Thoughts on Coming Apart and the Coming Great Reset

Turning and turning in the widening gyre

The falcon cannot hear the falconer

Kit Webster

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The Beginning of the End Game

April 11, 2025

Themes and Theses - Why I'm Contemplating Out Loud

(Initially formulated in the early 90s, following decades of reading history, philosophy, psychology and a lot of contemplation, particularly on the subject of cycles. In the end, this is a relatively straightforward story about human nature and of history rhyming.)

The US will enter a period of crisis in the early 2000s. In the late 90s, I incorporated Strauss' and Howe's terminology of the Fourth Turning (without incorporating their generations paradigm) and agreed with Howe that the end stage of the crisis began with the Great Financial Crisis and would last into the early 2030s. We are not yet to the middle of the end stage of the crisis.

The crisis will be serious and could be existential.

Internal strife will increase, up to and including secession and civil war.

International conflicts will increase as the vacuum created by the weakening of the US is filled by other players.

There will be many threads to the crisis, but the primary thread will be debt, deficits and entitlements. Other factors include, eg, demographics, a loss of meaning and myth and a loss of self-discipline.

Politics will move leftward as citizens look for some refuge from the chaos. The US will become increasingly susceptible to a (man) on a white horse, who can come from either the left or the right.

Inflation, as the most likely way to address debt since austerity is not politically acceptable, will significantly lower standards of living, exacerbating the civil crises.

Eventually, the dollar will be inflated away and lose its reserve status.

Once the old rot is cleared out, and assuming continuity, there will be the basis for the establishment of a new order.

(Added around 2020) The loss of faith by our youth in our founding principles means that the new order will at least partially be based on new principles. As yet, I have no visibility as to what those principles might be.

(Added in the early 00s) While humans are contributing to global warming, policies implemented to address manmade global warming will create a significant energy crisis, probably toward the end of the Fourth Turning.

(Added in 2023) The lowering / elimination of standards in education, the judiciary, law enforcement, the military and other segments of our society will create a population unable to adequately comprehend, do or respond to the challenges of democracy and culture.

Quotes to Contemplate

Great and good are seldom the same man. - Winston Churchill

Break a complex system, even if you think you can rebuild it, and you'll find springs and cogs you never realised were in it will be lost across the room and you'll be left with a pile of junk. - Polemic Paine on X

The most effective way to prevent the spread of measles is the MMR [measles, mumps, and rubella] vaccine. - RFK Jr

The Tariff Earthquake exhibits many of the same features as a physical earthquake. Much of the damage has yet to reveal itself; much remains uncertain as the chaos spreads. Like an earthquake, the damage is systemic: both infrastructure and households are disrupted. The potential for second-order effects to prove more devastating than expected is high. - Charles Hugh Smith

You can defeat 40 scholars with one fact, but you cannot beat one idiot with 40 facts. - anon

> Primary Ideas in This Week's Post

Consumer baubles are the least important part of the process. Critically, people were born, unsustainable technology was created, unsustainable dollars were sent to help the needy, cure diseases, etc. It is difficult to wrap your mind around, but an entire, significant, artificial layer of existence was created out of unproductive debt. When the point that unsustainability is recognized occurs, the result will not be as "simple" as I described above - the system does not transition to a prior, sustainable level. The current, unsustainable system must transition to a new, sustainable system that reallocates the sustainability, as it were, among its existing components. Some new components will continue, perhaps existing in different form. Some components that were sustainable in the past will disappear. People will view the system differently and come up with new rules under which it will operate. But the scope of the overall change will be profound because the unsustainable layer is large.

Trump has broken the world - for better and for worse. Some of the damage is repairable, but some will require a reordering of assumptions and priorities. Not since Biden confiscated Russia's foreign exchange reserves, perhaps not since Nixon closed the gold window or Bretton Woods, and maybe never has there been such a profound impact to the global system.

The equity markets are damaged and probably will continue downward. Tariffs are still in place, issues with China are not resolved and Trump is determined.

The tariff standoff with China needs to be resolved quickly.

Navarro has been demoted and Bessent now leads tariff strategy. Minus one idiot, plus one adult. But Trump is still in charge.

The buildup at Diego Garcia continues. The US is negotiating with Iran. We seem to be coming to a critical phase of this issue.

Political violence is becoming increasingly normalized. This is broader and deeper than Antifa and BLM.

The Beginning of the Endgame

Since the world continues to unfold as I said it would, let me try to summarize the set-up, where we are, and the coming end game.

When I began putting my theses together some 30-odd years ago, I did not have a firm timeframe in mind for the end of the cycle I was predicting. Back then it was "probably early 2000s."

Later, when The Fourth Turning was published and when 2008 was established as the beginning of the Fourth Turning, I decided that its timing, together with some other cycles, was pretty good. So, the end of the Fourth Turning was going to be 2030-ish. The climax of "my" deconstruction would be 2030-ish.

