficult that it needed to be.  In the meantime, it might not be a bad idea to take an extra trip to the store and stock up on some essential goods.

And if you were planning to buy something in the somewhat near future, you might want to consider getting it now before prices go higher.

Immigration is the new terrorism. It is the new excuse that the government uses to take away our liberty.  The powers-that-be still use terrorism as an excuse, but immigration seems to be the new big issue to create fear and get people to willingly trade liberty for security (false security).

In the wake of September 11, 2001, terrorism was the go-to excuse for almost everything.  As Bush said, you were either with us or with the terrorists.  Terrorism was used as an excuse to execute at least two wars (Afghanistan and Iraq), spy on Americans more broadly, give us the so-called Patriot Act, give us the TSA, torture and detain people with no due process, and give us a host of other infringements on our civil liberties.

Since that excuse has worn out its welcome, now they have turned to immigration.  Some of the same people who will now admit that the Bush administration used terrorism to take away our liberties will accept the Trump administration taking away our liberties in the name of fighting immigration.  And apparently that doesn’t just mean illegal immigration.

Immigration and Libertarianism

Immigration has long been an uncomfortable subject for me.  I have shared some of my thoughts before.  It is difficult for a libertarian to take a stand on immigration when we live in such a statist world.  I also pointed out many years ago that conservatives won’t stop immigration because they favor the welfare state too much.

We live in a warfare and welfare state.  This makes it tough to take a position of having open borders or something similar.  Allowing unchecked open immigration may lead to some bad characters entering in order to seek revenge for U.S. foreign policy.  At the very least, it will lead to financial ruin by handing out massive welfare to new immigrants.

If we didn’t live in such a statist world, then it might be possible to have something closer to an open borders position.  I would argue that there should still be some kind of sponsorship to take responsibility of the people coming here.  That could be a family member, an employer, or just someone doing someone else a favor.

Anyway, I have never really held it against other libertarians who take different positions on the immigration issue.  As long as they are seeking to dramatically reduce the welfare and warfare state, then this will help us with immigration because the people coming here will be coming here for the right reasons.

Trump and Immigration

I have never felt comfortable with Trump’s rhetoric about immigration.  I can sympathize with some of his supporters.  It is ridiculous what the Biden administration did.  It wasn’t just that Biden and company didn’t stop illegal immigration – they actively promoted and facilitated it.

I know conservatives like to focus on particular incidents of illegal immigrants committing horrific crimes.  This is in a country of 340 million people.  You can always find examples of something.

This isn’t to excuse those incidents.  They matter a great deal to the people who were directly impacted.  The point is that these incidents are used as an insinuation that violent crime is really bad because of illegal immigration.  We don’t really know that to be the case.  Most violent crime in America is happening because of Americans.

Trump campaigned on deporting illegal immigrants.  I wasn’t really outraged by it at the time.  I also didn’t really think it was possible to deport a large number of people without significantly infringing on every American’s civil liberties.

Now that Trump has been in office for about 100 days in his second term, we have seen how bad it is to give power to people.  You may have your idea of deporting the right people who crossed into this country illegally. The problem is that Trump and company have their own ideas on who to deport and how to do it.

Trump has already been going after the low-hanging fruit of people (particularly students) who are here legally.  Trump and company are arresting and attempting to deport legal immigrants (including at least one green card holder) for things they say and write in support of the people in Gaza.  In Trump world, apparently you aren’t allowed to say anything critical about the Israeli government.

Before we were even three months in to the new Trump term, he was already trying to destroy free speech. And they are using immigration as the excuse.  Apparently, if you are an immigrant and here legally, you aren’t allowed to have a political opinion contrary to the establishment narrative or you risk being arrested with no charges and being held captive.

This is incredibly disturbing for anyone who cares about liberty.

And if that wasn’t enough, the Trump team is talking about making a criminal out of anyone who criticizes Israel.  On this, we’re back to the Bush play of saying you are with the terrorists.

And if that wasn’t enough, now Trump is saying that he would like to have the option of deporting the really bad people who are American citizens.  You know, it would just apply to people who hit 85-year-old women over the head with a baseball bat – that is, until they just start deporting Americans for criticizing Israel.

Dictator Syndrome

Harry Browne once wrote about dictator syndrome.  You can have what you think is the best idea for a new government program.  You could think that your plan would actually be efficient and help the people that are supposed to be helped.  But one big problem is that you aren’t the dictator.  Your plan will never come out how you thought it should.  It would go through Congress (or executive order) and all kinds of changes would be made to satisfy the lobbyists.  And even then, it would be interpreted differently in the future from how it may have been intended.

