@Phil @realcaseyrollins @diego Some changes are good, and some changes are bad. Some good changes can be made quickly. In social affairs, most changes should be made over time, because people with real lives and plans have to adjust to them, will be hurt — badly, seriously, sometimes fatally — by abrupt unexpected changes. In a democracy, you have to actually persuade people that the course you’ve set is good, if it is to endure. 1/
@Phil @realcaseyrollins @diego (That last, actually, is my biggest critique of Biden’s industrial policy. He did good things that were off to a good start! But he inadequately promoted those good things, and inadequately educated the public about their deliberate, not-so-quick time tables. So, after an election, all his genuinely sprouting seeds are getting ripped to shreds.) /fin
@realcaseyrollins @Phil @diego There’s no such thing as a “tariff deficit”. Pre-Trump formal tariffs were very low in both directions among developed countries, but the US ran a large trade deficit.
Working to balance the overall deficit, carefully and over time, would have been wise policy. Balancing *individual, bilateral* deficits is just stupid, let alone trying to do it so abruptly.
@realcaseyrollins @Phil @diego Do you think Europeans do not perceive the US as bullying? Again, it’s ordinary that interacting with governments, especially foreign governments, is difficult, businesses resent it, and always perceive, often not wrongly, discrimination in favor of the home team. 1/
@realcaseyrollins @Phil @diego But I don’t think US tech giants, which dominate European markets and use Ireland to avoid most US taxes, have been so hard done. /fin
@realcaseyrollins @Phil @diego Trump’s “reciprocal tariffs” do not offset actual tariffs. Those “tariffs” do not exist. They assume that a bilateral trade deficit is ipso facto evidence of non-tariff barriers, and use a miscomputation to offset the combination of (usually very small) formal tariffs and the hypothetical non-tariff barriers they’ve deduced. 1/
@realcaseyrollins @Phil @diego The computation is structured not to replicate others tariffs, but to discern the rate which, under some probably incorrect assumptions and with almost definitely incorrect inputs, would push each bilateral relationship to balance. (Note: This is for the now-suspended “reciprocal tariffs”.) /fin
@Phil @realcaseyrollins @diego i don’t have the wealth to make bets on such a scale. the Bryan Caplans of the world usually stick with $100.
@Phil @realcaseyrollins @diego I participate in financial markets to put money on my views. Unsurprisingly, I’m short US equities, long foreign currencies, and long gold atm. Lower equities and a weak dollar might have been good developments, if the means of achieving them had not been so destructive. I don’t think I’m interested in making Bryan Caplan style interpersonal bets.
@Phil @realcaseyrollins @diego sayeth the glorious mad intoxication of the destroyer.
when you, and we, wake up from your hangover, all that will be left is the destruction.
@Phil @realcaseyrollins @diego Have you paid attention to what our tech giants do to Europe? You only see “bullying” one way. Believe me, I’ve dealt with Europe’s difficult bureaucracies. They impose it on one another, at the country and individual level, as much as on trading partners. But you feel special, because it’s a lot of work to deal with them. Surely they’ve singled you out and bullied you.
@Phil @realcaseyrollins @diego MAGA is nothing more or less than a wrecking ball driven by pathetically un-self-aware personal resentments. It is a movement of disappointed toddlers wrecking what other kids have built with their blocks.
@Phil @realcaseyrollins @diego Non-tariff barriers are what the administration says have been so unfair (because formal tariff rates of many partners it’s punishing have been low)! But any policy is a nontariff barrier or subsidy. Almost no policy or regulation is orthogonal to trade. The only way to address misunderstandings and disputes over nontariff barriers is to adopt a norm of balance. Then they stop mattering.
@Phil @realcaseyrollins @diego The biggest bully in public affairs I have ever encountered is the current US administration. And believe me, I mean to smack back in any way I can.
Our trading partners have not been bullies, even though we have allowed ourselves to — it was always under our control, Dorothy! — to trade with them on foolish terms.
@Phil @realcaseyrollins @diego Developed countries tariff one another very little, until now. Tariffs extraordinary limited role should be sectoral, not country by country. It might (usually not, but it’s not incoherent) make sense to, say, tariff batteries to protect an infant industry in the US. (Subsidies are usually preferable.) Bilateral tariffs make basically no sense, basically ever.
@Phil @realcaseyrollins @diego The US did not have a near monopoly on anything during the period. If it had it would have been in large *surplus*, producing for the whole world, rather than in balance.
Between 1945-1950 that was roughly the case, but not afterward, 1950-1983, when US trade basically balanced.
@Phil @realcaseyrollins @diego Mistaken people have been making the same mistakes for a very long time.
(Except, despite their mistaken reasoning, this administration may make their alarmist predictions come true after all, by themselves wrecking what they had predicted would fail.)
@Phil @realcaseyrollins @diego It’s not very hard to impose capital controls. China has done it for decades. There’s nothing impractical about imposing balance via the capital account unless you are ideologically attached to “free movement of capital”.