And, here we are, a short 5-ish years away.

My thoughts always included a mighty decline in the value of the dollar. As I refined my thoughts, I decided that the beginning of that decline would be a great signal that the end game of The Fourth Turning had begun.

It looks like the dollar has started down. It is not yet confirmed that THE move down has begun, but it is likely.

Things are going to get increasingly interesting at an increasing rate.

I would like to provide a rough analogy for where I think we are.

There once was a company, at one time it could have been a railroad or a computer mainframe company or an internet company or an AI company. The only requirement is that it is a company with apparently-great prospects that will revolutionize the future.

The company begins with a monopoly in its space and grows and thrives impressively - a true wonder - equal parts admired and feared and loathed by the entire world.

As humans do, the leaders of this company decided they were geniuses and invincible, that their were no limits to their abilities to expand, and decided to aggressively do so. Along the way, they paid themselves a lot of money, established an under-funded pension plan, provided child daycare and a dog park. And free, healthy snacks all day, every day. They proudly established programs to support every movement - BLM, LBGTQ, trans activism. There were procedures and rules for everything.

Although it required an ever-growing amount of debt to fund growth, lifestyles and social causes, there were no grown-ups on the board of directors or at the banks that funded them. The company continued to take on debt, seemingly without limits. It and its employees and suppliers were prosperous.

They blew through traditional measures of prudence, playing by their own rules.

Let's step back and see what was happening.

Let's assume that a normal debt limit for this company was $1 trillion, but it had $3 trillion in debt. That extra $2 trillion was not sustainable, but it enabled people who should be living in a $200,000 house to live in a $400,000 house. They could take vacations to Vegas they would not have, in normal circumstances, been able to afford. They dined out at good restaurants once a week, where in normal times, it would have been once a month, if ever. Not only were they living artificial, unsustainable lifestyles, but everyone who served them - the casinos in Vegas, the housing industry, the high-end clothiers, the restaurants - were also living artificial, unsustainable lifestyles. In sustainable times, the company could employ 10,000 people, but it grew unsustainably to 20,000. In a sustainable world, those extra 10,000 people would have been employed somewhere else, with all 20,000 making less money. In sustainable times, the restaurant would host 20 tables instead of the current 40. Houses would be worth $200,000 and there would only be one, high-end clothing store in town.

One day, some kid in the crowd noted that the emperor had no clothes. Investigations began, articles were written, the board of directors was changed and regulators stepped in to review the bank's loans.

Ultimately, at least 10,000 people would lose their jobs at the company. Others at casinos, clothiers, car dealers and restaurants would lose their jobs, as would employees at the casinos', etc. suppliers. The prices of houses around the company's headquarters would decline. And, there is still an "extra" (at least) $2 trillion of debt to burden a downsized economy.

The company never should have done what it did, but it did do what it did, and now the system had to be rationalized.

This kind of massive change generates social and political unrest. The weakening of a major player encourages the rise of competitors.

Chaos ensues.

The world is fundamentally changed and rearranged in unpredictable ways.

Consumer baubles are the least important part of the process. Critically, people were born, unsustainable technology was created, unsustainable dollars were sent to help the needy, cure diseases, etc. It is difficult to wrap your mind around, but an entire, significant, artificial layer of existence was created out of unproductive debt. When the point that unsustainability is recognized occurs, the result will not be as "simple" as I described above - the system does not transition to a prior, sustainable level. The current, unsustainable system must transition to a new, sustainable system that reallocates the sustainability, as it were, among its existing components. Some new components will continue, perhaps in a different form. Some components that were sustainable in the past will disappear. People will view the system differently and come up with new rules under which it will operate. But the scope of the overall change will be profound because the unsustainable layer is large and incorporates every facet of the economy. And it will be gone.

Perhaps the most important thing that happens, which I will not spend much time on, is the erosion of values and institutions from the availability of all of this easy money. As a culture, we become a moral shadow of ourselves.

Ultimately, a new world is established somewhere around - perhaps below - overall sustainable levels.

Back to our world, the kid in the crowd spoke up some time in the last year or so.

The dollar has begun its decline.

And, here we go.

Which brings me to my thoughts on Trump.

I do not like him and strongly do not like his approach to almost anything. A bull in a china shop who will hit you first and ask questions later. A corrupt, narcissistic, ideology-free zone.

While there is madness in his madness, I also see method.

There are enough heavy hitters that agree with me to the point that if I am delusional, I am in good company, although we are definitely in the minority.

So, let's take a leap of faith and decide that Trump sees that the system is broken and beyond repair. Every trend has been extrapolated to the absurd (one of my "laws" of human nature is that all trends will eventually be taken to their extremes) and every interest is vested and entrenched. We have gotten to the point that our debt, deficits and entitlements have become too big to reform. In other words, he may share that part of my worldview. If Democrats or traditional Republicans, who are deeply embedded in the system, were to continue to drive it, they would inevitably drive off the cliff with their foot on the accelerator. The system must be fundamentally reorganized in order to save it. Time is short, particularly in political years, so that massive systems and institutions must be radically changed quickly.

