People who know nothing of real life tend to talk of a financial bubble that is either in danger of popping or is about to pop or (for the apocalyptically minded financial commentators) has popped already, so grab your duffle bag of spam and shotgun shells and head for the hills. But it’s just a cute little soap bubble, full of warm, moist air and rainbows, that gently wafted away from a giggly little girl’s bubble bath; or is it?

Of course, it is a financial bubble, not a soap bubble, and that makes it serious: it might make multibillionaires into mere billionaires, and multimillionaires into a mere millionaires, and so on. This may force them to cut the lavish allowances of their various serial bounty wives, mistresses and concubines, who would then pout prettily, sulk and perhaps even withhold a few bedroom favors involving straps and whips and what have you. And we all know how awkward that would be for someone who’s been a very bad boy and needs to be punished.

Perhaps it is not a bubble at all but an ugly, festering abscess that has been leaking into the bloodstream and causing sepsis. As sepsis sets in, blood begins to curdle and clot, cutting off the flow of oxygen to the fingers, hands, arms, toes, feet and legs, causing various tissues to turn necrotic and gangrene to develop. Life-saving measures are then needed, including antibiotics and amputation of gangrenous extremities. Former Treasury Secretary Janet Yellen would seem to favor this second analogy; she likened the effects of the import tariffs recently introduced by Trump to “the worst self-inflicted wound.” Indeed, amputations due to sepsis-related gangrene do leave surgical wounds that may be described as nasty if the surgeon is an incompetent hack.

Is Trump an incompetent hack? We will never know, because the US Constitution does not provide a president with a scalpel. Therefore, instead of lancing the abscess, a.k.a. “bubble”, he was forced to resort to placing a tariff tourniquet around the patient’s neck. This was an obvious device for him to resort to: in the US, short of a veto-proof majority in Congress, the president can set and modify tariffs on a whim. He was then forced to loosen the tourniquet a bit when various blinks and bleeps filled the emergency room, making it obvious that the patient was no longer breathing.

The linear first-order logic is that tariffs will cause imported goods to cost more, favoring domestic producers and reducing the trade deficit and, in turn, the national debt. Therefore, in what at first glance appears to be an impeccably logical approach, each nation got a tariff in proportion to the US trade deficit with that nation. The nonlinear multidimensional nth order logic on which the global economy actually operates is that tariffs will:

• shut down much of the remaining production in the US because of very expensive or altogether missing materials and components,

• crash both the stock market and the bond market as foreign investors dump dollar-denominated assets,

• trigger a wave of retail bankruptcies because retailers will no longer be able to supply the market at prices which consumers can afford,

• cause inflation to spiral out of control as tariffs force consumer price increases,

• necessitate a wave of money printing, which will no longer be sterilized through trade deficits funneled back into US stocks, bonds and real estate as foreign investment

• and force the US, along with some (though not all) of its main trading partners into an inflationary depression.

The only benefit of all this to the US is that US federal debt will become pretty much irrelevant, since it will be repriced in what might as well be wooden shekels that nobody would want anyway. But before that happens borrowing costs, along with interest payments, will shoot up, and interest payments, which are already second only to Social Security payments, will eat up what will remain of the federal budget.

A major benefit to most of the rest of the world will be that the wasteful old dollar reserve currency system will be no more and trade will be conducted in local currencies, now digital and funneled frictionlessly through central banks based on bilateral trade relationships. Although a lot of time has been wasted discussing the topic of alternative reserve currencies, the important point is that reserve currencies (that is, capital held in reserve rather than deployed productively) are an obsolete concept. On the one hand, modern information technology makes international trade using digital currencies managed by central banks practical and relatively cost-free; on the other, the US no longer has the industrial, resource or military superiority to browbeat the world to honor its greenback.

But what is the nature of this financial bubble and/or abscess that is either popping or being lanced? It started with the US living beyond its means, which it has been doing since the 1970s. The US has been systematically running a budget deficit, financing it by federal borrowing and running up a debt which currently stands at $29 trillion dollars. The extra money allowed the US to import more than it exported, running up a trade deficit. The exporting nations then had to find something useful to do with all the excess dollars they were accumulating. They invested them in US Treasuries, thus closing the circle, allowing the US to continue borrowing.

