You’ve heard the term “emerging markets.” That was coined way back in the 1980s, to describe a range of countries that were growing wealthier. Not to Western levels, perhaps, but at least “emerging,” in this context, from absolute poverty. They were in Asia, Latin America, and so forth.
In the 1990s, go ahead and chuckle, even Russia was considered an “emerging market.” It collapsed, into autocracy. Perhaps you’re seeing some foreshadowing of my point here.
“Submerging markets” is a term that some clever guys coined later. Around the 2000s. Then, the idea was that richer countries might “submerge,” or grow poorer. We didn’t really that happen much. Until now.
There aren’t many submerging markets in the world. Perhaps the prime example is Britain, which chose Brexit, and tanked its economy, destroyed its vaunted public institutions, and experienced the sharpest, hardest decline in living standards in recorded history. All of that’s what America’s doing right now, too—only to even more staggering effect.
So. Submerging markets. What does that really mean? Right now, you’re worried about your life savings, stock portfolio, etcetera. And a lot of you have told me that you share what I write with your portfolio managers, and they’re like, “no way! He’’s wrong! It can’t happen here!”
Let me introduce you again to our new reality. Wall St today rose. It didn’t expect what was obviously going to happen to happen. Which is that…
Trump just nuked the economy.
Capital Flight, or What’s the Opposite of a Haven?
So what happens in submerging markets? We discussed capital flight a little bit in recent essays. But now it’s for real, even though it’s already begun—now it will intensify.
I want you to really understand this. Capital flight means just what it sounds like. Capital flees. For safer shores. Not just money, financial capital, but also human capital, aka people, and ultimately, organizational capital. How long do you think smart corporations are going to stick around in Trump’s America when they can be headquartered anywhere in the world? But I’ll come back to that point.
Every country in the world, and you might not know this, or you might, has a credit rating. Just like you do. And that credit rating assigns every country, and it’s currency and bonds, a level of risk, which is a level of safe investment.
You probably didn’t know this, but America’s credit rating got downgraded already. That was last year. From the highest one, to the second highest one—countries get letters, not numbers, like you and I do, but that’s besides the point.
America sort of got away with it that time. We saw relatively muted effects. That was because sane people were still in charge of the economy, and so there was hope.
But this time, America’s credit rating is almost certainly going to be downgraded again, and again, and again. And this time, it won’t get away with it. What does a lower credit rating do? If your credit rating goes down, you’re going to be able to tap way less credit. It means less investment.
That is what capital flight is, in the simplest way I can explain it to you. This is a mechanical process. That’s important to understand. It’s literally just like gears in a machine. Computers do it, not people. Algorithms. This is an automated system. And while America yesterday could slow that machine down, today, it can do that a lot less.
Capital flight means that America is becoming less investible by the day. Capital is already fleeing for safer shores. Trust and faith in America just imploded. That is why the dollar is falling. And at the end of the day, it also tells us that the stock market has to fall, too, and so does the bond market, probably. Should you be worried about grandma’s life savings? She's probably smarter than you, because she’s been around the block. You should be worried about yours.
What’s the opposite of a Haven? That’s what America’s becoming. Would you invest your money, life, future in…Russia…if I asked you do? Perhaps you see why I ask the question. But now ask yourself: why do countries have to make wars? Because they can’t attract capital to begin with.
How Trump Just Nuked the Economy
Now. Let me explain to you what “nuking the economy” means, more fully. And I’ll do that by explaining just.whyAmerica’s credit rating is going to fall.
Your credit rating is based on something like your debt to income ratio. So it is for countries. Their debt to income ratio, along with a good history of past repayments, etcetera, determines their credit rating. What is a 20% across the board tariff going to do?
It’s going to shrink the economy.
It has to. Again, this is mechanical. It’s not up for debate, it’s just physics. Prices will spike, suddenly, fast and hard. People are already stretched to the limit. They can’t afford to spend more. They will have to spend more the same stuff, which means cutting back on other stuff. That will, in turn, cause all kinds of negative effects: layoffs, unemployment, bankruptcies, a wave of businesses closing.