You can think that it is a wonderful idea to deport millions of illegal immigrants.  But how is that going to work?  The government can’t even get the traffic lights to time correctly.  They can’t even figure out if they are sending checks to dead people.  Even the government bureaucrats with the best of intentions usually end up messing up.

If you want to give the government the power to deport millions of people, then you are going to have a lot of mistakes.  Does anyone get due process?  What if the government just starts accidentally (or not) deporting Americans?

And how do you round up millions of people?  It seems the only way to do that is to make us a total police state where you have to constantly show your papers to prove that you belong here.  I don’t see any other way.

When you give the government the power to do good, you are also giving them the power to do bad.  Just think about this if you are excited about Trump deporting millions of illegal immigrants.  You are giving him the power to do a lot of harm.

Even if Trump were good and really smart (he isn’t), you are still giving power to the next person who steps in that office.  If Trump is deporting legal immigrants for criticizing Israel, then the next president might deport people who refuse to get vaccinated or people who have made any comments that are deemed racist.

Do you get the point?

We talk about the slippery slope.  But Trump’s plan to deport illegal immigrants has already morphed into Trump arresting people for writing opinion articles and talk of deporting American citizens.  It barely took any time at all just to reach this point.  If we don’t resist these things now, then who knows what will be next?  It seems like the next logical step is to deport anyone who criticizes Israel, including Americans.  Maybe it will be deporting anyone who shares a political opinion outside of the establishment narrative.

Conclusion

I am not in favor of open borders, especially in our statist system, but I am also not in favor of the federal government doing anything about it.  I have not become any more pro-immigration than I already was, but I have become more anti anti-immigration than I was just a few months ago.

Trump has done a great job of showing why you can’t give power to politicians and bureaucrats.  They will ultimately abuse it.  In this case, it barely took any time at all.

The yield curve can be a major economic indicator.  An inverted yield curve happens when short-term rates are higher than long-term rates.  This has been a somewhat reliable predictor of recession.

An inverted yield curve doesn’t make a lot of sense.  It means someone is willing to lend their money for a longer timeframe and get a lower rate of return.

If you can buy a 3-month Treasury bill at the same rate as a 30-year bond, why would anyone choose to buy the 30-year bond?  The only reason is that you expect rates might go down in the future and you want to lock in the return.

Of course, it is rare for an investor to actually buy a 30-year bond and hold it for the duration.  Most investors buy a bond fund.  Even if the fund includes longer-term bonds, the fund itself can get traded frequently.

It’s not exactly clear why an inverted yield curve is a predictor of recession.  Notice that I didn’t say it is a cause of recession.  We shouldn’t confuse cause and effect with correlation.

An inverted yield curve often means that short-term rates are higher because of a tight monetary policy from the central bank.  It can mean that entrepreneurs are taking out short-term loans (driving rates higher) in order to finish projects.  It can mean that investors are locking in long-term rates because they expect trouble ahead.  This obviously wouldn’t include trouble with price inflation, otherwise locking in your money for a long time with a fixed rate doesn’t make much sense.

2020

There was actually an inverted yield curve preceding 2020.  We got a recession in 2020, sort of, but it was short-lived.  We had government lockdowns, so it is hard to distinguish the lockdowns from any genuine recession.  The lockdowns themselves were worse than any regular recession.

Incidentally, the lockdowns did have one positive aspect economically.  People actually saved money.  Some people did it because they were scared.  Some people naturally saved money just because they couldn’t do things like go out to eat or go to a movie.

The Fed had already started to loosen its monetary policy in late 2019 and early 2020 because of the economic conditions.  But in March 2020, the base money supply absolutely exploded.  The Fed’s balance sheet went from just over $4 trillion in early 2020 to almost $9 trillion in 2022.  The initial explosion in March 2020 was nearly $3 trillion in the matter of 3 months.

This explosion in new money made whatever recession we had in 2020 very short.  It’s important to realize that this situation is very uncommon.  The virus and the lockdowns were an excuse for the Fed to go wild.

The Fed could technically do the same thing now in an attempt to avoid a recession or make it a really short one.  They could double the supply of money over the coming months.  But this is not likely to happen without a really bad economic downturn happening first.  Otherwise, the Fed risks destroying the dollar (more than it already has).

2020 was an anomaly.  We shouldn’t look at this and see that there was no bad recession after an inverted yield curve.

2023 and 2024 to Today

The yield curve was mostly inverted for all of 2023 and most of 2024.  This is a long time for it to be inverted.  This was coming off really bad price inflation that the Fed had to deal with.  Of course, it was the Fed that caused the price inflation because of its prior loose money, especially in 2020 as discussed above.

So, with the Fed hiking short-term rates in 2022 and investors not seemingly worried about sustained long-term price inflation, we got an inverted yield curve.