Very high risk. Probably won't work. But, the alternative is driving off a cliff, and no one seems to have a better idea. Congress is AWOL and the Fed is fiddling while the economy burns.

So, what the hell.

Only, this whole tariff thing as Trump has introduced it is batshit crazy. (Yes, tariffs can be a good thing, but this is not it.) A silver bullet through the heart of the world's economic system. Trump MUST get through all of his tariff negotiations very quickly, or the engine will seize up. Not slow down. Not sputter. Seize up.

There was never a future in which our theoretical company continued to thrive. If it was lucky, it would be reconstructed and parts of it salvaged.

There is much ruin in a nation.

Given human nature, it was inevitable that we would continue along this broad path - which has been my point. If some guy in Austin, Texas, can predict something 30 years in advance, much less the extraordinarily insightful Strauss and Howe, then, absent black swans, the broad march of a developed nation is predictable. The details are not and neither is the outcome, other than things will be different. If Harris had won the election, we would still be heading toward the cliff, just along a different path.

The new system will be built out of the pieces of the old system that remain - rearranged and reimagined.

The only thing for certain is that a new, very different - perhaps profoundly different - world will emerge - beginning in the next 5-ish years. The old, wonderful world that was initially a marvel, but was inevitably corrupted by human nature, will, with the exception of some vestiges, be gone.

Perhaps the new world will look like some version of historical old worlds. Maybe we are out of possible models. Maybe the liberal model was the last available alternative. I have not yet seen indications of the formation of a new model.

If so, it will look like some version of historical old worlds only that it will rhyme, not replicate. As a discussion for another day, I do not think our technological progress is sustainable, but that is not important to this discussion. In any event, technology, geopolitics and institutions will be different, so that any old model will evolve over a different path, according to the dictates of the same human nature.

And here we are.

In the early 90s, when I first predicted profound change for the US, it was mostly an academic exercise - a thought experiment. I did not want to be correct. But, I was fascinated by the implications of my theses and have continued to refine them. Intellectually, I am pleased that the world has proceeded as I have predicted. In a perverse way, I am glad I have lived long enough to see all of this unfold. Actually, fin de siècle is a lot of fun - irresponsibility and corruption can make for a grand life - before the bad bits begin. Practically, I am profoundly sad. We have taken down a perfectly good nation and a functioning world order, and are destroying rights and freedoms that are precious and will be very difficult to regain. Our son's life will become increasingly challenging.

But, one cannot ignore the lessons of history. That's what humans do and have done, over and over, sometimes to the point of Dark Ages, Depressions and World Wars.

There will be chaos and black swans.

We are entering a period in which everything is up for grabs.

I really do want to know how it turns out.

It's just that living through it will be very difficult.

Excellent article by Ben Hunt at the bottom of this post

Markets

Updated Charts

> I think that the main thing to think about the markets now is that things are broken that it will take time to repair, and may not ever be repaired. Trump is still president. He still believes in tariffs.

The short-term outlook for equity markets is not good.

"In Japan, in the early-mid 90s one often heard the term "トリプル安" ("triple yasu") which meant when yen, the nikkei, and JGBs all fell on the day. It was a sign of "decline of Japan in the world." Interestingly, the Nikkei used that reference for the US today." (The Dow, TBonds and the dollar all fell on the same day - pretty extraordinary.)

Having said that, all of my charts look like they are at turning points. Nothing to do but wait and see.

Trump has delayed all of his reciprocal tariffs, except with China, for 90 days. The tariff on China is an incredible 125%. The blanket, 10% tariff remains. The auto tariff remains.

China has countered with 125% tariffs.

He backed down for the reason I described in my interim note: the entire world was literally becoming unmoored. If Trump's original tariffs had succeeded, the world economy would have literally imploded.

He ran one of the strongest, most interesting bluffs in world history. But it was too big and too complicated to succeed, because, by the time all the negotiations would have succeeded, the patient would have died.

Stupid does not even approximately describe it. Nor does "beyond incompetent." Clueless would be a start.

The gambit would have had some chance of working, had it been better constructed.

Something has to give with China. They have imposed huge tariffs on American goods. At last count, it was 84%, but this war can continue to escalate or be quickly resolved.

Trump made a fundamental, rookie negotiating mistake when taking on Xi by raising the ante twice. Xi holds a strong hand and Xi cannot be seen to be bested by Trump. You do not directly attack people in strong positions.

This is one hell of a game of chicken.

Trump has painted himself into a corner on China and has to find a way out.

But, he is also negotiating with some 70 other nations, many of which have offered zero tariffs. This cloud may have a silver lining.

Tariffs

So, You Say You Want A Revolution?

> The Empire strikes back - with litigation as far as the eye can see.