That’s a shrinking economy.
There is no way around this fundamental fact of economics. None. There is no possible means by which raising prices in an economy dramatically, for the same stuff, can do anything other than shrink it, because of course, people are now effectively poorer, and that’s what a smaller economy really is.
Unless you think there’s a way that people suddenly paying way, way more for the same stuff is going to make them richer, the economy is going to shrink now. How much? The best paper on the subject, which was published today, speaks of a Smoot Hawley level effect. I’m pretty sure you can understand what that means, and I’ll discuss that more tomorrow.
Now let’s go back to the dull subject of credit ratings for countries. What happens when an economy suddenly shrinks? It’s debt to income ratio explodes. Again, that’s mechanical. No way around it. Bang. There’s your lower credit rating.
And as that happens, again, purely mechanically, automatically, capital has to flee America.
And that is how you make a submerging market.
What a Submerging Market Means, or, Not Sinking With the Ship
Now you are beginning to understand that when I said, Don’t Sink With the Ship, for the last year, I wasn’t kidding. That I meant it almost literally. And I’m glad if I helped many of you take protective measures ahead of the curve.
Let me now make it crystal clear what happens next.
As capital leaves America for safer climes and shores, what are the real-world effects? Capital is what makes markets. Less capital in markets means they fall. Now we are going to see, almost inevitably, stock markets fall, the dollar depreciate, and eventually, the world lose faith in US bonds, too—remember that dull subject of the credit rating?
And along this path, a whole lot of people are going to lose a whole lot of their life savings. That’s not a threat, it’s not even a warning, nor is it a prediction. It’s just an observation, because what I’ve been trying to teach you is that the above is as inevitable as tipping over dominos.
America’s retirement system is about to turn into a Weapon of Mass Destruction. That is what Trump nuking the economy means in practical terms. It works in a terrible way, at least in a moment like this. You deposit your money in an opaque set of systems over which you have very little control. Some guy called a portfolio manager has almost total control, faces no consequences, and at this very instant, is completely out of his or her depth.
They have never faced a situation like this before. And worse, even if they want to do the correct thing, they can’t, because they’re just cogs in the machine, too, and the Big Decisions are made at the top. All The Portfolios Must Be Structured Like This.
So millions upon millions of Americans now face the following situation. Their life savings are in a system a) over which they have no control b) doesn’t understand or grasp the magnitude of the catastrophe facing it c) isn’t equipped to deal with it and c) is going to be far, far too slow to act to protect them, and d) the point, can’t protect all of them.
Can’t, because it can’t really act until it’s too late. When Major Events happen, like the example of the credit rating downgrade, then, maybe, all those opaque portfolios over which Americans have little to no control will finally be changed up. But at that point, it will be too late. See my point? You are either ahead of this curve, or behind it, and the system as it’s designed is made to react.
But reacting after you’ve been nuked is a pretty bad way to avoid being burned.
So what happens as millions upon millions of Americans see their life savings go up in flames? Nothing good, and everything bad. That is why the paper I referred to above described a Smoot Hawley level event. Precisely because this is how depressions happen.
If we really face this scenario, then of course, the economy will contract, to begin with, and then as people begin to lose what they have, it will contract even more. Because they will spend, invest, consume, less. This is the “contractionary spiral” that is at the heart of classical theories of depression.
This is how you nuke an economy.
How to Start a Depression
Americans, I fear, don’t fully grasp the road that lies ahead of them. You dear reader, I hope, are in a different place, but in general, I don’t think that Americans fully grasp how devastating the above series of consequences will be. They understand, perhaps, that tariffs will “raise prices,” and that much if we’re lucky.
But this larger chain of consequences? I’m skeptical.
And that is a very bad thing. Because people will lose a very, very great deal now.
Now. Depression’s a loaded word. I’ll discuss it more tomorrow, like I said, but you don’t need to imagine the 1930s, because this isn’t the 1930s. Or is it? That’s a joke. Or is it? Kidding aside, just understand the point, which goes like this.
