8 ms·

How the 2025 US Financial Crisis is Different than 2008

61 points by 6stringmerc 2y ago

ArtTimeInvestor 2y ago
I think it would be valuable to have a first-principles discussion about trade imbalances. For a country, what are the actual downsides of having a trade deficit? Isn't it great to get stuff shipped to you and not having to ship the same amount of stuff back? In fact, wouldn't a 100% trade deficit be ideal? Have stuff shipped to you without having to ship back anything?
- diggan 2y ago
  Depends on your goal no? If your goal is to produce nothing and import everything, then I guess your last line fits with that goal. If your goal is to make the country manufacturing independent, then that doesn't sound like a great way of achieving that.
  - mindslight 2y ago
    "Produce nothing and import everything" is a straw man. The goal was to produce different things, hopefully more valuable ones. That hope has been shown to be a bit specious. But regardless, being able to obtain real goods by giving other countries arbitrarily-devaluable IOUs is still a no-brainer win, period. If your goal is to make the country manufacturing independent, then plunging us into a depression while cutting off existing supply lines is abjectly stupid! When it comes to building domestic industry from the ground up, tariffs are the equivalent of "sending thoughts and prayers". And they're even more specious knowing how volatile this administration is, and that the economic pain will mandate some course correction long before the foundations of any new factories are even poured. Never mind the cost of filling those new factories with equipment has now skyrocketed! (Or are we supposed to think that the tariff announcement has magically made the invisible hands of the market start rubbing three flattish surfaces together?) The actual way to have carried out the purported policy goal was to spend some of the massive surplus the US gets by USD being the world reserve currency ("the deficit") on deliberate targeted import substitution - direct subsidies for US based manufacturing activities. It's top-down centralized action but that's essentially unavoidable due to that massive centralized wealth collection from having the world reserve currency. That would (/would have) also prevent that collected wealth from simply being given to the financial industry in support of their overgrown products. Breaking up massively consolidated megacorpos into manageable entities that have to actually compete with each other would have gone a long way as well. The only first-principles ways I can earnestly explain Trump's actions is that either he's either confusing symptoms for causes, is mentally compromised (dementia and/or social media addiction), or is working for Russia/China. Likely some mix of all three. Hopefully the Democrats can get over their general ineptitude, spin this as a 30% National Sales Tax paying for Handouts to Most Favored Billionaires, get some Republicans to defect from the maggot party line, and fucking impeach+convict already. That's really the only course of action that can leave our country with a hope of remaining intact.
- somanyphotons 2y ago
  > Have stuff shipped to you without having to ship back anything? This makes you completely dependent on the whims of a foreign power who might not care for your concerns as their priorities change
  - ArtTimeInvestor 2y ago
    As long as they are as dependent on you (Because of military protection and software services) as you are on them, their priorities can't change on a whim.
    - daedrdev 2y ago
      Authoritarian countries don't have to care whats best for their country.
      - ceejayoz 2y ago
        https://en.wikipedia.org/wiki/List_of_heads_of_state_and_government_who_were_assassinated_or_executed https://en.wikipedia.org/wiki/List_of_heads_of_state_and_gov... contains plenty who made the mistake of believing that. https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu serves as a pretty good example.
        daedrdev 2y ago
        What a stupid argument. They already run dictatorships. They will already be killed or imprisoned if they lose power. Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Stalin and Mao never lost power despite their insane policies and ruthlessness.
        ceejayoz 2y ago
        > They already run dictatorships. Yes, and as such, their primary threat is large-scale popular unrest. They aren't going to lose an election, they aren't going to be reined in by other branches, they aren't going to voluntarily retire. Which, in general, means you have to at least try to do things that don't piss everyone in the country off. > Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Great example! He thought it'd go quickly and smoothly. It didn't, and for years now he's avoided the mass mobilization he'd need to win outright, because the regular people would hate it. > Stalin and Mao never lost power despite their insane policies and ruthlessness. Both had to backtrack when they pissed people off too much. https://en.wikipedia.org/wiki/Wuhan_incident https://en.wikipedia.org/wiki/Wuhan_incident "Fears of a more widespread PLA revolt led Mao and his core associates to scale back the movement's most radical components."
