"TATS KNOTT HOW TEARIFFS WERK"

Tiggity® · 2025-05-21T08:00:22.870Z

Not sure, but we may be about to find out.

Tiggity®

Ultimate Clemson Legend [108654]

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It's not real good. Credit default swaps on US debt are rising to levels

May 21, 2025, 8:48 AM [ in reply to Re: What happens when you start to question something that shall not be questioned? ]

that would suggest the debt is already at a downgrade. The vultures of our financial system are the hedge funds and others who buy CDS (credit default swaps). They circle when they smell a carcass, and are often the first sign of a problem. The markets and ratings agencies will be perhaps the very last signs of a problem.

Way back in the day, the ratings agencies rated most mortgage backed securities (MBS) as AAA. A few were AA. Hardly any were B or below. And from 2003 until 2008, they kept rating MBS as AAA, KNOWING they were full of crap sub-prime mortgages. They kept that AAA rating until the securities literally collapsed. The same people, the Michael Burry types, who literally had to invent a CDS market on MBS, those types are now betting against US debt, instead of mortgage debt.

Our national debt has been on an unsustainable track for decades, ever since Ross Perot ran for president, and before that even. And yet, only recently did Moody's downgrade US debt from the very top level. Others had downgraded it a TOUCH for over a decade. And if the credit ratings agencies drop a rating, you can assume the actual rating is far worse.

Switching gears, our debt is $36.8T. The higher our debt goes, the more sensitive it is to inflation and interest rates, the less inflation it takes to reach insolvency. As it grows, the level of inflation required to make us insolvent declines. We have about $4.9T in federal revenues each year, then 6+T of expenses, $1T or more being interest payments on our debt. Government spending has risen 25%+ since we had that bout of inflation, and most of that is simply in higher interest payments.

Enter Trump, and his tariffs. It is about the LAST thing anyone would ever want to do if you're in the debt situation we're in. What MAY be happening is the short sellers, the vultures, they probably know the truth that even the most skeptic tariff economists likely ignore because it's quantitatively unknown, and speculative at best, and is so bad that thinking about it would suck.

We have a trade deficit for a reason. We import more than we export, for a reason. How does a nation with 330 million potential human labor units, CONSUME more labor and resources than 3.5 billion other potential human labor units on this planet? Easy, you farm off excess labor, using dollars to leverage the labor and supply chains. Take China as an example. Trump has currently what a 30% tariff rate with them? We have just under a $300 BILLION trade deficit with China, prior to tariffs.

Now, every single American dollar sent overseas to BUY something, that is shipped back to the US, that dollar sent is multiplied in labor, to varying degrees based on currency disparities. For China, it's roughly 4 to 1. For every dollar we send to China to build/make something, we are shipped $4 worth of Chinese labor and products. The average Chinaman makes $16K a year in dollars. Average American makes $65K....roughly 400% more. So we SAVE 400% (minus shipping) making the product in China for US consumers to buy inside the US. They also have 4x the labor force to make stuff over the US, and do it 4x cheaper.

So.....when you add a 10% tariff to the goods as they're imported, you're adding essentially a 10% premium on top of 400% labor returned. Keep in mind the tariffs are taken at the ports, upon import, and are based on the market value of the product being imported in DOMESTIC dollars for domestic consumers. The margins of labor to dollars varies by country. Mexico is roughly 8-1. Vietnam is far higher than that, around 40-1. People who don't understand the labor part of the equation, and only see dollars (eg. Trump & Co), they will not take the labor into account at all, but they are taxing FAR more labor than they realize.

Because of this ignored LABOR part of the tariff equation, we stand a chance to see the "minor" inflationary pressure tariffs cause, to be multiplied due to the strength of our dollar. So when we import $500 billion in goods each year from China, we are importing $2 TRILLION in GDP. Or, likewise, the equivalent of $2 TRILLION in US domestic labor, that Trump wants to bring back to the US?

Second aspect, we lack the human capital (LABOR) to offset lost imports. We simply don't have the labor capacity to absorb the jobs we farm off to ChinaVietnamMexicoEtc. We have more dollars, a stronger economy, than we have the labor to support, without outlets like imports and illegal domestic workers. If you kick out all the illegals, and balance our trade, we will have SIGNIFICANT inflation, far higher than the MAGA crowd expects, and that magic inflation number needed to SINK OUR DOLLAR/ECONOMY/GOVERNMENT will shrink dramatically. Was 12%, then dropped to about 10%, could be as low as 8% now. The current fed lending rate, based on low inflation, is at 4.5%. And with this, we're paying $1T in interest yearly. At 8%, we pay $2T servicing debt, ON TOP of the deficits we already run. At 10% inflation on imports, IF THAT IS MULTIPLIED due to the labor aspect of the equation, then you can easily see that 10% tariff multiplied, making overall inflation go up more than expected. When you add 10% to the $4.4T part of our economy and GDP that is comprised by imports, and that 10% is multiplied by dollar leveraging, your tariff impact will be magnified far more than 10%, cascading into other areas driving up overall inflation far more than expected.

This is what the hedge fund guys are betting on, and I think they are likely onto something. The federal Reserve is already stepping in and buying treasuries as the market for US debt is contracting and the dollar is weakening. They're trying desperately to keep that 10yr bond yield below 5%, because that is what mortgage rates follow. That's why mortgage rates are rising now, and are at 7% now, and will keep rising no matter what Powell does with the interest rates, because the dollar is tanking.