America is now a submerging market. A contractionary spiral is what makes markets submerge, or go from rich to much, much poorer. Along the way, institutions cease to function, as they’re doing in America now, because par for the course here is oligarchy, which is the political system that accompanies the collapse into lower levels of wealth and prosperity. The social order which accompanies oligarchy is called neofeudalism, if you want to think about it that way.
In a submerging market, markets will do precisely what that word suggests, which is sink. Maybe there’s even a fantasy world in which Wall St loves tariffs. Even that doesn’t matter, because if there is, it’ll just be counterbalanced by even swifter falls in the value of the dollar, because are you kidding me, nobody else in the world is foolish enough to follow along with that delusion.
So in general, in submerging markets, we should see markets sink. Yet it’s true that America’s markets are fairly psychotic, and I mean that almost technically for those of you who are psychologists, as in, broken from reality (who else could have believed in the “Trump Bump”?), and they might even go along with all this for a while. They might even say to each other, because “the markets” are just people, hey, you buy this from me at a high price, and I’ll buy that from youat a high price.
But in the end, reality must prevail, as it always does. “Liberation Day” will go down in history, but for all the wrong reasons. America now is not a society that the world can place much trust in. American stocks, bonds, and dollars are losing the faith of the world by the day. That is what capital flight is made of. And it proceeds through the dull example I gave you, things like credit downgrades, which are really just reflections of these larger psychosocial realities: the loss of trust, the shattering of faith, the breaking of bonds.
Americans, I fear, a whole lot of them, will learn these lessons too late. That is why I am teaching them to you now.
US anti-abortion group expands campaign in UK
Exclusive: Alliance Defending Freedom, which is funding case of activist Livia Tossici-Bolt, is lobbying against buffer zones around clinics
A rightwing US group backing an anti-abortion campaigner whose case has become a new source of UK tensions with the Trump administration is significantly expanding activities and spending in Britain.
The UK branch of Alliance Defending Freedom (ADF), which is funding the case of Livia Tossici-Bolt – who is being prosecuted for an alleged breach of a “buffer zone” outside a Bournemouth abortion clinic – increased spending on campaigning and other activities in the UK to more than £1m last year.
ADF UK’s income was more than £1.3m in the year up to June last year, according to records filed to Companies House on Friday. It included “ADF support” of £1,119,975.
The organisation held discussions with a delegation from the US state department, which visited the UK last month before the release of a statement in which the US voiced concern about “freedom of expression in the UK”.
ADF UK, which describes itself as an advocate for “the right of Christians and others to freely associate and share their faith in public”, has been heavily involved in lobbying against the introduction of buffer zones around reproductive health clinics.
Its cases have included that of Adam Smith-Connor, who was cited by the US vice-president, JD Vance, as an example of free speech being under threat in Europe, after Smith-Connor was prosecuted for breaching a public space protection order.
Tossici-Bolt, ADF UK’s latest high-profile case, was mentioned in the US state department statement on Sunday.
A verdict on her alleged breach is expected on Friday. She denies the charges.
ADF, which is designated a hate group by the Southern Poverty Law Center in the US, has close links with Donald Trump’s White House after endorsing his election campaign and has spoken of working with his administration on areas including the reversal of trans rights.
The current speaker of the US House of Representatives, Mike Johnson, is a former ADF lawyer.
Filings show that the organisation’s British wing has a staff of nine, one earning a salary of £100,000 a year and two others paid between £90,000 and £100,000.
The same records give an overview of ADF UK activities in Britain, which range from briefing MPs to supporting campaigns against the assisted dying bill, and “free speech” cases.
The organisation is planning a big event in September in Britain as part of a plan to train law and public policy students.
ADF UK has five directors. Two, including the lawyers Robert Clarke and Paul Coleman, are based in the organisation’s international branch headquarters in Austria.
UK reproductive healthcare providers have voiced concern about ADF’s role and cited the reversal of abortion rights in the US and pressure exerted by rightwing campaigners.
Louise McCudden, the UK head of external affairs at MSI Reproductive Choices, said: “Before safe access zones were implemented last year, the behaviour we saw outside our clinics included spitting, calling women ‘murderers’ and physically blocking people from entering our clinics.