- skybrian 2y ago
  It’s not nothing in return. That’s pretty much impossible, unless it’s pure charity. Countries with a trade surplus are buying foreign investments with their exports. That’s not necessarily a bad thing - more foreign investment can be useful if it’s invested in something productive, and it diversifies risk. But if foreign investors get spooked, it can result in a financial collapse, like happened during the Asian financial crisis.
  - shiandow 2y ago
    To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in foreign hands. Either this money is eventually used to buy stuff or it is invested. The latter is what leads to a trade deficit. Not sure if it is the only way? Put that way it seems dubious if making trade more expensive would actually change things much. Anyone owning dollars still has the same choice between buying goods or investing.
    - skybrian 2y ago
      These foreign investments are mostly not currency. When a foreign country makes a lot of investments in the US, they could be buying stocks, bonds, or making direct investments - such as building US factories, as many foreign auto makers have done. Or buying entire companies - one of the big three US auto makers (Stellantis) is now foreign-owned. Stable countries that have a lot of attractive investments will tend to have a large trade deficit, and the US is one of the more profitable places to invest. (Well, not so much at the moment.)
- csomar 2y ago
  There is no trade deficit in that sense and can never be; no one is sending free shit. However, this is “goods” trade imbalance. There are lots of other types of cash flows happening in an economy. For example, if your country has a high % of remittances, it’ll have a chronic trade balance. (which is essentially the exercise of these remittances at foreign markets)
yabones 2y ago
Can anybody explain in a rational way why the US gov would want to revert to a mercantilist trade policy in the 21st century? It seems to me that they're undoing a hundred years of international development to become the de-facto trade and security hegemony with no real upside. Why?
- hottakesbun 2y ago
  The best answer is a reference from All the President's Men: "The truth is these are not very bright guys, and things got out of hand."
- jameskilton 2y ago
  [flagged]
  - loloquwowndueo 2y ago
    > It's vitally important to separate out "US Gov" with "Donald Trump" But they’re operating as one and the same. Or to put it in question form? What’s the government doing to stop the “king” from wrecking the country the government is supposed to serve?
    - wetpaws 2y ago
      [dead]
    - JackFr 2y ago
      The impotence of Congress is astonishing. Constitutionally the tariff power is exclusive to Congress, and Trump is exercising it only through emergency powers. Congress could end this easily had they a mind to. Presumably someone could make a challenge to the Supreme Court, but IANAL so it's not clear who has the standing to sue. As a former Republican, and a Reagan conservative the utter cowardice and corruption of the Republican party nauseates me. No principles, no ethics.
    - CodeMage 2y ago
      > What’s the government doing to stop the “king” from wrecking the country the government is supposed to serve? Nothing, because the government can't actually do anything in this situation. Trump's regime exploited the inherent weakness of every government, known from the times of Plato's Republic: quis custodiet ipsos custodes? The government enforces its laws against general populace by means of monopoly on violence. If you and I break the law, we face the consequences outlined by the law. If we continually refuse to comply with those consequences, we will eventually be subjected to state-sanctioned violence until we do so. But what happens if the government does not follow its own laws? Who enforces those laws? Sure, there are one or more entities whose job is to perform that enforcement, but those entities are also part of the government. What happens when they don't do that job? The US government is structured in a way that is meant to mitigate that risk. There are different branches, and checks and balances, and all that stuff kids learn in civics classes and immigrants like me learn when we want to apply for naturalization. But these measures only mitigate the risk. They don't remove it completely, because it's ultimately impossible to remove. Trump's regime has been allowed to circumvent these mitigations and, as a result, we are now in a situation that cannot be resolved by conventional means. If parts of the government try to resolve the constitutional crisis by following the Rule of Law, it will end up being ignored by those parts of the government that are already ignoring the Rule of Law. If those parts try to resolve it without following the Rule of Law, then what's the difference between them and the regime that caused the constitutional crisis in the first place?
