A "moron premium" for the US?
Why the US might be in deep trouble
The British newspaper The Telegraph rarely misses an opportunity to blast the left. But it has again demonstrated that it’s willing to call out the President of the United States.
On Saturday, the newspaper suggested Trump’s “erratic leadership” puts the US at risk of a “moron premium.”
The editorial includes this:
The problem is that Trump cannot simply announce a partial freeze on tariffs and expect investors in the bond market, such as the pension funds, wealth managers and foreign states, to forget that he ever declared a global trade war.
Nor will they simply disregard the escalating spat between the US and China with the two countries announcing a barrage of tit-for-tat tariffs.
There is also concern about where funding for US treasuries comes from.
In case you’re wondering what a “moron premium” means, the newspaper asks its readers to remember the brief and disastrous tenure of Liz Truss as the UK Prime Minister.
After Liz Truss’s ill-fated mini-Budget blew up the bond market three years ago, the former prime minister was forced into an embarrassing climbdown.
As well as sacking her chancellor Kwasi Kwarteng, she also quickly unwound her package of unfunded tax cuts to keep the markets at bay.
However, despite the radical reversal, borrowing costs did not return to their old levels and Britain was left paying what was unkindly dubbed a “moron premium”.
The US is now at risk of suffering a similar fate.
The absence of strategy is crippling whatever credibility the White House thinks it has. A do-A-today-only-to-then-change-to-B-tomorrow-and-then-to-C-the-next-day “plan” leaves the global community to wonder what the Trump administration actually wants to do.
Keep in mind, to presume if Trump woke up tomorrow morning and called off the entire tariff scheme (and don’t laugh, he just might) that a return to “normal” would happen is plain wrong. Allies can no longer count on Trump. Foes, already predisposed to not trusting him, will only dig in their heels more convincingly. The business community routinely scratches its collective head.
What a mess.