If I wanted to collapse the US economy, and render the governemnt insolvent, and possibly start a revolution and become king, I'd do just what Trump is doing. Trump plowed into his economic policy under the assumption the dollar was supreme, and would remain supreme. He's wrong on that. By design or ignorance? Does it matter?

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I found a use for AI, interpreting Tiggity posts.

Summary:

The article argues that the U.S. economy is in a precarious position, evidenced by rising credit default swap (CDS) prices on U.S. debt—signaling investor concerns akin to a debt downgrade. The author draws parallels to the 2008 financial crisis, where rating agencies delayed acknowledging the risk of mortgage-backed securities, implying a similar underestimation of current U.S. debt risk.

The U.S. national debt has reached $36.8 trillion, with annual revenues of $4.9 trillion and expenses exceeding $6 trillion—over $1 trillion of which is interest. As debt rises, inflation and interest rate sensitivity increase, making insolvency more likely at lower inflation thresholds.

The article criticizes Trump’s tariff policies, suggesting they worsen the debt situation by disrupting global labor arbitrage. By imposing tariffs, especially on China (where labor is significantly cheaper), the U.S. risks importing inflation and reducing economic efficiency. The U.S. lacks the labor capacity to replace cheap foreign imports domestically, and if trade is rebalanced or illegal labor removed, inflation could spike.

Hedge funds and other investors are betting against U.S. debt, anticipating that these dynamics—rising tariffs, constrained labor, growing debt, and weakening dollar—will lead to higher inflation, rising interest payments, and possible economic instability. The author suggests that current monetary policy (like the Fed buying treasuries) is a desperate attempt to prevent collapse.

What happens when you start to question something that shall not be questioned?

Re: What happens when you start to question something that shall not be questioned?

Re: What happens when you start to question something that shall not be questioned?

Trumps One Big Beautiful DEBT Bill may not good for Merica***

Re: Trumps One Big Beautiful DEBT Bill may not good for Merica***

Re: Trumps One Big Beautiful DEBT Bill may not good for Merica***

Re: Trumps One Big Beautiful DEBT Bill may not good for Merica***

Re: Trumps One Big Beautiful DEBT Bill may not good for Merica***

It's not real good. Credit default swaps on US debt are rising to levels

Thanks ChatGPT

Here it is stripped to the basics: FAFO***

Re: Here it is stripped to the basics: FAFO***

If you wanna start talking bearporn

Way TfuckingL; DR***

Re: It's not real good. Credit default swaps on US debt are rising to levels

It's like all my Clemson econ professors were right, and the effects of the

Whoa all the young MAGA bros got this! Do you even work out?***

Can't help but think the exchange rate/dollar to labor differences

No one's bringing anything back to America. We're just shifting the chess

I know that, and you know that, but I don't think the MAGA crowd knows that.

And nobody unemployed now is taking a factory job like those.***

We don't really have factory jobs like those given our lack of slave labor

Glad you now understand the tariffs were a terrible idea.***

They've caused me some issues, but overall it is looking like they're going

It doesn't appear the jobs are going to get filled.

Which in turn drives automation. Hence the reason there's a million machine

Egg-zackly. And even if someone or a company were able to build manufacturing

Hmm, not true. Most of the auto makers are ramping up domestic production

Auto-makers have been in the US for a while

Hand jobs, huh?

Those doods have the tightest grip of anyone you'll ever meat

Not all of them, like Isuzu. Most of this stuff has recently been green lit

TIL Lakebum has had my bathroom faucets in his sun kissed hands***

Do a Buy America Act analysis on a company's portfolio of sellable items

That's definitely true for a lot of things and isn't going to change

I don't think that's true...what I would say is that there's not as much...

It'll take years, maybe decades to bring anything back

yep...labor and infrastructure aren't going to allow a very rapid change...

I think the Upstate is a good example of how quickly the work force can change

You're right, we don't need low skilled labor. But if we're making it from

What are you meaning specifically?....

We are a direct FTE line to Nucor

Basically what you just said

Re: What are you meaning specifically?....

hmm...I'm not as negative long-term...

We don't need schools to do anything other than not push the idea everyone

This trend ended in the late 2010's

On the other side of that coin, students are taking advantage of dual credit

That's good to hear on both fronts***

It costs almost as much sometimes for an American to unpack a product and put

Oh no doubt, no argument there...

Is Timken still open in the upstate? I thought they moved all that to Mexico

There's a couple, they've got plants in China and probably Mexico too

I'd rather have Timken bearings, or SKF's or even NSK's

Vietnam is almost equivilent to Venezuela when it comes to dollar

My point is there's more "out there" than the admin realizes

We are doing some serious stuff with robots and automation

Look man, you are harshing my mello. I have some RSU's coming due Friday

hedge

Its an RSU. I have one choice.

lol

I hadn;t noticed the BTC run up.

it's at ATH

Stock market will be running on Solana in 5-10 years. Heard it here first***

Re: Stock market will be running on Solana in 5-10 years. Heard it here first***

Just checked..

Re: Its an RSU. I have one choice.

Crypto and gold are the best hedges, along with Ligustrum and Holly bushes.

Like.in your opinionumCOVID

Re: Like.in your opinionumCOVID

What's left to debate?

This is a typically American, myopic take.

When there were huge blinking signs on Sullivan's island going to the beach

They did this all over the world. Some places MUCH MUCH worse.

DHEC can get shot in the face too, which is probably a big reason we didn't

Telling me it was worse in other parts of the world is like telling your kid

Re: But,

I'll always take the opinions of a back woods hick lawyer turned governor

Re: Like.in your opinionumCOVID