Krugman: Trump's variability of Trump threatens a repeat of the financial crisis

Paul Krugman, an economic Nobel laureate, writes on Thursday on his blog that the volatility and unpredictability of President Donald Trump's policy paralyzes American business and threatens that the “Moment of Lehman Brothers” will repeat itself, in which the fall of this bank has become the beginning of the financial crisis.

Krugman, a professor of economics at the University of New York and London School of Economics, points out that signs appear on the market that may announce another financial crisis. Above all, “uncertainty about Trump's policy is the same problem for the economy as his policy.”

This situation “paralyzes business”: entrepreneurs and company boards are afraid of implementing any long -term plans, because they may turn out to be a “catastrophic mistake”. If the company builds a factory whose activity depends on imports, then customs can “cut its legs”. And if plants are created whose success depends on maintaining the tariffs, they can be finished by the decision to abolish duties – explains Krugman.

“I repeat, the thing is that there is no really economic philosophy of the magician, there is only what corresponds (at a given moment) of the crunch of ego Trump” – emphasizes the Nobel Prize winner.

He explains that adverse signals regarding the economy include Inflation, an increase in the interest rate on the US -US government bonds, as well as the fact that liquidity on capital markets is currently guaranteed primarily by hedging funds, but if they suffer as a result of “unpredictable policy”, this will cause “stress in the entire financial system”.

“New York Times” writes on Thursday that Trump's decision regarding the suspension for 90 days of implementation of customs duties “was dictated by the fear that his risky play with the customs can turn into a financial crisis. And unlike the previous two breakdowns in the last 20 years – the global crisis of 2008 and Pandemia in 2020 – only one man would be responsible for this crisis.”

“Wall Street Journal”, just like Axios, estimates that Trump has been buckled about tariffs also due to the opinions of the most influential bosses of companies. Particularly important were the opinions that Larry Fink, the executive director of the Blackrock Grand Investment Fund, and Jamie Dimon, head of the Bank JPMorgan Chase.

Fink announced that the presidents of the most important corporations believe that the country is already recession. Dimon published a note on Monday, warning them that “recent duties will most likely increase inflation and incline many (experts) to predict a possible recession.”

“You needed weekly declines on the stock markets and bonds, along with the persistent campaign of managers, congressmen, lobbyists and foreign leaders to persuade Trump to withdraw the main element of his revolutionary tariff plan for 90 days,” says “WSJ”. (PAP)

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