- Trump Administration Defies Judge Seeking Details on Plan to Return Wrongly Deported Man. The administration’s refusal to comply with a judge’s directives threatened to erupt into a showdown between the executive and judicial branches.

- Former president Barack Obama called on universities and law firms to stand up to intimidation from President Donald Trump’s administration and urged Americans to prepare to “possibly sacrifice” in support of democratic values.

In a speech Thursday night at Hamilton College in Clinton, New York, Obama also accused Trump’s government of working to destroy the international order created after World War II.

Obama painted a picture of a postwar political environment in which disagreements happened within a shared respect for certain rules and norms, such as free speech and an independent judiciary, which he said was now eroding. “It is up to all of us to fix this,” he said, including “the citizen, the ordinary person who says, no, that’s not right.”

The former president said that he disagreed with some of Trump’s economic policies such as widespread new tariffs, but that he is “more deeply concerned with a federal government that threatens universities if they don’t give up students who are exercising their right to free speech.”

Obama called for universities to be prepared to lose government funding to defend academic freedom and other core values, or dip into their endowments — though endowments are sometimes funded with restrictions from donors on how that money can be spent.

“If you are a university, you may have to figure out, are we in fact doing things right? Have we in fact violated our own values, our own code, violated the law in some fashion?” he said. “If not, and you’re just being intimidated, well, you should be able to say, that’s why we got this big endowment.”

- Rep Don Bacon (R) is set to introduce legislation to give Congress, not the president, tariff power. Senator Rand Paul (R-KY) just proposed a bill that would require the President to get Congressional approval for new tariffs.

- Supreme Court rules Trump can resume deporting foreign criminals under Alien Enemies Act.

- The D.C. Circuit Court of Appeals on Monday ordered that two Democratic members of federal labor boards fired by the Trump administration in January—Gwynne Wilcox of the National Labor Relations Board and Cathy Harris of the Merit Systems Protection Board—be reinstated to their positions. A three-judge panel of the same court on March 28 voted 2-1 to allow the Trump administration to fire the pair, which Monday’s ruling reversed.

> Bessent was not part of the tariff policy - it was led by two, certified idiots - Navarro and Lutnick. That is literally frightening. (My son wants me to call them sycophants instead of idiots, but he's a Millennial.)

> Trump illegally extends the TikTok decision, again, for 75 days.

> Some tariff-history tidbits -

1) 1996 Nancy Pelosi encourages all of Congress to back reciprocal tariffs

2) 2008 Bernie Sanders wants tariffs, says jobs are going overseas

3) 2018 Barack Obama calls for reciprocal tariffs

4) 1988 Donald Trump says foreign countries must pay tariffs

> The world is beginning to seize up - Howmet Aerospace has declared force majeure in the wake of Trump's tariffs. This is a Pittsburgh-based company that sells some of the most important parts to basically every major commercial and military aviation company.

> "0 to 1939 in 3 seconds”: Anti-Musk satire is flourishing in Britain.

> Trump’s tariffs on China could add as much as $300 to the production cost of a $550 iPhone produced there. That’s partly why Apple is reportedly shifting some of its production of the smartphones to India, where Trump tariffs are, currently, less than half as high. Sharp readers will note that this would not bring down the overall US trade deficit, which Trump believes is a vulnerability. But analysts say making an iPhone entirely in the US would boost the price to as much as $3,500.

> RFK Jr told the CDC to change its guidance on fluoride in drinking water.

> The ultimate game of chicken - Trump on Monday threatened to hit China with an additional 50 percent duty on Chinese imports, days after Beijing announced a 34 percent retaliatory tariff on American goods. Trump gave China until Tuesday to rescind its 34 percent tariff, which it issued in response to Trump’s “reciprocal” duty on China—also at 34 percent—that is set to take effect on Wednesday. Together with the administration’s two previous tariff hikes on China, the new levies could bring the total tariff rate on Chinese goods to 104

percent.

> Elon and I agree - "Navarro is truly a moron."

> Trump on Tuesday signed a series of executive orders bolstering coal plants and production.

> Huh? - NVIDIA CEO, Jensen Huang, has managed to secure a deal with President Trump, to allow NVIDIA to continue to export its H20 AI chips to China, when many expected Trump—who increased Chinese import tariffs to at least 125% this week—to impose heavy export restrictions on NVIDIA’s most advanced AI chips.

> Something's happening between the US and Iran. Rubio - "Peace talks with Iran are scheduled for Saturday."

> Alright! Trump is upending his trade team. Treasury Secretary Scott Bessent is now taking the lead, with Peter Navarro sidelined and Howard Lutnick recast as the "bad cop."

> US President Trump is open to making a new trade deal with China, White House says.

> Tulsi - Releasing RFK and MLK assassination documents within days.

> I have to admit, I have never understood why this was a real problem, as opposed to something to talk about twice a year - Trump pushes Congress to make daylight saving permanent.