But the recession generally happens after an inverted yield curve goes back to normal.  There is a delay.  We are now in the phase of a normalizing yield curve.  It is still flat by usual standards.  The 30-year yield is only about 0.4% (40 basis points) higher than the 3-month yield.  The 10-year yield and the 3-month yield are almost the same.

All it will take is one more rate cut from the Fed to drive down short-term rates below the longer-term rates.

In other words, the recession could happen soon.

Trump’s tariffs have complicated things in a sense.  Trump will get blamed because of his tariffs.  If you want to blame the coming recession on Trump, you are better off looking back to 2020 when there were lockdowns and unprecedented spending out of Washington DC.  Someone had to fund the deficit, and that someone was the Federal Reserve.

Trump’s tariffs certainly make the economic conditions worse.  They could be the trigger for bringing on the recession faster because of the uncertainty they have caused for businesses.  But I believe we are getting a recession with or without new tariffs.

If History is Any Guide

The inverted yield curve is still a predictor of a recession.  There is no reason to think that “this time is different”.

You don’t even have to understand exactly how it works and why it predicts recessions.  Just know that it does.  And it doesn’t matter who is president or who is running the Federal Reserve.  The recession is already baked into the cake.

If the time duration and the intensity of the inverted yield curve is proportionate to the severity of the recession, then we are in for a doozy.  It was inverted for almost 2 years.

Meanwhile, the Fed is still engaging in a policy of slight monetary deflation (in spite of some previous rate cuts).  We have a recession coming and the Fed is actually still deflating.

Trump cannot turn this around simply by proclaiming that he has negotiated deals to reduce tariffs.  It just causes more volatility in the stock market.

Expect the volatility to continue, but expect stocks to fall a lot farther from here.

The rhetoric has gotten hot between two people who are perhaps the most powerful individuals in the world in terms of impacting the economy.

When Donald Trump started his roller coaster tariff ride, Jerome Powell spoke of his concerns with tariffs contributing to inflation.  Powell was correct in a sense that tariffs will likely make some consumer products more expensive than they otherwise would.

At the same time, it is rather rich for the chair of the Federal Reserve to be placing blame on anyone else for inflation.  The Fed is inflation.  If you go by the original definition of inflation (increasing the supply of money and credit), then it is only the Fed and the banks that are supported by the Fed that can cause inflation.

Even if we use the term price inflation, it is still the Fed that largely contributes to constantly rising prices.  Sure, we can also blame taxes and regulations for higher prices.  But it is the Fed that gives us chronic price inflation where prices go up virtually every year.

It was obvious that Jerome Powell was trying to use the Trump tariffs as an excuse for continued inflation problems.  The problem for Powell is that we have already had really bad inflation problems.  That is likely one of the reasons that Trump won the presidency back.

Even though Powell was his mild-mannered self in the way he said it, he was trying to shift blame to Trump for any future economic problems while Powell is still on the job.

Trump Hits Back Harder

Meanwhile, Trump in his usual blustering self has fired back at Powell.  He actually called him a loser for not lowering interest rates.  Trump is trying to pass the blame to Powell for the economic fallout from his tariffs.

https://truthsocial.com/@realDonaldTrump/posts/114376239725335883

It is likely we are headed for recession with or without new tariffs.  That is largely because of previous Fed monetary policy being too loose.  Still, Congress and the president (including past presidents) also share some blame because of the massive spending and deficits.

Trump is a low interest rate guy.  He got lucky that the worst of the price inflation happened on Biden’s watch. Powell and the Fed were essentially forced to tighten in order to fight price inflation.

Most Americans would say that they are still suffering greatly with inflation.  Even though we hear that inflation is going down, it is just the rate of price inflation that is going down.  Prices are still going up on top of the already high prices.

Trump can say he wants lower rates, but what will happen if price inflation starts to accelerate again?  The Fed never even got it back down to their supposed 2% target.

Trump messed up with his erratic tariffs.  We almost instantly got a major downturn in stocks.  Even if Trump’s tariffs are not to blame for the coming recession, Trump will get the blame.  He idiotically instituted these tariffs, and he continues to be all over the place with them.  It makes it incredibly difficult to do business not knowing what your prices are going to be from one day to the next.

It is not surprising that Trump is trying to blame Powell.  Trump didn’t need to trigger this downturn in stocks.  It may have happened anyway, but it is especially a bad look for him.

They Are Both Right, in a Sense

They are both right to place blame on each other because they are both at fault to some degree.  Trump is actually partially at fault for what happened in 2020 when he approved trillions of dollars in spending to make up for the lockdowns that he endorsed.  This was done in tandem with the massive monetary expansion by the Fed.

It is also interesting that Trump is attacking Powell this much and calling him a loser.  Trump was the one who appointed Powell to his position in his first term.  If Trump thinks Powell is a loser, then what does that say about Trump’s ability to recognize talent?

