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Daily Missive

Trump 2.0’s Rendezvous With Reality

Loading ...Addison Wiggin

January 14, 2025 • 6 minute, 49 second read


debt crisisDOGEtariffs

Trump 2.0’s Rendezvous With Reality

“Sweeping tariffs and a shift away from strong dollar policy can have some of the broadest ramifications of any policies in decades, fundamentally reshaping the global trade and financial systems.”

–Stephen Miran, Trump’s tariff czar


 

January 14, 2025— The bond market is screaming that inflation isn’t dead yet. Today’s inflation data says it’s still softening.

Either way, one thing remains likely to lead to a resurgence in inflation: Tariffs.

Raising tariffs on, say, French wine would make it more expensive for elitists to enjoy their preferred Loire Valley Chardonnay.

But California wine producers should be happy, provided their vineyards haven’t burned down.

At its core, tariffs are a tax. And taxes are ultimately paid by the consumer. So, hearing various tariff proposals from members of the Trump camp points to a form of higher prices on goods. In a way, that’s a form of inflation.

Trump’s tariff czar, Stephen Miran, is considering turning many of today’s 2% tariffs into 20%, with some goods receiving an import duty as high as 50%.

That’s quite the jump. And unlike in Trump’s first term, when tariffs were focused on Chinese goods, these new tariff rates would apply to friends and competitors alike.

According to John Authers at Bloomberg, that may be why the average Democrat sees inflation jumping higher, with expectations for a 4% read.

Meanwhile, the average Republican is now blind to the danger of inflation, seeing only a 0.1% increase.

In addition to the fear of financing the government itself, we suspect that this tariff uncertainty is a major factor in the bond market’s recent stubborn rally in yields.

You may recall that we detailed the opening salvo of Trump’s trade war with China in a report last year, the section title of which we titled “The End Of Cheap”—not just because of monetary inflation… but the actual cost of the goods going up as replacements produced in the U.S. gain traction.

Even in periods of low inflation, like the ~2%-ish rates that marked the post-financial crisis 2010s, your purchasing power still declines over time. An ice cube will melt faster at 90 degrees, but 70 degrees will also keep the process going.

And what of Trump’s plans to aggressively shrink the government?

Taking the “chainsaw” approach that Argentina has to shrink its public sector could offset the government deficit-spending-inspired inflation. Since government spending is part of GDP, the shrinking government should have a deflationary effect.

But, as several keen readers have already pointed out in our comments section, at what cost to all the zombie jobs the government supports now?

We’re entering the confirmation phase of Trump’s cabinet appointees. Each personality puts a public face on each facet of Trump’s ambitious agenda.

We’re going to state for the record right now: Whether we support it or not is irrelevant. Trump claims a mandate. The devil — and the entertainment value of government through social media — are in the details.

Will Trump succeed? What does success even look like? He’ll certainly try and use a few tools, tricks, and emergency laws to move his agenda forward.

One thing is certain. As he did in his first term, Trump will face the entrenched bureaucracy, which will fight tooth and nail (at taxpayer expense) to keep the fiefdoms they’ve built for themselves.

Even the DOGE agenda could be dead on arrival, much as we would appreciate drastically shrinking government as a critical necessity to avoid a U.S. debt crisis. For a perspective unique to the man himself, we turn to Bill Bonner. ~ Enjoy, Addison

Full Speed Ahead

Bill Bonner, Bonner Private Research

We came back from snowy Ireland to snow-covered Maryland.

And this morning, we sit in front of the fire, and take a break from our customary rigorous analysis and air-tight logic to make some guesses.

As reported last week, the Musk/Ramaswamy DOGE group has already admitted that it can’t really eliminate the deficit—not even half of it.

But it only took just a little math to see that coming, not a lot of guesswork. They would have to cut into the muscle of the Pentagon and into the guts of the transfer payments (Social Security, Medicare, Medicaid) to really make much of a difference.

They aren’t going to do that because the politicians are in control, not the ‘efficiency’ guys. Politicos get power for themselves by spending money, not saving it. So, it was inevitable that Musk would fall out with the MAGA crowd.

Steve Bannon was on the case over the weekend. New York Post:

Days after fawning over what tech magnate Elon Musk’s deep pockets could do for the MAGA movement, Steve Bannon went berserk on the world’s richest man and vowed to limit his White House influence. Bannon, 71, who hosts the “War Room” podcast and has a penchant for plotting all-out brass-knuckled political warfare, suggested Musk “should go back to South Africa” and decried his stance on H1-B visas.

A bit more guessy is our hypothesis that the Trump phenomenon doesn’t mark a real break with the past… but merely an acceleration in the rate of degeneration. More spending. More debt. More blatant corruption. More foreign adventures. More inflation… and so forth.

The press confuses the issue. It says Trump represents the ‘extreme right’ as opposed to the mainstream ‘enlightened liberals.’ In the minds of many, the Trump win represents a whole new thing… a new era in U.S. politics.