“In the US, abortion clinics have been bombed and burned down, and anti-abortion campaigners have been known to gather outside clinics with guns. Doctors have been assassinated.”
Heidi Stewart, the chief executive of the British Pregnancy Advisory Service, said: “It is deeply concerning that US anti-abortion extremists are using their significant financial resources to attempt to influence women’s access to safe, legal reproductive healthcare here in the UK.
“Following the overturning of Roe v Wade and the re-election of Trump as president, the anti-choice movement in this country have become emboldened in their continued attempt to strip women of their rights, dignity, and future.”
An ADF spokesperson said it was a registered human rights charity in the UK and was grateful to the US for bringing attention to what it described as the “free speech crisis” in Britain.
“We advance the right to live and speak the truth for all people and are proud to support Livia’s case and the cases of our other clients who have been victims of ‘buffer zone’ censorship,” they said.
ADF was named in a Facebook post by the US Bureau of Democracy, Human Rights, and Labor (DRL), an office in the US state department, as being among organisations its delegation met while in the UK.
It also met officials from the Foreign, Commonwealth & Development Office and Ofcom, using its talks with Britain’s communications regulator to challenge it on the impact of new online safety laws on freedom of expression.
The freedom of expression statement was issued after the delegation met Tossici-Bolt and ADF UK.
Among the group was Samuel D Samson, who previously worked for US conservative organisations and was pictured wearing a Make America Great Again cap. He was appointed as a senior adviser at the DRL in January. On the day of Trump’s US election, he tweeted: “Today we choose God over pagan idols.”
The DRL’s interest in Britain marks a pivot by an agency set up in the 1970s to advance democracy around the world against the backdrop of the cold war.
President Trump fired six National Security Council officials after an extraordinary meeting in the Oval Office with the far-right activist Laura Loomer, who laid out a list of people she believed were disloyal to the president, according to a U.S. official with direct knowledge of the matter.
The six officials were among those vilified by Ms. Loomer during the meeting on Wednesday, the official said. Ms. Loomer walked into the White House with a sheaf of papers, which amounted to a mass of opposition research attacking the character and loyalty of numerous N.S.C. officials. She proceeded to excoriate them in front of Michael Waltz, the national security adviser, who was also in the meeting.
It was a remarkable spectacle: Ms. Loomer, a Sept. 11 conspiracy theorist who is viewed as extreme even by some of Mr. Trump’s far-right allies, apparently wielding more influence over the staff of the National Security Council than Mr. Waltz, who runs the agency.
Mr. Waltz was not among those who were fired; nor was one of Ms. Loomer’s top targets, the deputy national security adviser Alex Wong, the U.S. official said. Apart from the firings, several other officials who had been detailed to the council were reassigned back to their home agencies over the weekend, even before the White House meeting.
The account of the White House meeting and the subsequent firings is based on interviews with eight people with knowledge of the events. They asked for anonymity to discuss confidential meetings and discussions.
Ms. Loomer has been part of a group effort by some Trump allies to disparage members of the president’s White House staff whom they consider too hawkish, too eager to commit American troops around the world and fundamentally at odds with Mr. Trump’s “America First” foreign policy.
The agitators have used the phrase “neocon” — short for neoconservative — to describe many of those staff members working for Mr. Waltz.
The meeting with Ms. Loomer was also attended by Mr. Waltz, Vice President JD Vance and other senior officials including the chief of staff, Susie Wiles; the head of the personnel office, Sergio Gor; and Commerce Secretary Howard Lutnick.
Ms. Loomer was seated directly across the desk from the president. Next to her was Representative Scott Perry, a Pennsylvania Republican who was one of Mr. Trump’s biggest allies in his efforts to overturn his 2020 election loss. Mr. Perry had a separate list of staff concerns he wanted to discuss with the president, and his planned meeting with Mr. Trump collided with Ms. Loomer’s, one of the people briefed on the events said.
Mr. Perry and one of his aides did not immediately respond to text messages seeking comment.