1270018080 2y ago
A huge difference the 2025 crisis is done by 1 person over a 2 month span, it was entirely predictable with even a modicum of economic literacy, and entirely avoidable. Yes 2008 was also avoidable and a lapse in economic judgement, but no one saw it coming until it happened. This one was obvious from the beginning.
- mcphage 2y ago
  > This one was obvious from the beginning. And yet the markets didn’t price that in.
  - alabastervlog 2y ago
    They just kept thinking he wouldn't really do it. And he still hasn't! Most of the tariffs, AFAIK, haven't kicked in yet. His "they start at midnight" stuff in his long ramble-fest appears to have been BS. I think there's a wave on the 9th, and the last big wave is the 2nd of May. The current fall is because he took a big step closer to doing it, and did a little of it. The chance he won't go all the way is priced in, so there's plenty of room to fall as those dates get closer.
  - BlackjackCF 2y ago
    Because nobody wanted to believe that the US government would decide to self-own this hard.
    - mcphage 2y ago
      But that was his entire campaign: we’re going to shoot ourselves in the face, and it will be the best thing ever for everyone. So maybe someone bought into the “it will be the best thing ever”, fine, but if they bought into that but not the “we’re going to shoot ourselves in the face”, then what did they believe? The effect will happen but the cause won’t?
  - jmclnx 2y ago
    The people I know in market finance fully believed Trump was bluffing and salivating at his upcoming Tax Cuts. I told them I am very worried about the tariffs and I expect it to happen, but they could not believe Trump would be that stupid. So I really hope the Dems can stop these tax cuts and force Wall Street to go after Trump and friends.
jmclnx 2y ago
This crisis is fully caused by Trump and his minions, ruining a great economy. Which the article does get into.
- karmakurtisaani 2y ago
  You are downvoted and the article is flagged. Interesting.
nwellinghoff 2y ago
I think we (Americans) are hoping this is a giant bluff and he will pull it all back in less than 6m. Please God let it be a bluff…
- JKCalhoun 2y ago
  You think that would right the ship? We're past that. We need a complete change of our politicians, a rewriting of parts of our Constitution and then a lot of begging to regain the world’s good graces.
  - karmakurtisaani 2y ago
    It would be amazing if this lead to dumping the electoral college system in favor of something more representative. Also, reducing president's power would be amazing, maybe you guys would eventually see a functioning, consensus-based multi party system.
pcj-github 2y ago
I don't believe the Trump regime has any intention to make the economy better, nor cares in the least about the citizenry. This is about introducing levers to imposing fascism, favoritism, and loyalty tests upon corporate america.
AnimalMuppet 2y ago
This one isn't a crisis... yet. It likely will become one, but it's not yet a crisis.
chasing 2y ago
For one thing, we have a President this go-around who is actively behaving in a destructive way against the United States. That's the unique scenario we are broadly finding ourselves in: The office of the Presidency is being weaponized against the country and its citizens. Of course that's going to have a devastatingly different set of effects. The GOP has been hollowed out to the point that they're incapable of admitting this to themselves and participating in corrective action. The courts alone aren't sufficient. And because our elections are held on a clockwork cadence there's not much the citizenry can do at this point. Which is why I'm worried things are going to turn violent. When normal channels fail, people who feel like they have been pressed against the wall will act out in other ways. And a lot of people are in the process of having their livelihoods ruined.
- JKCalhoun 2y ago
  Violent like the violence within Russia? I think it more likely the average U.S. citizen just has to shrug and mutter, "Not much I can do about it, the billionaires run everything."
  - chasing 2y ago
    https://en.wikipedia.org/wiki/Estimated_number_of_civilian_guns_per_capita_by_country https://en.wikipedia.org/wiki/Estimated_number_of_civilian_g... The US has about 10x the numbers of guns per capita as Russia. To start. And I think we're not quite as inured to authoritarianism over here.
- spacemadness 2y ago
  And when they turn violent, that's when they go to the next phase of calling in martial law and turning the military against US citizens. And Congress will sit back and let it happen.

