So Many People Delude Themselves About Trump

Yesterday was another bad day on Wall Street and with the Felon's 104% tariffs against China kicking in last midnight, today likely will be no better. Everything from clothing to computers and smart phones and electronics comes from China and such a tariff if it remains will drive prices through the roof and put some businesses literally out of business. Most baffling is the reality that economist predicted the economy would be far better under a Kamala Harris administration, yet so many ranging from Wall Street to so-called Main Street either deliberately closed their eyes to the reality of the a second regime for the Felon or they embraced his attacks on social consciousness and green lighting of racism and bigotry, thus showing their own sick mindsets, let their greed get the better of them.  Indeed, everyone was warned by the Felon's own words as to what he might do by turning international trade upside down and basically alienating all of America's allies. Yet they chose to ignore plain warnings and have ushered in real damage to the economy and America's standing in the world. Given the outrages perpetrated by ICE, even foreign tourists are choosing to vacation somewhere other than in America,  A column in the New York Times looks at the delusions that helped get us to this frightening point: 

Donald Trump’s 2024 election sent many finance types into spasms of anticipatory ecstasy as they imagined freedom from regulations, taxes and unfamiliar pronouns. “Bankers and financiers say Trump’s victory has emboldened those who chafed at ‘woke doctrine’ and felt they had to self-censor or change their language to avoid offending younger colleagues, women, minorities or disabled people,” The Financial Times reported a few days before Trump’s inauguration. It quoted one leading banker crowing — anonymously — about finally being able to use slurs like “retard” again. The vibes had shifted; the animal spirits were loose.

“We’re stepping into the most pro-growth, pro-business, pro-American administration I’ve perhaps seen in my adult lifetime,” gushed the hedge fund manager Bill Ackman in December.

One Wall Street veteran, however, understood the risk an unleashed Trump posed to the economy. After Trump’s victory in November, Peter Berezin, chief global strategist at BCA Research, which provides macroeconomic research to major financial institutions, estimated that the chance of a recession had climbed to 75 percent. “The prospect of an escalation of the trade war is likely to depress corporate investment while lowering real household disposable income,” said a BCA report.

The surprising thing isn’t that Berezin saw the Trump tariff crisis coming, but that so many of his peers didn’t.  You don’t have to be a sophisticated financial professional, after all, to understand that Trump believes, firmly and ardently, in taxing imports, and he thinks any country that sells more goods to America than it buys must be ripping us off. All you had to do was read the news or listen to Trump’s own words. Yet Berezin was an outlier . . . .

On Monday, as stocks whipsawed on shifting news and rumors about the tariffs, I spoke to Berezin, who is based in Montreal, about how Wall Street had gotten Trump so wrong. He told me that many investors who pride themselves on their savvy are in fact just creatures of the herd. “All these cognitive biases that amateur retail investors are subject to, the Wall Street pros, are, if anything, even more subject to them because they’ve got career risk associated with bucking the trend,” he said.

People in finance, said Berezin, are more likely to be punished for being too cautious and pessimistic than for being too hopeful and aggressive. . . . . “You don’t get fired for being bullish, but you do get fired for being bearish on Wall Street,” said Berezin.

Some investors also felt a cultural affinity with the new administration that further clouded their judgment. When wokeness was ascendant, plenty of people in tech and finance quietly seethed at being guilt-tripped and forced to feign concern about social justice. “When the opportunity came to jettison all that, they were happy to do it,” said Berezin. “And Trump enabled them to do it.”

So last October, when Scott Bessent, soon to become Treasury secretary, said that Trump was really a free trader who used tariffs as a negotiating tactic, Wall Street was eager to believe him.

This claim was obviously absurd. Trump has been obsessed with tariffs, which he called “the most beautiful word in the dictionary,” for decades. In his 2018 book “Fear,” Bob Woodward reported that Trump scrawled “TRADE IS BAD” in the margin of a speech he gave after the G20 summit. It makes sense that Trump would see things this way. When he makes sales, whether of Trump University courses or Trump-branded cryptocurrency, he is usually taking advantage of the buyer, and he views global trade through the same zero-sum lens.

It’s widely known that during his first term, the so-called adults in the room thwarted some of Trump’s most destructive whims. There have been far fewer such figures in the Trump sequel, resulting in the wholesale degradation of American governance. The conspiracy theorist Laura Loomer just directed a purge of the National Security Council. Thanks to Elon Musk’s haphazard cuts, employees who once worked to prevent the spread of diseases like Ebola are gone, as are nuclear safety experts. . . . . Somehow, traders failed to recognize that there would eventually be economic fallout from such profound misrule.

“The markets should have put two and two together that if you’re talking about annexing Greenland, Canada, the Panama Canal, you’re probably going to be more radical on trade as well,” said Berezin.

But Wall Street professionals, like so many other ostensibly smart people, refused to see Trump clearly, mistaking his skill as a demagogue for wisdom as a policymaker. . . . . What an odd assumption to make about a man who bankrupted casinos.

Berezin thinks Wall Street still hasn’t come to terms with the cost of the nascent Trump presidency. “I do think that at this point we might have passed the event horizon, meaning that even if Trump backs off from the tariffs, there’s been enough damage done to the U.S. economy, to the global economy, to investor confidence, consumer confidence, that we’re probably going to see a recession regardless of what happens,” he said.

He points out that while public attention is focused on the stock market, there are alarming signs in the bond market. Usually, if stocks go down, so do yields on U.S. Treasuries . . . . right now, that’s not happening, which he thinks could signal a crisis of confidence in the stability of the U.S. government and the debt it issues.

“If we’re moving to this new world where the U.S. just can’t be trusted, then do we really want to hold a lot of Treasuries?” he said as he sketched out investors’ thinking. “Do we really want to use the dollar as a reserve?” It turns out that there’s a price for taking all the soft power America has accrued since World War II and setting it on fire. Who knew.