Mr. Trump’s scheduled meetings often collapse into one another. Mr. Lutnick, whose brother died in the Sept. 11 attacks, had attended a trade meeting just before Ms. Loomer’s and Mr. Perry’s meeting, and was present for a portion of it, one of the people briefed on the matter said. A spokesman for Mr. Lutnick did not immediately respond to a message seeking comment.
It is unclear what the firings mean for Mr. Waltz, who has a tenuous hold on his own job. Mr. Trump has so far declined to terminate Mr. Waltz after he inadvertently invited The Atlantic’s editor in chief, Jeffrey Goldberg, into a Signal group chat in which top officials, including Defense Secretary Pete Hegseth, shared sensitive details about forthcoming military strikes against Houthi terrorists.
But senior officials who have discussed Mr. Waltz privately with the president say that Mr. Trump’s reluctance to fire his national security adviser is more a matter of him wanting to avoid bad publicity than a sign of confidence in Mr. Waltz. Mr. Trump has made clear to his staff that he does not want to give the media the satisfaction of seeing Mr. Waltz fired. He also does not want to start the cycle of firing top officials that plagued his first term, they said.
To some in the government, the firings have felt arbitrary. Most if not all of the officials who have been targeted by Ms. Loomer were put through a personnel vetting process run by the Trump administration.
According to a review, only around a dozen counties were left off the list. That included the two North American countries Trump has already hit with tariffs: Canada and Mexico. That makes sense.
But they also include the Holy See (the government of Vatican City), a pair of communist countries (Cuba and North Korea), a few African countries (Burkina Faso, Seychelles and Somalia) and, most strikingly, Russia and its most closely aligned former Soviet republic, Belarus.
Why was Russia left off? Treasury Secretary Scott Bessent claimed Wednesday that this was because trade between the United States and Russia had trended toward zero thanks to U.S. sanctions after Russia’s invasion of Ukraine. The administration has offered similar rationales for the exclusion of Cuba, Belarus and North Korea, saying we just don’t trade much with them.
But we still do trade with Russia, including a substantial trade deficit in recent years. And a lack of any substantial trade with the United States didn’t spare other countries and territories from being on the list.
And when it comes to Russia (and Belarus), it’s difficult not to look at this as an attempt to avoid inflaming Russia during sensitive peace negotiations over the war in Ukraine. Trump has regularly treated Russia and its president, Vladimir Putin, with kid gloves.
Of course, that calculus didn’t spare Ukraine, which was slapped with a 10 percent tariff despite being under invasion.
In addition to the exclusions of Cuba, Russia and North Korea, both Afghanistan and Iran got tariffed at a lower rate (10 percent) than Israel (17 percent). Trump has recently signaled he would like to pursue a nuclear deal with Iran.
For a few months, the Donald Trump White House managed, at least in public, to keep some of the right’s fringiest figures at bay. Until yesterday.
The far-right celebrity Laura Loomer was at the White House on Wednesday. If you don’t spend a lot of time online, you probably don’t know who Loomer is, and that’s healthy. To say that she is a “conspiracy theorist” is not quite enough: She has referred to herself as a “proud Islamophobe” and has claimed that 9/11 was an “inside job”; she has charged that some school shootings were staged, accused Florida First Lady Casey DeSantis of “exaggerating” her struggle with breast cancer, and questioned whether the “deep state” might have used an atmospheric-research facility in Alaska to create a snowstorm over Des Moines. (Why? So that foul weather would suppress the turnout in the 2024 Iowa GOP caucuses and hurt Trump’s campaign.)
Loomer has even alienated her ostensible allies in the MAGA movement, to say nothing of the hostility she has engendered among various other Republicans. (Peter Schorsch, a former Republican operative who now runs the website Florida Politics, described her to The Washington Post as “what happens when you take a gadfly and inject it with that radioactive waste from Godzilla.”) Indeed, Trump’s own aides found Loomer so toxic that they tried to keep her away from the 2024 campaign, as my colleague Tim Alberta reported last year. A source close to the Trump campaign told Semafor last fall that Trump’s people were “‘100%’ concerned about her exacerbating Trump’s weaknesses,” but that attempts to put “guardrails” around her weren’t working. Trump clearly likes the 31-year-old provocateur, and in Trumpworld, there’s apparently very little anyone can do once the boss takes a shine to someone.