It's Getting Serious

From the NCRI:

Political violence targeting Donald Trump and Elon Musk is becoming increasingly normalized. Following the July 13, 2024 attempted assassination of President Trump, tolerance - and even advocacy - for political violence appears to have surged, especially among politically left-leaning segments of the population. This pattern builds on a broader trend NCRI identified in two December 2024 reports which analyzed how viral social media narratives were legitimizing political violence, particularly in the aftermath of the UnitedHealthcare CEO’s assassination.

1 The reports found widespread justification for lethal violence - including assassination - among younger, highly online, and ideologically left-aligned users. A spillover effect into offline domains is already occurring, as illustrated by a ballot measure recently submitted in California that is macabrely named “the Luigi Mangione Access to Health Care Act.”

2 A broader “assassination culture” appears to be emerging within segments of the U.S. public on the extreme left, with expanding targets now including figures such as Donald Trump and Elon Musk. NCRI empirically assessed this shift with original survey data and open source intelligence analysis to assess how normalized and justified violence against the administration has become in public discourse. The findings signal a threat to political stability and public safety. Key data points include: ● Muder Justification: 31% and 38% of respondents stated it would be at least somewhat justified to murder Elon Musk and President Trump, respectively. ○ These effects were largely driven by respondents that self-identified as left of center.

3 with 48% and 55% at least somewhat justifying murder for Elon Musk and President Trump, respectively, indicating significantly higher justification for violence against these figures. ● Property Destruction: Nearly 40% of respondents (39.8%) stated it is at least somewhat acceptable (or more) to destroy a Tesla dealership in protest. ● Psychological/Ideological Correlations with Assassination Culture: These beliefs are highly correlated with one another, as well as with the justification of the murder of the UnitedHealthcare CEO and hyper-partisan left-wing ideology. ○ This suggests that support for violence is part of a broader assassination culture, underpinned by psychological and ideological factors.

See full report here.

Miscellany

Not funny.

Really, really next level. If I were to pick one graphic to illustrate our times, this would be it.

Crashing the Car of Pax Americana

April 7, 2025 | Ben Hunt |

“Can I confess something? I tell you this as an artist, I think you’ll understand. Sometimes when I’m driving… On the road at night… I see two headlights coming toward me. Fast. I have this sudden impulse to turn the wheel quickly, head-on into the oncoming car. I can anticipate the explosion. The sound of shattering glass. The flames rising out of the flowing gasoline.”

“Well, I have to — I have to go now, Duane, because I … I’m due back on planet Earth.”

“Are you going to drive them to the airport? No, I haven’t even finished my drink. Duane can take them.”

Annie Hall won the Best Picture award at the 1978 Oscars. It also won Best Actress in a Leading Role (Diane Keaton), Best Director (Woody Allen), and Best Original Screenplay (Woody Allen). Woody Allen was nominated for Best Actor in a Leading Role but lost to Richard Dreyfuss in The Goodbye Girl. This scene, with a young Christopher Walken playing the role of Annie’s suicidal fantasist brother Duane, is one of my all-time favorites, and it captures perfectly the feeling I have today with the Trump Administration driving the national car.

You don’t hear much about Annie Hall today, and I can’t remember the last time I saw a Woody Allen movie on television or on an airplane. That’s despite the fact that Woody Allen was nominated for Best Original Screenplay 16 times (by far the most in Academy history) and Best Director 7 times (behind only Martin Scorsese and Billy Wilder with 8 nominations, and William Wyler with 12). You don’t see Woody Allen movies anymore because Woody Allen has been credibly but not conclusively charged with sexually abusing his adopted daughter Dylan Farrow, he had an affair with another young adopted daughter of Mia Farrow while he was still married to her, and his movie Manhattan is a biographically-styled account of the Woody Allen character having an affair with a high school student. Woody Allen is, if not an outright pedophile, a really creepy predator of really young girls, and that’s why no one shows his movies anymore.

One of the hardest things in life is to hold two conflicting ideas in your head at the same time, like the ideas that Annie Hall is a brilliant movie by a brilliant writer AND that this same brilliant writer is at best a lecherous slimeball who richly deserves his public disgrace. It’s really not easy! It would be so much easier to let one of the ideas dominate the other, either to ignore and dismiss Woody Allen’s work because he is an evil man, or to ignore and dismiss anything about his personal life so that his movies can be enjoyed without any consternation at all. I choose to hold both ideas simultaneously — that it’s okay to enjoy Annie Hall AND it’s okay to despise Woody Allen — because as easy as it would be to let one idea dominate, it’s just not … true.