It is funny to hear the establishment financial media say that Trump is interfering with Fed independence.  The Fed isn’t independent and it shouldn’t be independent.  If it didn’t rely on a government-granted monopoly to create money and control interest rates, then maybe it should be independent, but that’s not the case.

Powell is right to blame Trump’s tariffs for turmoil in the market.  Of course, we wouldn’t have this giant bubble if it weren’t for the Fed.

While Powell is chairman of the Federal Reserve, he is not going to do anything out of the ordinary to rock the markets.  He is generally going to go along with the establishment consensus.  He probably won’t not lower interest rates just to get revenge on Trump.  If Powell wants to be political and get at Trump, he is probably better off lowering interest rates.  The whole thing is going to blow up anyway, and then it will just make Trump look worse.

Powell can say, “Hey, I did my part and lowered interest rates to try to stimulate the economy.  I can’t help it if the president had a reckless tariff policy that crashed the market.”

As the economy worsens, things aren’t going to settle down.  Powell may end up stepping aside.  He doesn’t need the headache anyway.  Then Trump can get his new bad pick and he’ll have nobody else to blame but himself.  Of course, he’ll still find somebody else to blame.

We were headed for recession anyway.  It was a really bad political move for Trump to mess with these tariffs the way he did.  It will only serve to make things worse and make him look worse.

The famous fable titled The Boy Who Cried Wolf is about a boy who cries for help because he falsely claims there is a threatening wolf.  The villagers come running to his cries for help, but there is no wolf.  The boy does this same thing several times with the same result.

There does come a time when a wolf finally does appear, but when the boy cries for help, the villagers assume that it is another false alarm because the boy had deceived them several times in the past.  In the original tale, the wolf eats the sheep.  In a later version, the wolf also eats the boy.

When someone says not to cry wolf, it means that you shouldn’t mislead people or tell fake stories.  That is often used as the main lesson of the fable.

But maybe it should be a lesson for the villagers too.  Just because someone has been telling fake stories all along, don’t automatically assume that every story is a lie.

The Trump Wolf

There have been a lot of Trump haters going back to 2015 when he first announced his run for president on the Republican ticket.  It is mostly political leftists, but not exclusively.  But it wasn’t just a hate for Trump the way someone might hate all politicians or all politicians from a particular party.  It was an obsessive hatred.  It was given a name: TDS, or Trump Derangement Syndrome.

Being critical of Trump didn’t mean you suffered from TDS.  It had to be an obsessive hatred for Trump to be TDS.  It has almost been a disease of hypocrisy.  If Trump says it, it must be bad.  If someone else said it, it would be fine, or at least not that bad.

The problem is that many Trump haters, in their quest to destroy Trump, felt the need to make up fake stories about him.  They said he colluded with Russia to steal the 2016 election.  They said he referred to white supremacists as very fine people.  They said he told people to drink bleach.  They said he held a Nazi rally at Madison Square Garden.  The list goes on and on.  Sometimes it was just a matter of taking Trump out of context.

The leftists have been crying about Trump for about a decade now.  It’s not that they had no valid criticisms.  It’s that they felt the need to make things up, embellish stories about him, and often make him out to be something that he’s not.

For some people, including some people who don’t care much for Trump, it has destroyed the credibility of the Trump haters who make up fake stories.  And it should destroy their credibility.  The problem is that we shouldn’t necessarily always believe the opposite of what they say.

The Wolf Has Arrived

In the fable, the wolf arrives, but nobody believes the boy because he has lost credibility.  People who tend to be more conservative or libertarian, or considered to be more on the right side of the political spectrum, will dismiss what the leftists are saying about Trump.  The problem is that, this time, they might be right.

Depending on your perspective, Trump started out well in his second term.  He pardoned or freed all of the J6 prisoners.  He pardoned Ross Ulbricht.  He had some seemingly good nominations for important cabinet posts such as Robert Kennedy Jr. and Tulsi Gabbard.  He had Elon Musk and his DOGE people uncovering waste and, more importantly, criminal spending.  Despite some bad nominations, it was looking pretty good for the first month of the new Trump term for those who seek greater liberty.

Then something happened, and the wolf has arrived.  It is more ferocious than some of us ever could have imagined.  It has all gone downhill so fast.

The Trump team has been bombing Yemen.  They have continued to fund the Israeli destruction of Gaza and the war in Ukraine.  They are close to starting a war with Iran.  They have been deporting not just illegal immigrants, but also trying to deport people who are here legally for the “crime” of speaking out against the Israeli state.  Of course, we have also gotten the tariff fiasco along with the first $1 trillion military budget.