And so Loomer reportedly walked into the Oval Office yesterday with a list of people who should be removed from the National Security Council because of their disloyalty to Trump and the MAGA cause. (Asked for comment, Loomer declined to divulge “any details about my Oval Office meeting with President Trump.” She added, “I will continue working hard to support his agenda, and I will continue reiterating the importance of strong vetting, for the sake of protecting the President and our national security.”)
The next day, at least six staff members, including three senior officials, were fired. If Loomer had nothing to do with it, that’s a hell of a coincidence. (The NSC spokesperson Brian Hughes told The Atlantic that the NSC does not comment on personnel matters.)
Today, an unnamed U.S. official told Axios that Loomer went to the White House because she was furious that “neocons” had “slipped through” the vetting process for administration jobs. The result, according to the official, was a “bloodbath” that took down perhaps as many as 10 NSC staff members. Most reports named Brian Walsh, the senior director for intelligence, and Thomas Boodry, the senior director for legislative affairs; other reports claim that David Feith, a senior director overseeing technology and national security, and Maggie Dougherty, senior director for international organizations, are among those dismissed. Walsh formerly worked as a senior staff member for Marco Rubio on the Senate Intelligence Committee, Boodry was National Security Adviser Michael Waltz’s legislative director when Waltz was a House member, and Feith was a State Department appointee in the first Trump administration.
The firings at the NSC represent an ongoing struggle between the most extreme MAGA loyalists and what’s left of a Republican foreign-policy establishment. Senator Tom Cotton of Arkansas, for example, has been in an online tussle with the Republican fringe—a group that makes Cotton seem almost centrist by comparison—over Alex Wong, another Trump NSC official, whom Loomer and others have, for various reasons, accused of disloyalty to Trump. Other conflicts, however, seem to center on a struggle between Waltz and the head of the White House Presidential Personnel Office, Sergio Gor, who has reportedly been blocking people Waltz wants on his team because Gor and others doubt their commitment to the president’s foreign policy.
Such internal ideological and political food fights are common in Washington, but the national security adviser usually doesn’t have to stand by while his staff gets turfed on the say-so of an online troll. If these firings happened because Loomer wanted them, it’s difficult to imagine how Waltz stays in his job—or why he’d want to.
Waltz, of course, is already slogging through a mess of his own creation because of the controversy surrounding his use of the chat app Signal to have a highly sensitive national-security discussion about a strike on Houthi targets, to which he inadvertently invited a journalist—The Atlantic’s editor in chief, Jeffrey Goldberg. (Waltz’s week wasn’t getting any better before Loomer showed up: New reports claim that the meeting about the Yemen strikes was only one of many conversations about important national-security operations that Waltz held over Signal.) Trump reportedly kept Waltz on the team purely to deny giving “a scalp” to the Democrats and what he perceives as their allies in the mainstream media.
Now Waltz’s authority as national security adviser is subject to a veto from … Laura Loomer? It’s one thing to dodge the barbs of the administration’s critics; that’s a normal part of life in the capital. It’s another entirely to have to stand there and take it when an unhinged conspiracy monger walks into the White House and then several accomplished Republican national-security staffers are fired.
The reason all of this is happening is that in his second term, Trump is free of any adult supervision. The days when a Secretary of Defense Jim Mattis or a Chief of Staff John Kelly would throw themselves in front of the door rather than let someone like Loomer anywhere near the Oval Office are long gone. Trump has surrounded himself with sycophants who are apparently so scared of being exiled from their liege’s presence that they can’t bring themselves to stop someone as far out on the fringe as Loomer from advising the president of the United States.
Meanwhile, a person close to the administration told my colleague Michael Scherer today that “Loomer has been asked to put together a list of people at State who are not MAGA loyalists.” Waltz might yet get fired, but whether he stays or goes, he doesn’t seem to be in charge of the NSC. Perhaps next we’ll see if Marco Rubio is actually running the State Department.
