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this post was submitted on 01 May 2025
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That's fair, the idea that US economy might be imploding is still very difficult for people to swallow, and it's probably gonna take some serious shocks before real dumping begins.
#NothingEverHappensGang.
Despite initially buying into it, I don't think the implosion is a given at this point. It's not really in your interest to dump an asset that you're holding a lot of, it's better to sell quietly so no one else notices that people are edging out the door. But besides the fact that the data is public and available, what do you move your stuff into? Gold? Your own bonds? Other foreign bonds/currencies? There isn't really a good backup safe haven, so I imagine what we're seeing right now is people a rush to figure it out quietly.
It's entirely possible that the looming supply shock hits the US and the government's attempt (or lack thereof) to respond to it is what finally causes the fireworks, but it's also possible someone near Trump talks some sense into him, he talks to China and they extract some mild concessions, and the ships start sailing again. People can tolerate a month or two of shortages more than they can tolerate indefinite shortages. Who knows, though? That's the fun of living in an economy balanced on a knife edge by a dementia-addled blob of seemingly-sentient adipose tissue.
Thing is that if the asset you're holding is visibly depreciating in value, and there's no prospect of that reversing then you have little choice left. Gold is in fact being bought up by banks around the world. Also, China issues bonds and if their economy is seen as being more stable, which it obviously is, then it makes perfect sense to cut your losses on the dollar and start buying Chinese bonds instead. Buying bonds is literally a confidence vote on a particular economy at the end of the day.
Here's the other thing to consider. Chinese companies are actively redirecting their trade away from US as we speak, and a lot of that is going towards domestic economy https://archive.ph/EAI45
Once companies redirect their trade, there is little reason for them to make themselves reliant on US again in the future. So, regardless of what Trump's dream team does from here on out, there are going to be less goods from China coming to the US going forward. Many of these goods are simply irreplaceable because nobody else is producing them, especially not in such volumes. The ships might start sailing again, but in increasingly reduced volumes.
The US is facing a situation where there are less goods available which means prices for the remaining goods go up, and that in turn drives up the cost of living which is already untenable for large swaths of the population. It's already widely expected that the US will go in a recession this year. And the only card US has to play is that it's a consumer economy. If consumption drops then it's a death spiral for the US.
It's not, though, not yet. Tbills are still paying way more interest than Japanese government bonds and so if you believe that the US isn't teetering on the brink of default, it's still the place to park your cash.
China does issue bonds, but their current outstanding debt is $2.5 trillion US equivalent. They don't currently have the capacity or the desire to issue enough debt to replace the US as the top dog.
There's still plenty of reason to reorient back to the US if the winds shift again. The typical American consumer still has way more international purchasing power than the typical Chinese consumer. The dollar is weakening, but it's still way stronger than it was around the crash in '08.
I don't disagree that the winds of change aren't blowing in the US's favor, but I think it's going to take a lot longer than we think to wind down the empire. We've got a little bit of a bias because we're focused on where the cracks are forming, but we can't lose sight of the fact that there's a lot of interest in giving the US to back off the window sill and rejoin the party. Trump may be dumb and reckless enough and the checks on his power weak enough that this time Uncle Sam really does jump, but I wouldn't look for guarantees
Having lived through the collapse of USSR, I can tell you that these things happen very suddenly. One day everything seems normal, and the next you're fighting for bread so you have something to eat for the next week. Once an inflection point is reached, the unravelling happens at an incredible pace from there on out. Maybe the US isn't quite there yet, but a lot of indicators are certainly pointing that a breaking point is indeed approaching.
That's not the only model, though, slow decline is a possibility (and it seems like that's China's preferred path). As far as looking to the market for indicators goes, there are some signs that the US is weakening but the broader macro trends suggest that the big money's betting on the US to continue. Big money can be wrong; Trump could totally torpedo the US economy on his own and it doesn't seem like anyone wants to stop him, but if that's the case we won't see it coming.
China might prefer a managed decline, but it's dealing with a US political class too incompetent to even attempt one. Do you honestly believe clowns like Lutnick or Bessent, who barely grasp the crisis unfolding around them, have the slightest clue how to fix it? Wall Street is often wrong, if you're banking on their confidence then buckle up for disappointment.
I get why denial runs deep. If your whole life, crises were 'solved' and things limped back to 'normal,' it’s easy to assume the system's resilient. But each 'recovery' has been a wealth transfer to the top, leaving workers with thinner margins and less capacity to survive the next shock. Today we see record debt delinquencies, credit cards funding groceries and rent, a populace already financially underwater.
Tariffs will act as a catalyst spiking prices, crushing consumption, and triggering further business collapses. The resulting resulting job losses will accelerate the downward spiral. This is a classic crisis of capitalism.