It is a complete disaster.  It is a disaster for liberty.  There was potential for Trump to do some good or at least to do less damage than his predecessors.  That is all out the window now.  It is actually quite shocking how fast everything went downhill all at once.  If it had just been the tariff fiasco without all of the other bad stuff, there would be reason for optimism.  But we are getting almost everything bad coming out of the Trump team now with the occasional exception.

The left is screaming about this stuff.  It isn’t so much the leftist corporate media screaming about it, but there is a lot of criticism all over the place.  Some of the criticism is still wrong or not explained in the right way.  But some of it is right on target, too.

The problem is that the leftists have been crying wolf.  The Trump supporters are blocking them out.  When a leftist complains that Trump is shutting down free speech, the Trump supporter just shrugs and thinks it is another TDS sufferer who is lying.

These Threats Are Real

Trump was highly inconsistent and sometimes sounded like a war hawk, but generally his campaign message was one of more peace.  The worst thing he is doing right now is promoting more war.  He is helping to continue death in the Middle East and Ukraine while ramping up the death in Yemen.  He is on the verge of a total disaster with Iran.

The massive infringements on free speech and civil liberties is the next worst thing happening right now.  They are using immigration as the new terrorism, while also continuing to use terrorism as an excuse to infringe on our liberties.

Trump campaigned on fighting illegal immigration.  Apparently, this might just mean arresting and deporting anyone who has a scary tattoo and could potentially be a bad person.

In a matter of weeks, the Trump team moved on to arresting legal immigrants, including a “permanent” legal resident, for objecting to the Israeli state killing people in Gaza.  So, according to Team Trump, you have no rights if you are a legal immigrant.  And the hardcore Trump supporters are actually trying to defend this.

Question for Trump supporters:  How would you have felt if Joe Biden and company had arrested and deported permanent legal U.S. residents for questioning the COVID vaccines?

Question for Trump supporters:  How would you have felt if Joe Biden and company had arrested and deported permanent legal U.S. residents because they were Christian homeschoolers?

Of course, the Trump defenders say that these people were supporting terrorism, supporting Hamas, etc.  But that isn’t even true.  And why weren’t they charged with an actual crime?

The Trump defenders say that these are immigrants and that they should just keep their heads down and not say anything because they are supposed to be guests in our country.  Is that really the way you want things to work?  You don’t think legal immigrants should have any rights or any entitlement to a political opinion?

Watch Out American Citizens

Anyway, Trump and his team are already moving on from just arresting and deporting immigrants (legal or otherwise).  They are already targeting American citizens.

Trump said he is open to deporting people to El Salvador for the really bad people, like for people who hit old women over the head with a baseball bat.  Apparently, Trump doesn’t understand due process, or he just doesn’t care.

It always starts with the really bad people.  “Well, they don’t need due process because they are really bad people and everybody knows it.”

It’s like when they censor people who say really bad or controversial things.  They don’t start with the mildly controversial things.  They have to get people acclimated to the new normal.

Now we have Sebastian Gorka, Trump’s counterterrorism czar, saying that supporters of a man who is reported to have been mistakenly deported are on the side of the terrorists.  And if you are supporting terrorists, then you are subject to federal crimes.

So, this guy Gorka is saying that people speaking out in this case could be prosecuted for speaking out.  This could include many millions of American citizens who have been critical of the Trump team’s handling of this case.  Gorka is the one who is a criminal and a traitor to America.  He is directly threatening to imprison people merely for speaking.

First they came for the illegal immigrants.  Then they came for the legal immigrants.  Then they came for the citizens who were trying to speak against it.  At some point, there is nobody left to speak against things, or everyone left is too afraid to do so.

Conclusion

This is an extremely dangerous time.  The leftists have lost credibility with the other side, and rightly so.  But it doesn’t mean that many of the warnings today about Trump are wrong.

In the fable, the wolf eventually does arrive.

Trump is doing his absolute best right now to prove all of his critics correct.  Remember all of those warnings about Trump trying to be a dictator.  Trump is trying to validate all of the TDS sufferers who lied about him.

It is so vitally important that people who supported Trump, or at least those who didn’t make up stories about him, speak out against what he and his team are doing now.

The Trump team is a serious threat to free speech and due process, two critical foundations of American liberty.  We must stop these infringements now before they get worse.  This means that some Trump supporters or former Trump supporters need to join in recognizing that we are on a path that destroys liberty.

Trump has been playing a game of chicken with China.  Unfortunately, it’s being done with the American people and the Chinese people.  Trump enacts higher tariffs on imports, which disproportionately hurts the American people and makes things more expensive in the United States.  The Chinese government retaliates by enacting its own higher tariffs, which disproportionately hurt the people in China.

It’s a rather sick game when it impacts the living standards of hundreds of millions of people.

