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Daily Missive

Lose-Lose Deals

Loading ...Bill Bonner

February 3, 2025 • 4 minute, 17 second read


Trade war

Lose-Lose Deals

 

The idea of punishing trade is silly; specialization is the sine qua non of prosperity. One man grows tomatoes so another can focus on corn. One takes advantage of long summers to welcome tourists.

 

Monday, February 3rd, 2025

 

Bill Bonner, writing from Baltimore, Maryland

 

 

Investors sat on the edge of their chairs on Friday. Trump said he was going to impose tariffs on Mexico and Canada. Both countries promised to retaliate. The madness of it was just beginning to become clear.

There are win-win deals. There are win-lose deals. And there are lose-lose deals. Mr. Trump has found one — a deal so bad that a poll of ‘39 of the nation’s leading economists’ found not a single one who approved of it. The Wall Street Journal called it ‘the dumbest trade war in history.’

Imagine a town that tries to protect itself from competitors. Rather than freely trade with the shoe shop in a nearby-town, it demands a pay-off; ‘if we buy your shoes,’ it says to the owner, ‘you’ll have to pay us a 25% tariff.’ It makes the same proposition to the car dealer in the next town over… and with the newspaper in the state capital.

What do you think? Does this town get rich… or does it become a joke?

The idea of punishing trade is silly; specialization is the sine qua non of prosperity. One man grows tomatoes so another can focus on corn. One takes advantage of his long summers to welcome tourists… another drills for oil in the chilly north.

But you can only benefit from specialization if you can trade. Trade with neighbors. Trade with different states. Trade with people in foreign countries. That is why real money was such a breakthough; it allowed people to trade, easily, with people they didn’t know and didn’t trust.

A fool might be able to make a pair of clumsy shoes for himself in a day’s worth of labor. The shoemaker, spending an entire career at it, can make more shoes… and better ones. Then, the world is a richer place; it has more shoes! Those who don’t participate go barefoot.

This is not a controversial idea. Everybody knows that at the very least, tariffs will raise prices and make Americans poorer. They will be stuck with inferior products at high prices made by bad industries with good lobbyists. That’s already happening in the auto sector.

In this regard, Trump is merely following the Biden administration, which imposed a 100% tariff on Chinese-made electric cars. Even with a 100% tariff, the Biden bunch worried that the cars might still be attractive to US consumers… so they added more restrictions, effectively banning the lower priced/higher quality cars from the US market. Now, Americans pay twice as much for a similar car.

Team Biden argued that China’s cars should be kept out for ‘national security’ reasons. The Emergency Economic Powers Act of 1977 apparently gave him the authority. But where’s the ‘emergency’ on the steppes of Saskatchewan? Where’s the national security risk in Ottawa?

And now, all over the world, people are wondering. Being an enemy of the US empire is dangerous. But being a friend is not much better. Trump is threatening to take Greenland from our Danish allies…and the Panama Canal from our Central American friends.

Friends and enemies alike are now looking for alternatives to US consumers, US products and the US dollar. All have been politicized. Like tourists outfitted with explosive vests, who wants them?

In December the EU inked ‘the largest trade deal in history’ with the Mercosur nations of South America. Thailand did a deal with several European nations. Brussels is negotiating with Malaysia. China has done nine new trade deals since 2017. Even India, normally reluctant to enter trade agreements, is now in talks with the EU.

Only in the Americas does the US still dominate trade. And now, that is in jeopardy, too.

On Friday morning, investors wondered if the president would really do such an imbecilic thing. Maybe it was a negotiating tactic, they asked. But negotiating for what? Nobody seemed to know. Did he really expect foreign nations to solve Americans’ drug addictions…or secure its borders?

Then, when the White House revealed that it was serious about imposing tariffs on long-time friends, stocks sold off. The headlines this morning tell us that Wall Street is ‘bracing’ for more… but who knows?

What we do know is that with so much chaos and uncertainty sweeping the world, investors are looking for safety. Gold glitters, says Dan. The price per ounce went over $2,850 last week.

Cryptopolitan:

Gold makes new all-time high as Trump’s actions weaken the US dollar

The Canadian dollar and Mexican peso tumbled almost instantly while the Oval [office] interview was still going on. US Treasury yields pulled back immediately, and West Texas Intermediate oil futures jumped to $73 a barrel.

Peter Cardillo, a market economist, is betting gold will hit $3,000 an ounce soon. “We see the potential for much higher prices,” he said.

More on gold… tomorrow…

Until then,

Bill Bonner


Beware: The Permanent Underclass

October 3, 2025 • Addison Wiggin

Back in the Global Financial Crisis (2008), we recall mass layoffs were driving desperation.

Today, unemployment is relatively low, if climbing.

Affordability is much more of an issue. Food, rent, healthcare, and childcare are all rising faster than wages. Households aren’t jobless; they’re stretched. Job “quits” are at crisis-level lows.

In addition to the top 10% of earners, consumer spending is still strong. Not necessarily because of prosperity, but because households are taking extra shifts, hustling gigs, working late into the night, and using credit cards. The trends hold up demand but hollow out savings.

It’s the quiet form of financial repression. In an era of fiscal dominance, savers see easy returns clipped, workers stretch hours just to stay even, and wealth slips upward into assets while daily life grows harder to afford.

Beware: The Permanent Underclass
Is Tokenization Inevitable?

October 3, 2025 • Ian King

Last month, Nasdaq asked the Securities and Exchange Commission (SEC) for approval to let tokenized stocks and ETFs trade on its main exchange.

If approved, these digital shares would sit side-by-side with traditional equities. Meaning, they would fall under the same U.S. securities laws that govern $50 trillion in annual equity trades.

And this rollout could begin as early as 2026, once the Depository Trust Company — the clearinghouse that settles every U.S. stock trade — updates its systems to handle digital tokens.

If it happens, this won’t be a small tweak to the machinery of finance. It’ll represent the first major step toward moving Wall Street onto blockchain infrastructure.

And we don’t have to imagine what it might look like…

Because it’s already happening.

Is Tokenization Inevitable?
The Myth of Productivity, Again

October 3, 2025 • Addison Wiggin

The launch of ChatGPT in October 2022 ended the pandemic-era bear market in stocks. The AI story has been the predominant narrative for three years now. The indexes on Wall Street are at historic highs, surpassing 2000, 1968, 1929… the last three tech-inspired bubbles.

But ChatGPT did something else. It brought the idea of “productivity gains” back into the economic conversation.

The Myth of Productivity, Again
The Stablecoin Standard

October 2, 2025 • Mark Jeftovic

Stablecoins have proceeded rapidly from being a grey zone through which capital would traverse as it moved into or out of the crypto-economy, to becoming an extension, if not a nascent pillar, of the fiat money system itself.

Coinbase Head of Institutional Research David Duong sees the market cap for stables hitting $1/2 trillion by 2028 (which would be somewhere between a 4X and 5X from where we are now).

Demetri Kofinas recently interviewed Charles Calomiris, former Chief Economist at the US Office of the Comptroller of the Currency, and it was eye-opening to hear someone of his stature speak so matter-of-factly about how the structure of the banking system is evolving in realtime.

The Stablecoin Standard