Thus, in effect, the US has been borrowing money from foreign nations with which it fueled not productive investment (which would have been reasonable) but consumption, leaving behind nothing but a pile of debt with no productive collateral to support it. Trade deficit money also poured into US equities and inflating stock prices to a point where they became purely speculative and not supported by dividends, as well as real estate, making housing unaffordable to millions of people.

Along the way, widespread access to money borrowed from foreigners made it possible to import products instead of manufacturing them locally and a giant wave of offshoring occurred, to the point that now the US economy is 80% services and 20% everything else. As a result, the US industrial base, including plant and equipment and all the rest of the industrial infrastructure is either decrepit, obsolete or has been scrapped. Skilled industrial labor, institutions for training it, expert communities and skilled industrial management have evaporated: most of the Americans who knew how to make stuff are either dead or retired.

What industrial activity remains, including construction and maintenance, is desperately dependent on imported components, many of them from China. All other commercial activity likewise depends on imports: entire retail chains such as Walmart would simply stop functioning if container ships from China stopped showing up at US ports. Import replacement is possible (as has been shown by Russia since 2022) but it is an arduous process of setting up production lines and readjusting supply chains that takes time and capital, and the US has neither.

An oft-repeated trope is that high import tariffs will cause severe damage to the Chinese economy and make the Chinese cry uncle and suddenly become very agreeable and willing to export to the US entire factories (together with the workers?) instead of just the products made in them. This is an odd point of view to say the least. If US-China trade were zeroed out, the US would lose 13% of its imports and 6% of its exports, while China would lose 15% of its exports and 5% of its imports.

These are not small numbers, but then US-China trade produces just 2.7% of China’s GDP while Chinese GDP growth estimates for this year are between 4.1% (IMF) and 5% (Chinese government target). But China would not lose 2.7% of its GDP since it is in active discussions with other nations on redirecting its US exports to them, perhaps at a discount, but still profitably. Even if this effort fails, all that will happen is that China’s GDP growth will be temporarily reduced. Meanwhile, what this means for the US is empty shelves at Walmart and other retail chains and stopped assembly lines at most factories, including military contractors, due to lack of Chinese-sourced components.

Another oft-repeated trope is that high import tariffs will magically restore American industry to its former glory, producing an effect similar to that achieved by the protectionist William McKinley, the 25th US president, back in late 19th century, when US industrial production grew by leaps and bounds. The hope is that high import tariffs will not produce an effect similar to the Smoot-Hawley Tariff Act of 1930, which served as the trigger for the Great Depression. But neither of these situations resembled the one the US faces in the present, which is a trifecta of military impotence, industrial decay and financial ruin. Add resource depletion to this already powerful mix and what you get is a recipe not for some MAGA pipe dream but for collapse.

Resource depletion has been endlessly discussed since around 1970 when the US passed its peak of conventional oil production, was forced to start importing oil and, oh by the way, was also forced to sever the connection between the US dollar and gold (that was not a coincidence). This topic was actively discussed for decades and there was, for a time, even a Peak Oil movement that studied energy depletion and even made some accurate predictions. Global conventional peak oil production peaked in 2005-6, right on schedule, oil price shot up to close to $150/barrel and a couple of years later there came the global financial crisis of 2008 (that was not a coincidence either).

But right around then shale oil in the US came on stream and made the US once again the world’s biggest oil producer — for a short time. That time is coming to an end: shale oil production has largely stopped growing and is now predicted to start declining around 2027. Unlike conventional oil, shale oil from fracked wells tends to decline precipitously and will go off stream just as rapidly as it came on stream — within a decade or so. The US will be forced to start importing oil once again, but this time, instead of just printing dollars, it will be forced to earn foreign currency in order to pay for it, and the question is, “How?” Given that there is no good answer to this question, it is reasonable to assume that the US will become, overall, a very bad investment.