Trump got into a game that he didn’t fully understand.  He can continue to talk tough about making other countries come to the table and getting fair trade, but he is in over his head.  He already had to backtrack significantly because of the beating in the stock market.  And then he relented and exempted certain electronics, including Apple iPhones, from the higher tariffs.

I guess higher prices of smartphones wasn’t acceptable, but he figures you won’t notice the difference as much if you are paying more for smaller household goods.

The obnoxiously high tariffs that Trump has put in place on Chinese imports will certainly hurt some Chinese manufacturers who make products that are sold in the United States.  Still, the pain is far more widespread in the United States, as all Americans are consumers in some sense.

Trade Deficits

What is with this obsession over trade deficits?  It is amazing how much people spout off about trade deficits without understanding what they even are.  This seems to include some Trump advisors, and maybe Trump himself.

There is no imbalance of trade.  It is trade.  As long as it is done voluntarily, both parties expect to be better off.

With so-called trade deficits, everybody has a trade deficit with others.  I have a trade deficit with the grocery store.  I get food and other items, and the grocery store gets my money.  The grocery store doesn’t feel obligated to use the same money and buy something off of me.

If the Chinese sell some furniture to Americans and then use the money to buy U.S. stocks, who cares?  I guess some people care a great deal, because that is what a trade deficit is.

Or maybe the Chinese buy products from Canadians and then the Canadians use that money to buy American products.  In this case, our trade deficit with China would be offset with the Canadian trade deficit.

It is all a collectivist notion.

If anyone should complain about an imbalance in trade, it is probably Russia.  They used some American dollars to buy U.S. Treasury debt, which the U.S. government essentially defaulted on a few years ago.

The Big Player – Debt

There is an elephant in the room that Trump doesn’t seem to be talking about.  Xi, the president of China, does not seem to be talking about it too, at least not openly.

The Chinese government/ central bank owns almost $800 billion in U.S. Treasury securities (i.e., U.S. government debt).  Just going back to early 2022, China had over $1 trillion.  Looking at the sanctions put on Russia, it is no surprise that China has been backing away from owning so much U.S. debt.

With the tariff trade war taking place now, we have to believe that Chinese officials are privately talking about getting rid of U.S. debt.  I don’t think they are going to go nuclear (financially speaking) and sell off mass amounts of U.S. debt.  But they can just let what they have mature and not roll it over.

If Trump thinks the trade deficit is such a problem, then stop selling U.S. debt to foreigners.  How’s that for an idea?  Maybe Trump will get his wish of reducing the trade deficit with China by encouraging China not to buy U.S. financial products, including U.S. Treasury bonds.

That means fewer buyers of U.S. Treasuries.  That means the federal government will have to cut spending (there’s no sign of that) or the Fed will have to start buying up debt again (more inflation).  There is also the option of letting Americans buy the debt, but this will likely mean much higher interest rates, which will only lead to even more spending and more debt coming out of Washington.

The Trump Destruction

Trump has no idea what he is doing here.  Elon Musk understands economics much better than Trump, but I don’t think Musk can get through to him here.

Trump really is a bully, which is part of his tariff strategy.  He wants foreign leaders to come and beg him.

Trump has also threatened countries that consider abandoning the dollar and using their own currency or some alternative to the dollar.  Yet, Trump seems to be doing his best to destroy the dollar, or at least destroy its status as the world’s reserve currency.

It is because of these threats and because of these tariffs that countries will be forced to abandon the dollar.  They cannot trust the U.S. government.  And it is exacerbated by what they have seen done to Russia.

If I were a Chinese official, I would not want to be under the thumb of this U.S. president or any U.S. president.  I would be getting out of dollars and moving to alternate currencies or gold.

Trump foolishly thought he held all the cards.  He did not.  It is especially difficult when he attacks virtually every country on the planet with higher tariffs at the same time.  He could have done it to one country and gotten away with it.  The markets have forced him to scale back.

Trump says that Xi wants to make a deal but he just doesn’t know how to go about it.  I think Trump is talking about himself.

We were already going to get a recession with or without new tariffs.  This has made it worse, and it will put most of the blame squarely on Trump when it comes.  The stock market is a more immediate feedback mechanism.

I think Trump is going to want to desperately make a deal with China.  In Trump fashion, he will declare himself victorious.

If nothing is done and these tariffs exceeding 100% remain in effect, we are going to see much higher prices for some consumer goods.  We may see lower prices for some assets, particularly financial assets.  The tariffs will make a recession far worse than it would have been, and I believe it would have been bad enough without the tariffs.

Trump will get blamed for the recession other than from his hardcore supporters.  It is deserved even though the Federal Reserve plays a big role.  He is acting like an economic dictator.  If you govern with threats and constantly changing rules, there are going to be consequences.

