The Sleeper Issue That Could Destroy the Economy

[applegrove]

The Sleeper Issue That Could Destroy the Economy

December 12, 2025 at 1:04 pm EST By Taegan Goddard 72 Comments

https://politicalwire.com/2025/12/12/the-sleeper-issue-that-could-destroy-the-economy/

Catherine Rampell: “There are many items on President Trump’s agenda that are hurting the U.S. economy: the pointless trade wars, the socialization of the private sector, the mass deportations, and much more.”

“But in the long run, the most damaging policy of all might be one that’s gotten scant attention, at least from non-finance-nerds: Trump’s quest to crush the Federal Reserve. If Trump succeeds, he may doom the United States to high inflation for years, if not decades, to come.”

Jonathan Last: “If Trump succeeds, then he will have created a problem without a solution—because no future administration can force bond markets to reappraise the American central bank.”

[lapfog_1]

1. rapidly rising prices due to tariffs and lack of cheap labor

push the Fed to set interest rates to near zero as stimulus for a failing job market

hedge funds buying up all available housing to turn it into rental properties.

piss off EU China and Canada / Mexico / South America... to the point where they rethink both trade AND bond purchases ( those lower interest rates won't be very attractive either ).

and run huge deficits because billionaires need more tax breaks.

What can possibly go wrong????



It's that time of year again... Welcome to Potterville!!!

[popsdenver]

13. For some reason

I always thought the "Fed Interest Rate" they keep lowering was purely for banks to borrow between each other???? Anyone know?????

[ProfessorGAC]

16. That's More The First Layer

They set the prime rate, but then banks set their lending rates as prime plus.
The Fed pushes prime rate up as a way to slow demand because it makes lending more expensive, so consumption, theoretically, goes down.
This is then considered a hedge against inflation.
However, in most things economic, it is not a simple X therefore Y relationship.
Higher interest rates reduce corporate borrowing for capital projects that will lead to productivity increases, raising supply to meet demand.
So, it's a balancing act to lightly quash demand while not inhibiting supply growth. And nobody truly knows where those 2 curves intersect across all industrial segments. So, it's at best an educated guess; at worst a wild guess with no basic in fact.

[popsdenver]

17. Thanks Professor

sounds pretty complex............

[bucolic_frolic]

2. That's hard to understand and therefore hard to think about.

We usually worry about crashes in the US economy. They happen for cyclical reasons, or due to debt implosion. We've had them from wars, from an attempt to create a national bank, from overbuilt sectors of the economy.

Making the Federal Reserve moot is another matter. Expanding the money supply without barriers. Greenspan had low interest rates, Bernanke had QE1-2-3 and Twist, Trump had Stim. They pumped a lot of liquidity into the economy over a 22 year period to keep it going.

Liquidity without restraint has not been seen since colonial times I think to say, when US bonds and currency became worthless, when bond holders feared they would not be paid, and maybe some weren't - I never researched the issue nor heard it spoken of in econ classes. But of course the greenback is becoming the Crypto Stable Coin currency, haven't you heard?

[popsdenver]

15. The TRUE coup de gras

which would trash everyone below the 1%ers, would be to crash the stock market.........It has been reported that lots at the top are are selling and going to cash positions......?????

[bucolic_frolic]

19. True

Markets need new investors or fresh cash to move higher, and they also need growing earnings, and where will that come from with layoffs? Market seems to be bumping up against recent all time highs, with potential for rolling over. Companies not involved in AI are pretty much flat.

[lostnfound]

29. Cash is not good either, as the dollar will be worth less. Private equity may (or may not) be more insulated

PE doesn’t sell in the same way as publicly traded stocks.
They have more inside information, shell games, and opaque maneuvers — probably able to commit fraud in legal ways. Look what they did to hospitals.
On the other hand, the move to allow 401Ks to invest in private equity will provide the owners of PE to ‘get an exit plan’ by selling off at inflated prices to uninformed investors. Especially if the PE owners also sit on boards (or their token reps do) of the managers of those retirement fund banks, or have other influence over those banks.

No safe harbor that. I know of.

[Farmer-Rick]

22. Crashes are a feature of unregulated capitalism

Last edited Sat Dec 13, 2025, 02:08 PM - Edit history (1)

Capitalism is a horrible economic system that crashes and burns every now and then. Especially if it's allowed to get out of control. Maybe we should get an economy that doesn't require crashes?

[lostnfound]

30. Do you mean get one that *doesn't* require crashes? (Typo, I think)

[Farmer-Rick]

31. Yes, yes I did

Thanks for letting me know.

[Irish_Dem]

3. Who benefits and how from Trump destroying the US economy for decades?

[Kid Berwyn]

4. This questions is the disturbing me.

[applegrove]

5. Maybe the Trump MAGAs see AI depressing and even reducing wages

to the extent that it will fight inflation and the rich will come out ahead.

[Kid Berwyn]

6. The Nerd Reich is low enough to do that.

Which isn't as low as what Thiel and Musk have in mind for humanity, which in any case will likely be cut out of any "guaranteed income."

So, why shaft We the People halfway? The US taxpayer is already on the hook for the world's banking casino: derivatives and, soon, crypto. Like all good vultures, they have staked out the spots nearest the carcass for themselves.