My ask of you in reading this note is that we make an effort to hold several conflicting ideas in our heads at the same time. Like, for example, that the American socioeconomic system desperately needs fixing after decades of venal corruption from (mostly) Democratic but (also) Republican Administrations AND there is an underlying global system worth preserving that gives the United States enormous privilege, wealth and freedom of action in the world. Or, for example, that there’s no reason to doubt the authentic intentions of Donald Trump and his Administration to improve the position of the United States AND their economic policies can have the unintended consequence of blasting the underlying global system to smithereens, making it impossible to achieve their goals. It’s really not easy to hold all of these ideas simultaneously! Every bit of party propaganda from the left and the right, every big voice on social media, everyone wants you to give yourself over to a single idea of party purity and ignore everything else. But it’s just not true.

The truth is that the United States became as sclerotic and bloated under Joe Biden as the Soviet Union under Leonid Brezhnev, and that Joe Biden’s cognitive decline and its obscene cover-up made the United States government a global patsy and a domestic feeding trough. The truth is that our border policy was stupidly permissive. The truth is that we really do need to eliminate vast swaths of the Federal bureaucracy and the Christmas tree funding programs that always grow and never shrink. The truth is that a Department of Government Efficiency is a really good idea.

AND the truth is that the purpose of government is not efficiency for efficiency’s sake. AND the truth is that the quality of mercy is not strained and neither is due process, so that justice may be sure but never cruel. AND the truth is that spending money to curry political favor abroad through CIA USAID programs is a lot cheaper and a lot more efficient than sending in the Marines, AND is a lot more profitable than seeing the Chinese take our place in the world. AND the truth is that we have three co-equal branches of government, where the unconstitutionality of a President ‘vetoing’ Congressionally-authorized spending programs through Executive Order is well-settled law. AND the truth is that government debt isn’t like our own personal debt, so that we can’t go broke as a nation AND we’re nowhere near having a budget crisis AND we have the strongest, most vital economy in the world AND we can still grow our way to a more equitable prosperity without breaking a global system that works so formidably to our advantage.

This underlying global system has a name. It’s called Pax Americana.

Pax Americana is the Bretton Woods monetary system and the Plaza Accords and the SWIFT banking system and the unquestioned dominance of the USD as the world’s reserve currency.

Pax Americana is the NATO alliance and the Pacific Fleet and CENTCOM and the NSA and the unquestioned dominance of the US military as the world’s security arbiter.

Pax Americana is the American brands, American universities, American entrepreneurialism, and most of all the American stories that have dominated the hearts and minds of everyone on Earth for the past 50 years.

Pax Americana is the ability of the United States to set the rules for every coordination game in the world. The rules of trade, the rules of intellectual property, the rules of money, the rules of culture, the rules of war … all of those rules were made by us. Only by us! And in return we gave the rest of the world two things: global peace (pretty much) enforced by a blue-water navy with force projection capabilities anywhere in the world, and unfettered access (pretty much) to the buying power of the American consumer.

The results of Pax Americana?

The United States has seen more than 300 million citizens lifted into the highest standard of living in the history of the world, as we have exchanged intangible things like services and the full faith and credit of the US government for tangible things like oil and semiconductors and food at an unimaginable scale.

The world has seen more than a billion people lifted out of crushing poverty, mostly in China and India but everywhere else, too, as the capacity to make tangible things has shifted permanently (yes, permanently) from West to East.

My strong, unwavering belief is that Pax Americana is a damn good deal for the United States AND the world, especially as American leadership in AI opens up an entirely new realm of intangible things that the United States can trade for tangible things. Is it a perfect deal for the United States? No. Do other countries free ride on our provision of security and an end-market of the American consumer? Absolutely. Has the system been internally captured by oligarchs and professional politicians, so that the distribution of this great wealth flowing to the United States goes less and less to ‘average’ Americans? 100%. Should we aggressively prune and reform the Pax Americana system? Should we root out its foreign free riders and domestic leeches? Yes, please!

But that’s not what this Administration believes. Neither Donald Trump nor his key advisors believe that Pax Americana is a good deal at all, much less a damn good deal like I believe. They believe the United States is being cheated and taken advantage of without end, both internationally and domestically. They don’t want to fix the Pax Americana regime of coordination through multilateral rule-setting. They want to blow up the entire deal and replace it with an America First regime of competition through bilateral engagement.

I appreciate their frustration. I share a lot of it. But I am desperately opposed to crashing the Pax Americana car, Annie Hall style, because the America First system that this Administration wants to have as a replacement is not a stable system that is possible to have as a replacement. The end result of blowing up Pax Americana and its – yes – globalist system of rules and institutions and alliances that coordinates the flow of capital, labor, goods, services and culture without ‘winning’ any head-to-head relationship will be a system that is both worse for the United States AND the world. Here’s why:

Back in September 2016 I wrote a note called Virtue Signaling, … or Why Clinton is in Trouble, which was about the soft defection within the Democratic party for such a feckless, inauthentic candidate like Hillary Clinton, a soft defection that I thought would catapult Trump to a (very) unexpected victory. And then I wrote this:

Don’t get me wrong. I’m thoroughly despondent about the calcification, mendacity, and venal corruption that I think four years of Clinton™ will impose. I think as a candidate she’s a bizarre combination of Michael Dukakis and Teddy Kennedy, and I think as a president she’ll be an equally bizarre combination of Ulysses Grant and Warren Harding, both of whom presided over a fin de siècle global economic collapse. Gag. But I don’t think she can break us, not as a society, anyway.