Do you know why the Smoot-Hawley Tariff Act of 1930 was named as such?  It’s because it was legislation named after two congressional sponsors.  It was not a good piece of legislation, as it likely contributed to the Great Depression, but at least it was legislation.

Herbert Hoover, as president, had to sign the legislation for it to pass.  He didn’t arbitrarily dictate it to everyone.  At least it gave some notice and predictability to businesses.

All Taxes are Bad

All taxes are evil, but some are definitely more evil than others.  If a society is going to have some form of forced taxation, then it is best for the taxes to be small, proportional, maintain privacy, and minimize the disincentive to produce and build wealth.

Excise taxes tend to be less bad because they minimize on infringing on our privacy, and they minimize disincentivizing productivity.  Some are more fair than others.

If you have a gas tax that pays for the roads, that seems to be a rather fair way to go about it.  Now we have electric cars that don’t use gas, so it isn’t taxing the users as fairly as in the past.

Some people see tariffs as a good form of taxation.  It is a tax on imports.  I hear some Republicans justifying Trump’s tariffs by saying that it would be great if they could replace the income tax.

Guess what?  Trump isn’t getting rid of the income tax.  He can dictate higher tariffs, but he can’t dictate an end to the income tax.  Anyway, he doesn’t want to end the income tax because he needs the money to fund his massive budgets.

It’s not as if Trump is pushing to end the income tax at the same time he is imposing higher tariffs.  In fact, Trump isn’t even pushing for any of his campaign promises to stop taxing Social Security and no taxes on tips.

It’s not even clear if Trump is imposing higher tariffs in order to collect more money for the government.  He sees it as some kind of power trip to order other countries around.

The Excuse Factory

With Trump’s tariffs and a wild stock market, we get to hear the Republican talking points come out trying to justify it.

“He is using it for leverage.”

“He is trying to bring back manufacturing.”

“China is refusing to negotiate.”

“Other countries are manipulating us.”

It is all a bunch of collectivist thinking and bad economics.

Why does China have to negotiate with Trump?  Just because Trump said so?  Why can’t Trump just allow Americans to choose whether or not to voluntarily buy things from China?

For manufacturing, I don’t think most Americans really do want to bring it back.  How many Americans really want to work in a factory or some kind of manufacturing plant?  I don’t.  If there are people in China who want to work in factories and sell us things we want, why wouldn’t we let them?

This whole thing about manipulation and fair trade is a joke.  The Federal Reserve is the biggest currency manipulator in the world.

If you really want to help businesses in America, then start reducing spending, reducing taxes, and cutting all of the red tape.

How Can a Business Plan Properly?

Imagine trying to operate a business in this environment.  The costs of imports are fluctuating constantly as new tariff announcements are made.

Even companies who manufacture products in the U.S. often import materials.  This would include American car companies.

Imagine being the head of a construction company.  A client comes to you and says they want a quote on adding additional space on their building this summer.  In order to do the job, you will need quite a bit of lumber.

The lumber you will need cost $5,000 last week.  Next week it may cost $8,000 because of higher tariffs.  Maybe Trump will announce a reprieve for 90 days and you can get your lumber for $6,000.

If you quote a higher price than you would have before all of these new tariffs, the client might just say no.  If you quote a price assuming lumber will go back down to $5,000 but it ends up being $8,000, then you risk not making much profit on the job.

Now picture this scenario with tens of thousands of businesses and millions of people.  It is complete craziness.  It is impossible to predict or properly plan when your prices can arbitrarily go up or down depending on the mood of the president.

Feedback Mechanism

There is one good thing about this tariff disaster.  There is a fast feedback mechanism in the form of the stock market.  When higher tariffs are announced, stocks tank.  When there are signs that there will be tariff relief, stocks go up.

Trump announced today that he would be suspending much of the tariffs for 90 days while imposing 125% tariffs on China.  If these China tariffs stay in place, prices for many consumer goods are going to go a lot higher.

I told someone that I feel better about these tariffs than I did about the vaccine mandates from Joe Biden and company.  With the tariffs, there is instant feedback, and the majority of Americans don’t want to see their stocks crash and prices increase.  With the vaccine mandates, there were probably only 25% or so who were adamantly opposed to them.  It was definitely a tougher battle.

Trump has already gotten the message.  Now he is trying to find a way to backtrack on it.  The recession will probably happen anyway, but now his tariffs will just get more of the blame, even if he cuts them back permanently.

Elon Musk attacked Peter Navarro, Trump’s economic advisor.  Musk said Navarro is dumber than a sack of bricks.  Musk understands that these tariffs are bad for business.  We just don’t know if he still has influence on Trump.

Navarro is truly a moron. What he says here is demonstrably false.