[applegrove]

8. Crows would see the British and French lining up against each other

to battle and would amass there in the trees before the battle for the pickings to come. No doubt the tech bro oligarchs and MAGAs in on the joke are positioning themselves to be in the right place after humanity, liberalism, democracy and diverse loving people fight the hate-filled MAGA patsies. Both will be much poorer and less powerful for the battle. Better for the crows.

[Kid Berwyn]

18. They have long prepared for that day.

"The Event, they call it."

After his Ted-like talk, a futurologist said, the superrich approach and ask the same question about life after the collapse of civilization and society: "How can I control my security forces?"

The things people worry about. Hitchcock's The Birds was no joke.

[applegrove]

20. Yeah. I think it was Thiel who had plans to evacuate to New Zealand

after the event and it occurred to him his pilot might not want to fly there if his family was not invited to escape too on the same plane. How to keep your staff staffing basically. So it was a conundrum.

[lonely bird]

21. If I was his pilot...

I would make arrangements for rescue prior to bailing out and setting course for the plane to crash into the ocean.

[Farmer-Rick]

24. Back to fuedalism then.....

Sounds like what a king would consider more important. The lives of serfs are disposable but the king needs them to fight his wars.

[Irish_Dem]

7. China and Russia plan to be the sole global economy.

The Yuan will be the standard global currency.

Trump is making it all happen faster than even China thought.

[lonely bird]

23. Russia is fucked

Its economy is based entirely on oil and gas. It has an enormous demographic problem including loss of young men due to Putin’s stupidity and mental illness. I wouldn’t be surprised if it has a brain drain.

China has a big demographic problem as well. The failure of the Party to sufficiently develop its internal markets will be a huge problem as will internal migration due to climate change.

[Irish_Dem]

27. Yes. But if Trump can divert US resources to Russia, and hand over Ukraine and its resources,

and Putin can rob Europe, there is some hope.

Russia is in dire condition right now and must get bailed out by Trump and Europe.
And steal as much as possible.

China has the better chance at world economic dominance.
Yes it has many internal problems, but the plan is for the US to crash and crash big.
China steps into the vacuum.

[popsdenver]

38. Number one

would be Putin, then China......etc

[Martin68]

9. Krugman has written on this, the fact that the violation of the Fed's political independence would destroy the

institutions credibility. Without credibility, their actions and statements would hold no weight. In the long term, this would be more damaging than Trump's other actions.

[lonely bird]

25. This is the entire problem in a nutshell

The whole “government is the problem” (thanks Ronnie Reagan the idiot) directly assaults and undermines all of society. It is a direct frontal assault on the psychological underpinnings of government in general and democracy in particular. Democratic government exists and can perform only if society believes in and has confidence in it.

Thus I have taken to calling the Heritage Foundation, Federalist Society and other Radicalized Reactionary Party think tanks terrorist groups. Their goal is the destruction of the country in service of racist neo-feudal wet dreams.

[walkingman]

28. Nailed it, and thanks for bringing up Reagan as the architect of what we are

now living through 50 years later. There are many that never actually lived through the Reagan era that have been told what a "conservative" God he was when in reality he was a corrupt, senile, B-grade actor that brought religion and anti-union/pro-business dominance into America's political system.

We are paying the price for those who continue to think business (corporations) is more important than people and that religion is the answer to our problems. It is easy to see how many still view him as their God.

[Martin68]

35. Good point. They've undermined everyone's trust in the voting system, which held strong in spite of the attacks.

In many cases it was Republican election workers who were defending the integrity of the vote against Trumps' minions. They've persuaded many that federal government workers are getting paid for doing nothing, and that the government is a huge waste of money. Reagan started that process. But it was Nixon who had already betrayed the system and tried to weaponize the FBI and the IRS. Like Trump, Reagan was doing it to boost big business and the wealthy at the expense of middle and working class Americans.

[Attilatheblond]

10. Saw an article headline re foreigners considering selling their US bond holdings

Is Europe about to shaft Trump?

Already have a raging headache, so I bookmarked it rather than reading it right now.

[Sneederbunk]

11. Sleeper issue plus sleeper president, not a good mix.

[Seinan Sensei]

12. Shades of Hitler's "Nero Decree"

Hitler at the end of WWII, with Third Reich’s imminent demise at-hand, wanted to destroy German buildings and infrastructure so Allied forces could not have them, could not use them.

[Wednesdays]

14. And to punish Germany for losing the war. nt

[Hugin]

26. What the heck does "... socialization of the private sector..." refer?

All I have seen from the Turd Reich is exactly the opposite.

[applegrove]

34. Subsidies given to corporations?

[Hugin]

37. I suppose that's what it means in this case.

Definitely a problem. Opposite sides of the same ugly coin.

[Initech]

32. Donald Trump and his goons have done more to destroy the US than Osama Bin Laden ever dreamed of.

[Samael13]

33. So we had hoovervilles will the new encampments be called trumpvilles

[gab13by13]

36. The Fed does more than set interest rates,

it regulates banks.

Sending interest rates to zero will crash the dollar. Yes, Russia and China want to replace the dollar as the world's currency and the BRIC countries could come up with a basket currency or as suggested the Yuan will replace the dollar, either way, the US is fucked.

[Dave says]

39. It's coming

The collapse of the American economy and reputational power. He did say we don’t need 34 dolls when 2 or 3 will do.