Trump, on the other hand … I think he breaks us. Maybe he already has. He breaks us because he transforms every game we play as a country — from our domestic social games to our international security games — from a Coordination Game to a Competition Game.

The difference between Trump 1 in 2017 and Trump 2 in 2025 is that this time he means it. Or rather, in this administration Trump has the personnel and the planning to implement this Coordination Game to Competition Game shift in every strategic interaction that the United States government participates in, both domestically and internationally. He’s been very explicit and clear about all this.

What’s a Coordination Game? Well, one classic representation of a Coordination Game is what Jean Jacques Rousseau back in 1755 called the Stag Hunt, and in 2×2 graphical form it looks like this:

The four quadrants are the four outcomes from the independent choices of the Row Player and Column Player to either cooperate with the other player (whatever cooperate means for the game in question) or to defect (i.e. not cooperate, again whatever that means for the game in question). The numbers are the pay-offs for the players, higher numbers being higher pay-offs, red numbers for the Row Player and green numbers for the Column Player. At every point in time, each player can independently decide whether to stick with their current behavioral choice (cooperate or defect) or switch choices. The shaded quadrants are the equilibrium outcomes – the ‘sticking points’ – where rational players may end up in a stable and persistent way because neither player has an incentive to change behaviors.

In the Stag Hunt, if players coordinate successfully with each other, meaning they hunt together (cooperate) to take down a mighty deer that they share, they get the upper left quadrant outcome – the best possible outcome (+2, +2) both individually and collectively.

The upper left quadrant of the Stag Hunt is Pax Americana.

It is the sum total of all the international institutions and policies and agreements and norms that set the rules for coordinated actions that keep a global peace (mostly) and allow unfettered access to the US consumer (mostly), so that Americans become unimaginably wealthy and billions of non-Americans become non-desperately poor by making the things that Americans buy with the pieces of paper their government prints.

This is a highly stable outcome, which is why Pax Americana has lasted for decades now. The Row Player has no incentive to go down one row from Cooperate to Defect, and the Column Player has no incentive to move over one column from Cooperate to Defect. They could, but their payoff would be reduced (from 2 to 1). Plus this would really suck for the other player, who thought you were both hunting for the stag, so their pay-off would go from 2 to 0 because they’re not even getting a rabbit. That means that the next time you both go off hunting, they’re definitely switching their strategy to defect, too, so that at least they get something, and both players end up in the bottom right quadrant. You’re both getting some food, but you’re also both worse off than you were before. That’s also an equilibrium or sticking point, because once you get there you don’t have an immediate incentive to move up if you’re the Row Player or move to the left if you’re the Column Player, but both players know that a stable outcome of cooperation is at least possible in a Coordination Game like Stag Hunt, so you can imagine a negotiation that gets both players back into the upper left quadrant!

But what if you don’t believe that the upper left quadrant outcome of the Coordination Game is the best possible outcome for YOU? Sure, maybe you’d agree that’s the best possible outcome for everyone taken together, the classic win-win situation where the total global outcomes are maximized, but what if you don’t really care about that? What if you want the best possible outcome for the United States – period! – regardless of what that means for the other players, and you think you can get that sort of truly ‘winning’ outcome by doing all sorts of threatening and racing and fighting and otherwise defecting from the status quo upper left equilibrium of Pax Americana? What if you don’t want to play a Coordination Game, but instead want to play – and win! – a Competition Game?

Well, that means that you see the world like this:

The only thing that changes in the pay-offs of a Competition Game from a Coordination Game is in the upper right and bottom left quadrants, where the Column Player (upper right) and Row Player (bottom left) can now get their best possible individual result from defecting when the other player is cooperating, from dominating this head-to-head interaction. Sure the total benefits are lower (total of 3 instead of total of 4), but you get ALL the benefits. You are winning.

The problem, of course, with the Competition Game as it applies to international relations is that you keep playing it. Other countries have agency. They’re not stuck with being your patsy and getting nothing good out of the deal. I mean, some countries are. If you’re Cambodia or Argentina you say “thank you, sir, would you please throw me a bone?” and you grovel like a dog. But if you’re China or Europe, or even Canada, you don’t have to take the sucker’s payoff of 0, you can push both players into the bottom right quadrant of (+1, +1). You can both be worse off, but it’s better than outright losing. It’s like the mob boss turning state’s evidence against you so that you get 20 years in prison. There’s no way you’re not going to prison, but you can carve a couple of years off your sentence by testifying against the mob boss, too.

That’s why the Competition Game has another, more common name: the Prisoners Dilemma.