And in some ways it does. But not the important ones.

Perhaps less in practice than in theory, traditional party politics pitted the ‘progressives’ against the ‘conservatives.’ The improvers — a role played by the democrats — wanted to use the strong arm of the feds to build a better world. Spend, spend, spend… for better schools, welfare for the poor, make the world safe for democracy, save the planet — you name it.

The role played by conservative Republicans was avuncular… dragging their feet to slow them down… and using the Constitution to impose restraints.

But over time, the wily old Republican uncles realized that they could use the government’s ‘free’ money to buy votes and gain power too. And now, is there a dime’s worth of difference between the two parties?

Both spend trillions they don’t have, knowing that it will lead to higher prices for their own voters… Both approved the invasion of Iraq… and the attack on Libya… and the bombs and cash that get sent to Ukraine and Israel (much of which comes back to the U.S. firepower industry… where a portion of it is then spent to guarantee more spending).

Where they disagree is not on the direction of the ship, but the color of carpet and the wine served at the captain’s table. Like married couples, they argue over the details…and often duck real differences. But it didn’t matter what song they played in the bar…when the icy water rushed through the corridors, the Titanic was doomed.

Bush, Obama, Trump I, Biden — none departed from the Big Empire course. And now Trump II is promising even more glorious expansion — to Greenland, Mexico, Canada… and perhaps teaming up with Mr. Musk… to the stars!

We’re all passengers on this ship, whether we like it or not. Where will we end up? East, West, South or North? The best guess is that it will go down. ~ Bill Bonner, Bonner Private Research

Regards,


Addison Wiggin,
Grey Swan

P.S.  Higher inflation will benefit our usual safe-haven investment standby, gold. It might even find its way into crypto.

Right now, higher yields and weaker economic performance abroad are pushing the U.S. dollar higher and gold prices lower. That likely won’t last. Ditto with bitcoin, for investors who don’t mind much more short-term volatility. Join the ranks of the Grey Swan Investment Fraternity paid members for specific guidance on navigating the bumpy Trump 2.0 road ahead.

As always, if you’d like to participate in our ongoing conversation, please send your comments on the Grey Swan here: addison@greyswanfraternity.com.


Matt Milner: Main Street’s New Gateway into Wall Street’s Playground

July 8, 2025 • Addison Wiggin

For close to one hundred years, the U.S. government made it illegal for ordinary investors to invest in pre-IPO startups — in other words, companies that weren’t public.

Unless you were a wealthy accredited investor (net worth of at least $1 million, or annual salary of $200,000), you could only invest in publicly-traded stocks and bonds.

This forced ordinary investors to miss out on big gains. According to Cambridge Associates, a financial advisor with clients including the Rockefeller Family and the Bill Gates Foundation, private startups have delivered annual returns of 55% over the last twenty-five years.

That’s five, six, seven times higher than the average returns of stocks. And it’s enough to double your money every two years or so.

Matt Milner: Main Street’s New Gateway into Wall Street’s Playground
The Labor Market’s Warning Signal Now

July 8, 2025 • Addison Wiggin

A Bloomberg survey shows 30% of everyday Americans expect the labor market to get worse. Each jump of this magnitude in the past has preceded a recession.

Labor market data is screaming that there’s trouble in the real economy.

Except, of course, the data from the Bureau of Labor Statistics – the same government agency that has “revised” away over a million jobs reported as having been created during the Biden administration.

The Labor Market’s Warning Signal Now
Here Cometh Tariff Tantrum 2.0

July 8, 2025 • Addison Wiggin

The second half of 2025 opens with fireworks and fog. The markets are still chasing dreams, even as the ground shifts beneath them. Tariffs are more than a tax — they’re a weaponized expression of a new economic order.

Profitless stocks are a signal of excess liquidity, not optimism. And every new announcement from the White House or Truth Social carries ripple effects that touch everything from currencies to commodities to your portfolio.

As an investor, your job isn’t to outguess the next tweet or tariff — it’s to understand what the world’s actually rewarding now, and what it’s quietly punishing.

In that light, cash flows still matter. Real assets still matter. Confidence, liquidity, and political clarity… matter more than ever.

Here Cometh Tariff Tantrum 2.0
Mamdani Land

July 7, 2025 • Joel Bowman

Universal healthcare and “free” (taxpayer-funded) education and the rest of the redistributive voter bribes are ways of spending money, not generating it. Progressive taxation is a means of redistributing wealth, not producing it. The difference is non-trivial.

Countries like Kuwait and Norway are not rich because of their respective governments’ addiction to expensive giveaway programs, whatever one thinks of the merits or alleged compassion of such redistributive policies. They are wealthy despite them.

Down at the other End of the World, meanwhile, president Javier Milei has been busy liberating Argentina’s long-suffering citizens from three-quarters of a century of politicians’ worst laid plans. We’ll have more about the goings on in our adopted home later in the week.

Mamdani Land