61 points by 6stringmerc 2y ago

I think it would be valuable to have a first-principles discussion about trade imbalances. For a country, what are the actual downsides of having a trade deficit? Isn't it great to get stuff shipped to you and not having to ship the same amount of stuff back? In fact, wouldn't a 100% trade deficit be ideal? Have stuff shipped to you without having to ship back anything?

diggan 2y ago
Depends on your goal no? If your goal is to produce nothing and import everything, then I guess your last line fits with that goal. If your goal is to make the country manufacturing independent, then that doesn't sound like a great way of achieving that.
- mindslight 2y ago
  "Produce nothing and import everything" is a straw man. The goal was to produce different things, hopefully more valuable ones. That hope has been shown to be a bit specious. But regardless, being able to obtain real goods by giving other countries arbitrarily-devaluable IOUs is still a no-brainer win, period. If your goal is to make the country manufacturing independent, then plunging us into a depression while cutting off existing supply lines is abjectly stupid! When it comes to building domestic industry from the ground up, tariffs are the equivalent of "sending thoughts and prayers". And they're even more specious knowing how volatile this administration is, and that the economic pain will mandate some course correction long before the foundations of any new factories are even poured. Never mind the cost of filling those new factories with equipment has now skyrocketed! (Or are we supposed to think that the tariff announcement has magically made the invisible hands of the market start rubbing three flattish surfaces together?) The actual way to have carried out the purported policy goal was to spend some of the massive surplus the US gets by USD being the world reserve currency ("the deficit") on deliberate targeted import substitution - direct subsidies for US based manufacturing activities. It's top-down centralized action but that's essentially unavoidable due to that massive centralized wealth collection from having the world reserve currency. That would (/would have) also prevent that collected wealth from simply being given to the financial industry in support of their overgrown products. Breaking up massively consolidated megacorpos into manageable entities that have to actually compete with each other would have gone a long way as well. The only first-principles ways I can earnestly explain Trump's actions is that either he's either confusing symptoms for causes, is mentally compromised (dementia and/or social media addiction), or is working for Russia/China. Likely some mix of all three. Hopefully the Democrats can get over their general ineptitude, spin this as a 30% National Sales Tax paying for Handouts to Most Favored Billionaires, get some Republicans to defect from the maggot party line, and fucking impeach+convict already. That's really the only course of action that can leave our country with a hope of remaining intact.
somanyphotons 2y ago
> Have stuff shipped to you without having to ship back anything? This makes you completely dependent on the whims of a foreign power who might not care for your concerns as their priorities change
- ArtTimeInvestor 2y ago
  As long as they are as dependent on you (Because of military protection and software services) as you are on them, their priorities can't change on a whim.
  - daedrdev 2y ago
    Authoritarian countries don't have to care whats best for their country.
    - ceejayoz 2y ago
      https://en.wikipedia.org/wiki/List_of_heads_of_state_and_government_who_were_assassinated_or_executed https://en.wikipedia.org/wiki/List_of_heads_of_state_and_gov... contains plenty who made the mistake of believing that. https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu serves as a pretty good example.
      - daedrdev 2y ago
        What a stupid argument. They already run dictatorships. They will already be killed or imprisoned if they lose power. Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Stalin and Mao never lost power despite their insane policies and ruthlessness.
        ceejayoz 2y ago
        > They already run dictatorships. Yes, and as such, their primary threat is large-scale popular unrest. They aren't going to lose an election, they aren't going to be reined in by other branches, they aren't going to voluntarily retire. Which, in general, means you have to at least try to do things that don't piss everyone in the country off. > Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Great example! He thought it'd go quickly and smoothly. It didn't, and for years now he's avoided the mass mobilization he'd need to win outright, because the regular people would hate it. > Stalin and Mao never lost power despite their insane policies and ruthlessness. Both had to backtrack when they pissed people off too much. https://en.wikipedia.org/wiki/Wuhan_incident https://en.wikipedia.org/wiki/Wuhan_incident "Fears of a more widespread PLA revolt led Mao and his core associates to scale back the movement's most radical components."
skybrian 2y ago
It’s not nothing in return. That’s pretty much impossible, unless it’s pure charity. Countries with a trade surplus are buying foreign investments with their exports. That’s not necessarily a bad thing - more foreign investment can be useful if it’s invested in something productive, and it diversifies risk. But if foreign investors get spooked, it can result in a financial collapse, like happened during the Asian financial crisis.
- shiandow 2y ago
  To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in foreign hands. Either this money is eventually used to buy stuff or it is invested. The latter is what leads to a trade deficit. Not sure if it is the only way? Put that way it seems dubious if making trade more expensive would actually change things much. Anyone owning dollars still has the same choice between buying goods or investing.
  - skybrian 2y ago
    These foreign investments are mostly not currency. When a foreign country makes a lot of investments in the US, they could be buying stocks, bonds, or making direct investments - such as building US factories, as many foreign auto makers have done. Or buying entire companies - one of the big three US auto makers (Stellantis) is now foreign-owned. Stable countries that have a lot of attractive investments will tend to have a large trade deficit, and the US is one of the more profitable places to invest. (Well, not so much at the moment.)
csomar 2y ago
There is no trade deficit in that sense and can never be; no one is sending free shit. However, this is “goods” trade imbalance. There are lots of other types of cash flows happening in an economy. For example, if your country has a high % of remittances, it’ll have a chronic trade balance. (which is essentially the exercise of these remittances at foreign markets)