— Elon Musk (@elonmusk) April 8, 2025

I wonder if Elon Musk realizes that DOGE is almost dead.  There will be no cut in federal spending of $1 trillion.  The budget is going up.  Trump is celebrating the first trillion-dollar “defense” budget.

The good news is that these high tariffs probably won’t stick for long unless Trump is trying to go down as the least popular president ever.  The bad news is that we will still get a recession.  The other bad news is that we are back to business as usual in Washington DC: militarism and massive spending.

A supposedly bad guy ran into a building in Yemen, so the U.S. government blew up the building.  If Donald Trump’s own family had been residing in that building, would he still have given orders to blow it up in order to keep shipping lanes open?

If a criminal runs into a building in the United States, it is not protocol to blow up the building.  Even if it is a really dangerous criminal, it doesn’t make much sense.  You have to kill people in order to save people?

What Trump and his team are doing in Yemen is highly immoral.  It would rightly be condemned here in the United States if the police were to blow up a building because a criminal was in there.  They would probably be charged with murder.

Yet, when it happens in Yemen, there doesn’t seem to be a lot of concern.  After all, we can just say that they are all a bunch of terrorists or they are harboring terrorists.  If there was a little child in there, well, that’s their fault.  Or it’s collateral damage.  We have heard all of the justifications for murder.

Elon Musk Thinks About the Families in Ukraine

Elon Musk talked about being compassionate for the people involved in the conflict in Ukraine.

He said:

“I take great offense at those who put the appearance of goodness over the reality of it.  Those who virtue signal and say we can’t give in to Russia, but have no solution to stopping thousands of kids dying every day….  I have contempt for such people and I want to make that clear.  Because they’re virtue signaling and their lack of a solution means that kids don’t have a father.  It means that parents lost a son.  For what? Nothing.”

Elon Musk becomes deeply moved, and deadly serious, when Bret Baier asks him why he called Sen. Mark Kelly a "Traitor" for pushing to send more US aid and weapons to Ukraine.

Watch every second of his response.

"We should have empathy for the thousands of people dying everyday… pic.twitter.com/FP3rZSFDzL

— Charlie Kirk (@charliekirk11) March 27, 2025

Everything Musk said there is true.  He is actually taking a moral stand for peace by saying this.

We can wonder if Musk feels the same way about kids in Gaza or Iran.  We can wonder if he feels the same way about kids in Yemen who are now being bombed by Trump – the guy who said he wanted to bring peace.

If Musk truly believes what he is saying here, then something has to give.  Either Trump has to scale back on his war making or Musk has to speak out against it, whether in public or private.  If he goes to Trump privately and shares his concern of Trump killing innocent people, then Trump will face a choice.

Even if Musk stays in his lane with DOGE, starting wars with other countries isn’t compatible with cutting spending.

If there is a fallout between these two personalities, then watch out.  The danger is that Trump gets rid of Musk and steps up his status as war criminal and chaos maker.

Trump Influencers

What happened to the people who surrounded Trump in the leadup to the election?  There seemed to be people generally in favor of more peace rallying around Trump.  They included Robert Kennedy Jr., Tulsi Gabbard, Donald Trump Jr., J.D. Vance, Tucker Carlson, Nicole Shanahan, and even Joe Rogan.

Tulsi and RFK have, unfortunately, seemed to somewhat cheer on the warmongering.  Vance opposed the bombing in Yemen, but he didn’t exactly strongly oppose it either.  We have no idea if Don Jr. is saying anything to his father.  Nicole Shanahan has not exactly been speaking out against war, but even she admitted that she was a little concerned with one of Kennedy’s comments.  She is continuing to focus on her main issue of health.

Tucker Carlson continues to be heroic, but he also hasn’t taken any direct hits at Trump yet.  I don’t blame him for this because he realizes that he could quickly lose his influence with many people if there is a falling out there.  Still, at some point, I think Tucker will have his line in the sand.  If Trump goes into an all-out war with Iran, I don’t think Tucker is staying quiet.

How is it that Trump learned almost nothing from his first term?  Maybe he is just a big phony and really wants war.  He just knows how to deliver the lie.

It really is hard to say, but Trump has quickly turned into another war president.  His intentions almost don’t even matter at this point.  He has blood on his hands.  He is killing innocent people, including children, in Yemen.  It doesn’t matter if he is being misled by his war hawk advisors.  Why did he put them there as advisors?

Trump’s presidency has gone up in flames in the matter of weeks.  Some of his supporters will just go along with whatever he says.  It is like post 9/11 all over again.  If the government says we have to keep you safe from terrorists, then just let them do whatever they need to do.

The only hope is that there are enough Trump supporters or former Trump supporters who speak out against these insane and immoral policies.  He must be called out by credible people for his war making and his immoral acts.