@Phil @realcaseyrollins @diego I’ve proposed mechanisms to address balance sanely for years. As have many others. It’s a fair cop the politics have been hard. Maybe this administration was, finally, an opportunity to do the right thing.
Then, oops. In its blinkered furor, its eagerness to scapegoat, its disdain for considered action rather than gut decisionmaking, it may have discredited the cause of balance for generations.
@Phil @realcaseyrollins @diego For Christ sake, read a little bit. I just linked to a mechanism, a foreign payouts tax:
The entire Bretton Woods order that prevailed from 1945 through the early 1970s was a mechanism.
Your movement is not “smacking back” because we need to. It is smacking back because it is full of people who like to smack.
@Phil @realcaseyrollins @diego The dollar was not on remotely a path toward collapse until your movement put it there. Sure, a dollar has lost a lot of value over the last hundred years, if you kept it in a mattress. If you put it anywhere else — earned short-term, credit and interest-rate risk free Treasury bill rates — its value has increased.
From me, https://www.interfluidity.com/uploads/2017/10/Fiat-Is-Effective-Minitalk-light-edit-to-share.pdf 1/
@Phil @realcaseyrollins @diego It’s true that there’s a strong case for keeping trade in general in overall balance, though there are reasons for time-limited exceptions.
I’ve spent the last month making that case:
https://drafts.interfluidity.com/2025/04/20/keynesian-compromise/index.html 2/
@Phil @realcaseyrollins @diego As I have for many years.
https://www.interfluidity.com/v2/540.html
3/
@Phil @realcaseyrollins @diego But there is no coherent case for insisting upon and imposing *bilateral* rather than *overall* trade balance. Which is what this administration has absurdly, destructively, I’m sorry but stupidly, tried to impose. 4/
@Phil @realcaseyrollins @diego The United States should broadly buy roughly as much as it sells. It matters not a whit if it buys more from Lesotho than it sells to Lesotho as long as it sells to somebody else more than it buys from them. 5/
@Phil @realcaseyrollins @diego The overwhelming majority of ways the world could be in overall balance — all countries in overall balance — involve a lot of offsetting bilateral trade imbalances. That is the space we want markets to explore and optimize over. Insisting on bilateral balance between all countries is the international equivalent of barter. You only trade where there is a double coincidence of wants. 6/
@Phil @realcaseyrollins @diego But the Trump Administration wants to personalize international trade into trade partners taking advantage, or ripping us off, when the only party that could have intervened to insure the US remained in overall balance was the US itself, and it would not have been hard, we just didn’t want to do it, persuaded ourselves (wrongly!) that we shouldn’t. 7/
@Phil @realcaseyrollins @diego So it destroys friendships and alliances, and takes down the US economy, by idiotically deploying tariffs intended to immediately bring all trading relationships into bilateral balance. 8/
@Phil @realcaseyrollins @diego If what you want is a world of overall-balanced trade (which you should!), you should be perfectly comfortable with BRICs-ish diversification from the dollar as reserve currency to a wider basket of reserve assets. 9/
@Phil @realcaseyrollins @diego If a single issuer (think country) is to be the reserve currency provider, then it *must* run a current-account (usually trade) deficit, in order to supply the world with the reserve asset it demands.
I suspect you’ve encountered it. This is known as the Triffin Dilemma https://en.wikipedia.org/wiki/Triffin_dilemma?wprov=sfti1# 10/
@Phil @realcaseyrollins @diego My view is that the benefit of a world with overall balanced trade outweighs the benefit to the US of trying to maintain a near monopoly on reserve asset provision, so I prefer we go for overall balance rather than continue to run large deficits to supply the world with dollars. /fin
it’s true a “deep state” means the ship of state turns slowly, acts as a kind of low-pass filter on the effect of political decision making and remaking, and therefore in a certain sense “restrains democracy”. 1/
but it also helps immunize the polity from the consequences of political noise, short-lived passions, momentary errors, accidentally electing a mad king. 2/
genuine democracies don’t naively presume that popular passions are always perfect. they build institutions that give effect to values and interests durably expressed by the public, but frustrate controversial sharp turns unless they persist or recruit broad consensus. 3/
with apologies to Mencken, democracy is not when the people get what they want good and hard, but when government is responsive to the people but able to distinguish signal from noise, without any king or higher authority arrogating the role of deciding what’s signal. 4/
it’s the institution. /fin
existence is inconceivable, but so is its alternative.
@admitsWrongIfProven well, there might still be time!
@diego okay. but political consensus in the US would be badly shaken by a stock market crash, which even people who have little understanding of the stock market know is a disruptive event that reflects and portends economic difficulty.
but in fact, stock market fluctuations are far less dangerous than what’s happening to the dollar, US Treasury bonds, and gold.
it’s less costly, but more politically salient, so a useful signal.