yabones 2y ago

Can anybody explain in a rational way why the US gov would want to revert to a mercantilist trade policy in the 21st century? It seems to me that they're undoing a hundred years of international development to become the de-facto trade and security hegemony with no real upside. Why?

hottakesbun 2y ago
The best answer is a reference from All the President's Men: "The truth is these are not very bright guys, and things got out of hand."
jameskilton 2y ago
[flagged]
- loloquwowndueo 2y ago
  > It's vitally important to separate out "US Gov" with "Donald Trump" But they’re operating as one and the same. Or to put it in question form? What’s the government doing to stop the “king” from wrecking the country the government is supposed to serve?
  - wetpaws 2y ago
    [dead]
  - JackFr 2y ago
    The impotence of Congress is astonishing. Constitutionally the tariff power is exclusive to Congress, and Trump is exercising it only through emergency powers. Congress could end this easily had they a mind to. Presumably someone could make a challenge to the Supreme Court, but IANAL so it's not clear who has the standing to sue. As a former Republican, and a Reagan conservative the utter cowardice and corruption of the Republican party nauseates me. No principles, no ethics.
  - CodeMage 2y ago
    > What’s the government doing to stop the “king” from wrecking the country the government is supposed to serve? Nothing, because the government can't actually do anything in this situation. Trump's regime exploited the inherent weakness of every government, known from the times of Plato's Republic: quis custodiet ipsos custodes? The government enforces its laws against general populace by means of monopoly on violence. If you and I break the law, we face the consequences outlined by the law. If we continually refuse to comply with those consequences, we will eventually be subjected to state-sanctioned violence until we do so. But what happens if the government does not follow its own laws? Who enforces those laws? Sure, there are one or more entities whose job is to perform that enforcement, but those entities are also part of the government. What happens when they don't do that job? The US government is structured in a way that is meant to mitigate that risk. There are different branches, and checks and balances, and all that stuff kids learn in civics classes and immigrants like me learn when we want to apply for naturalization. But these measures only mitigate the risk. They don't remove it completely, because it's ultimately impossible to remove. Trump's regime has been allowed to circumvent these mitigations and, as a result, we are now in a situation that cannot be resolved by conventional means. If parts of the government try to resolve the constitutional crisis by following the Rule of Law, it will end up being ignored by those parts of the government that are already ignoring the Rule of Law. If those parts try to resolve it without following the Rule of Law, then what's the difference between them and the regime that caused the constitutional crisis in the first place?

