*** 8/27/25 - Dan Drezner - Worst Economic Experiment Ever - No matter how this plays out, America will lose..............
Buzz Sawyer
"The first possible outcome is that Trump triggers an escalating financial crisis. Markets have already reacted to Trump’s assault on the Fed by betting on lower short-term interest rates but higher long-term interest rates. The combination of Trump’s misbegotten economic policies will lead to an extremely unpleasant stagflationary cycle. And a lot of people will suffer.
The second possible outcome is even more disturbing: financial markets will be copacetic to Trump’s idiocies for a much longer period than anyone expected and then collapse. "
The hard-working staff here at Drezner’s World is fully aware of all the extralegal moves that the Trump White House have made in recent In part this is due to the utterly depressing reality of the current situation. But it’s mostly because at this point things can only play out in one of two very bad ways — and both pathways wind up at the same endpoint. Drezner’s World is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. First, let’s consider the ongoing policy fiascoes:
In the past ten days the Trump administration has doubled down on piss-poor economic policy. Last week the president announced that the federal government was acquiring a ten percent equity stake in Intel. The company confirmed the deal on its own website, explaining, “The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program.” This comes on the heels of Trump’s other attempts to extort profits from U.S. firms, demand “golden shares” from foreign takeovers of U.S., firms, and browbeat companies into firing people he doesn’t like and squelching criticism he doesn’t want to hear. Little wonder that economic conservatives are disgusted and the Financial Times has dubbed Trump the “Dirigiste-in-Chief.” Meanwhile, Secretary of Commerce Howard Lutnick continues to say extremely stupid things about government control over the U.S. economy.¹ In a CNBC interview he suggested creating a Putin-style national and economic security fund. In that same interview he said the government should acquire equity stakes in defense contractors, stating, “what’s the economics of that? I’m going to leave that to my secretary of Defense and the deputy secretary of Defense. These guys are on it and they’re thinking about it.” To put it gently, Secretary of Defense Pete Hegseth has bankrupted two NGOs already, so I’m not sure he’s the guy you want to be thinking about this question. And then there is what Lutnick said at yesterday’s cabinet meeting:  Adam Schwarz @adamjschwarz.bsky.socialThe Trump Cabinet laughs as Howard Lutnick announces he will demand that American universities give the US government a stake in patents that they own.
More federal government coercion of private entities into ceding ownership.
More federal government intimidation of universities.  Tue, 26 Aug 2025 18:39:37 GMT View on BlueskyFinally, there is Trump’s assault on the Federal Reserve. In claiming to have fired Fed Governor Lisa Cook without any kind of valid procedure — or evidence — the administration is obviously threatening the independence of the Fed. Cook is not going anywhere, so we will have to see how
So what will happen? Look, none of this is rocket science. Any decent social scientist would be able to explain why someone with Trump’s leadership style will crash and burn an economy if there are no constraints on his power. The question is what happens now. There are two possible outcomes, neither of them is good, and both of them arrive at the same ending. The first possible outcome is that Trump triggers an escalating financial crisis. Markets have already reacted to Trump’s assault on the Fed by betting on lower short-term interest rates but higher long-term interest rates. The combination of Trump’s misbegotten economic policies will lead to an extremely unpleasant stagflationary cycle. And a lot of people will suffer. The second possible outcome is even more disturbing: financial markets will be copacetic to Trump’s idiocies for a much longer period than anyone expected and then collapse. Nathan Tankus explained why this was possible in Politico:
In this scenario, markets are not leading indicators but lagging indicators of how government policy affects the real economy. Which means, in the end, a somewhat different path to the same end: a weak, unproductive U.S. economy. It is this equifinality that makes Trump’s policies such a bad economic experiment. The question is not what will happen due to Trump’s array of statist, corrupt policies; it is how we all wind up worse off. Thanks for reading Drezner’s World! This post is public so feel free to share it.
1 Is there a world in which this degree of state intervention produces superior economic growth? Perhaps, but it is not this world, in which the state is run by presidential whim and U.S. state capacity has been weakened so badly. You're currently a free subscriber to Drezner’s World. For the full experience, upgrade your subscription.
© 2025 Daniel W. Drezner
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