This bit of perspective should go a long way toward explaining what has been happening in US politics. With collapse on the horizon, billionaire friends huddled around Donald Trump and tried to come up with a plan for saving their fortunes. They conspired to dethrone the autopen-wielding zombie and his merry band of thieves and to make Trump president, and in this they succeeded. But now what? The US ship of state is sailing full steam ahead toward a big rock called “collapse” while half the crew mutinies and demands that the captain not touch the helm: “Hands off!” they shout. There is neither the time nor the resources to come up with a great new plan and rush it through Congress. What is Trump to do?

The obvious first step is to cut the engines. To this end, Trump is doing all he can to shut down or dismantle as much of the federal bureaucracy as possible as quickly as possible. USAID is gone; US State Dept. is cut in half; the IRS bureaucracy is taking the option to quit with pay. The US ship of state is still sailing toward a big rock, still isn’t steerable, but it might be slowing down.

The second obvious step (briefly switching from the ship metaphor back to the festering pustule metaphor) is to amputate gangrenous limbs. The EU and NATO were initially contrived to make it easier for the US to control Europe. But now both of these entities are completely pointless from the point of view of the US and are to be severed. The spectacle of them trying to organize some sort of bizarre cargo cult around the Ukraine’s rotting corpse now that US money has dried up is enough to convince anyone that these George Soros-trained muppets need to have their allowances cut off and be sent to their rooms without supper.

The Europeans are planning for Russia to invade them (while Russia is planning no such thing, having lots of far more interesting and lucrative engagements) and this can only mean one thing: the Europeans are ready to start fighting each other again. After all, 80 years is far too long for the Europeans to abstain from mindlessly slaughtering each other. Keep in mind, just England and France were at war with each other for close to 200 years! Already Germany has occupied Estonia, Latvia and Lithuania while France has occupied Romania. Türkiye (not in EU but still in NATO) has just bitten off a fat chunk of Syria but seems to be choking on it. Britain, always eager to swoop down on a bit of fresh carrion, is circling in on the rotting remains of the former Ukraine. Does the US want any part of that? Is there any doubt that it doesn’t? No, the US wants Greenland, Canada and the Panama Canal. The expression “circling the wagons” comes to mind.

Same with the UN. It’s a hypertrophied bureaucracy that eats freshly printed US money. Therefore, US funding for the UN has been cut without mercy. The new logic in international relations is “You eat only what you kill.” Even the Israelis are finally being shown their place with a question being raised as to “Whom is governing whom?” After all, it would be so much more cost-effective from the point of view of the US to just send all those Jews back to Russia. The Jewish Autonomous Region is ready and waiting for them! And what, you may ask, about the former Ukraine? Here, I might quote Marco Rubio, or maybe Steve Witkoff, or maybe JD Vance: “Just shut up about it, would you?!” (You see, that sad former Soviet Socialist Republic is the scene of the latest and most shameful US military fiasco, and so it is impertinent to keep bringing it up.)

The third obvious step is to rock the boat by having the crew panic and stampede from one side of the deck to the other and back repeatedly. One day there are tariffs, the next they are postponed by 90 days. One day iPhones are subject to tariffs, the next day they are not, but then again, maybe they still are. Spreading fear and uncertainty from the Oval Office is a good way to make financial markets gyrate wildly, giving those in the know an opening to buy low and sell high over and over again. Some pencil-necked nonentity in the US senate even threatened to start an insider trading investigation, then realized that he’d also end up investigating his own insider trading.

At this rate, before it all crashes, Trump’s merry band of billionaires may end up as trillionaires. It will be quite a trick to do anything with these trillions of paper wealth before they turn out to be just bits of paper, but they are already thinking about it. They are busy talking to the Russians, pretending that it’s about peace in the former Ukraine, but really trying to get in on the Russia-China tandem, which looks to be the next great thing in the history of the planet. With Russia in possession of key technologies and not at all short of natural resources and China now the world’s manufacturing hub, it is a match made in heaven. The Russian ruble is now the world’s strongest currency, followed at a respectful distance by gold. The US dollar? Forget about it!