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Inflation, Recession and security

 The world is facing an interesting time with President Trump playing with the tools of government.   One thing for sure, is that uncertainty is a much more important factor than it has been for the past few years.   Our Prime Minister was asked if Britain could "take" the Russians, an idiotic question considering that the United Kingdom is an Island far from Russia, but the real point is could Europe "take" Russia?   What the Ukrainians have demonstrated in spade is that the Russian army is not what it used to be, and the nuclear threat is the same for Europe as it would be for the Americans.  The answer is yes, Europe can deal with the Russians.

However, the tariff games that Trump has been playing are another story entirely.   The destabilization that he creates will first stop all capital investment.  Boardrooms the world over will slow down the CAPEX train until they have a firm understanding of what is going on.   

President Trump's real objective is to create sufficient revenues to allow him to cut taxes on the richest Americans, that is his only goal.   Cutting expectations from Medicaid, Medicare, and Social Security are the only way to go.   

Yesterday the Feds released their Q1/25 GDP growth estimates for the United States, the figure went from +3.2% GDP growth to an estimated -2.9%.  The quarter will be over in 25 days so the goose is cooked!

For the British government, the news is not all bad, the price of British debt has crashed by nearly half a percent in less than 30 days.   There is a flight to safety, and the pound is one of the safer bets with a deep capital market.    The British economy was already slowing down, the delayed impact of the Brexit and the transfer of loss from continental Europe to the United Kingdom.

For Trump, the news of a Q1 recession is about as bad as can be expected, He will blame the previous administration, but it doesn't matter, the impact on the American Treasury will be severe.  In addition, countries will liquidate their US Treasury holdings mainly because the US debt market is liquid.  So the American government will see rising cost of borrowing...

I still can't believe that President Trump has been in office for less than 60 days, the daily feverish activity, the mistakes and the take backs are impressive, but business doesn't care.  Boardrooms will sit on their hands until they have a sense of certainty.   I would expect to see massive cuts in American corporate Capex for March 2025.   I would expect to see the dollar weaken against most European currencies.   

P.S.   it is interesting to see the impact on Gold and cryopto currency; the former is going up the latter is going down.




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