1270018080 2y ago

A huge difference the 2025 crisis is done by 1 person over a 2 month span, it was entirely predictable with even a modicum of economic literacy, and entirely avoidable. Yes 2008 was also avoidable and a lapse in economic judgement, but no one saw it coming until it happened. This one was obvious from the beginning.

mcphage 2y ago
> This one was obvious from the beginning. And yet the markets didn’t price that in.
- alabastervlog 2y ago
  They just kept thinking he wouldn't really do it. And he still hasn't! Most of the tariffs, AFAIK, haven't kicked in yet. His "they start at midnight" stuff in his long ramble-fest appears to have been BS. I think there's a wave on the 9th, and the last big wave is the 2nd of May. The current fall is because he took a big step closer to doing it, and did a little of it. The chance he won't go all the way is priced in, so there's plenty of room to fall as those dates get closer.
- BlackjackCF 2y ago
  Because nobody wanted to believe that the US government would decide to self-own this hard.
  - mcphage 2y ago
    But that was his entire campaign: we’re going to shoot ourselves in the face, and it will be the best thing ever for everyone. So maybe someone bought into the “it will be the best thing ever”, fine, but if they bought into that but not the “we’re going to shoot ourselves in the face”, then what did they believe? The effect will happen but the cause won’t?
- jmclnx 2y ago
  The people I know in market finance fully believed Trump was bluffing and salivating at his upcoming Tax Cuts. I told them I am very worried about the tariffs and I expect it to happen, but they could not believe Trump would be that stupid. So I really hope the Dems can stop these tax cuts and force Wall Street to go after Trump and friends.

jmclnx 2y ago

This crisis is fully caused by Trump and his minions, ruining a great economy. Which the article does get into.

karmakurtisaani 2y ago
You are downvoted and the article is flagged. Interesting.

nwellinghoff 2y ago

I think we (Americans) are hoping this is a giant bluff and he will pull it all back in less than 6m. Please God let it be a bluff…

JKCalhoun 2y ago
You think that would right the ship? We're past that. We need a complete change of our politicians, a rewriting of parts of our Constitution and then a lot of begging to regain the world’s good graces.
- karmakurtisaani 2y ago
  It would be amazing if this lead to dumping the electoral college system in favor of something more representative. Also, reducing president's power would be amazing, maybe you guys would eventually see a functioning, consensus-based multi party system.

pcj-github 2y ago

I don't believe the Trump regime has any intention to make the economy better, nor cares in the least about the citizenry. This is about introducing levers to imposing fascism, favoritism, and loyalty tests upon corporate america.

AnimalMuppet 2y ago

This one isn't a crisis... yet. It likely will become one, but it's not yet a crisis.

chasing 2y ago

For one thing, we have a President this go-around who is actively behaving in a destructive way against the United States. That's the unique scenario we are broadly finding ourselves in: The office of the Presidency is being weaponized against the country and its citizens. Of course that's going to have a devastatingly different set of effects. The GOP has been hollowed out to the point that they're incapable of admitting this to themselves and participating in corrective action. The courts alone aren't sufficient. And because our elections are held on a clockwork cadence there's not much the citizenry can do at this point. Which is why I'm worried things are going to turn violent. When normal channels fail, people who feel like they have been pressed against the wall will act out in other ways. And a lot of people are in the process of having their livelihoods ruined.

JKCalhoun 2y ago
Violent like the violence within Russia? I think it more likely the average U.S. citizen just has to shrug and mutter, "Not much I can do about it, the billionaires run everything."
- chasing 2y ago
  https://en.wikipedia.org/wiki/Estimated_number_of_civilian_guns_per_capita_by_country https://en.wikipedia.org/wiki/Estimated_number_of_civilian_g... The US has about 10x the numbers of guns per capita as Russia. To start. And I think we're not quite as inured to authoritarianism over here.
spacemadness 2y ago
And when they turn violent, that's when they go to the next phase of calling in martial law and turning the military against US citizens. And Congress will sit back and let it happen.