In the Prisoners Dilemma, there is only one equilibrium, not two, only one sticking point where both players will rationally end up to avoid the ‘suckers payoff’ of playing nice while the other player plays to win. That lower right quadrant is (very) quickly the end point of this game, and once you’re there it’s a black hole that you can’t get away from. Unlike the Coordination Game, there are no negotiations that will get you out of the bottom right quadrant, because everyone can see that the upper left quadrant isn’t a stable outcome! I mean, do you think that Donald Trump will ever stop trying to ‘win’, that he would ever stop pressing an advantage if he thinks it exists? What kind of stable cooperative agreement could you ever hope to find with him? And even if he’s no longer President or even if another political party came into the White House, who’s to say that a similar advantage-pressing President won’t come back in the future? And don’t even start with the tit-for-tat arguments here, because that would require Trump to take a massive and public L to get a reciprocal pattern of cooperation going again. No, once you replace the Pax Americana coordination game with the America First competition game, you’re in it for good, or at least until the next world war where the victor imposes its own hegemonic rule-setting on its conquered foes. Let me say that again, for emphasis.

You cannot negotiate your way out of this Prisoners Dilemma.

You cannot unring this bell. Sure, you can reverse this policy and that policy, and god knows we’re going to get plenty of that, but you can never go back to the way things were before. Once you toss over the game table, even if you reset the table exactly as it was before, the other players must take into account the possibility that you will toss it over again. Their reactions in every game you play with them in the future will be different, much more wary and suspicious, and game outcomes that required a measure of trust and coordination will now be completely out of reach. You may still be the most able game player overall, but you will be surprised by how clever the less ‘powerful’ players can be, especially if they work together.

What is lost in the shift from the upper left quadrant of the Stag Hunt to the bottom right quadrant equilibrium of the Prisoners Dilemma?

The unipolar moment of American military dominance becomes a multipolar scrum of regional spheres of influence and diminished global security.

The US dollar becomes a choice, not a necessity, and debt issuance on everything and everywhere – not just by the US Treasury – becomes more risky and expensive.

Global growth and productivity become permanently diminished versus their potential.

Highly efficient but non-robust systems, both economic and political, break. Not all at once, but slowly. And then all at once.

We’re now experiencing the ‘all at once’ moment in capital markets.

Or rather, we’re now experiencing the first leg of that moment. Because as bad as last week felt, you could still tell yourself that this was all a bad dream, that we’d get most of this negotiated away, that we’d get a sense that there was actually a sensible plan to all of this. But with China implementing its own tariffs and Europe not far behind, we all now know that we all now know that there’s no easy walk-back from this. There is no reset button here. There is no resolution of ‘uncertainty’. There is only a more or less existential threat against every US company of every size and every industry, with an indeterminate path and duration. We all now know that we all now know that we have to brace ourselves for a Long March of ‘all at once’ for months and months. Just like in 2008. It won’t be a straight shot down in 2025 anymore than it was a straight shot down in 2008 (I mean, markets almost got back to their highs in May 2008 on the heels of the Bear Stearns execution), but ultimately it is a big move down in … everything … as the United States reneges on the global regime of Pax Americana.

I believe there have been three great pillars of investing success over the past 20+ years: US home country bias, US tech bias, and US dollar bias. I believe that all three of these are now melting icebergs, with enough mass to melt for a decade or more. That’s the backdrop for a Prisoners Dilemma portfolio, basically doing the reverse of what’s worked on autopilot for the past 20 years.

And in the foreground? Policy difference between countries that matters, so that global macro can actually work again. Business model difference between companies that matters, so that discretionary long/short can actually work again. Oh it won’t work for everyone, because reversion to the mean trades aren’t nearly as useful when the global socioeconomic regime shifts, and it really won’t work for everyone as global growth downshifts into the bottom right quadrant of constant competition. But I believe in my heart of hearts that skill is going to matter again in investing, when it hasn’t for a loooong time now. Especially if that skill is married with AI-enabled tools to track the pace and timing of the melting icebergs and the policy differences and the business model differences that matter.

Like this analysis of tariff Narrative formation that we published in Narrative Shopping earlier this week:

Rolling 30-Day Tariff Semantic Signature Density

What you’re looking at is the output of a set of what we call semantic signatures. Semantic signatures are linguistic markers not for sentiment, topics, or keywords, but of a specific meaning being conveyed about something. In this case, that something is tariffs. We’ve modeled six distinct such signatures and evaluated them against our extensive database of news, blogs, Substacks, research reports, and transcripts. In short, we are looking for the density of the most common tariff narratives in news about global trade because we think the relative and absolute levels of the various narrative forms of the White House argument for tariffs are a leading indicator of how and to what degree the White House implements tariffs and how and to what degree the White House is willing to negotiate their reduction. It’s one of multiple tools and datasets we’ve developed for measuring the twists and turns of our path from the upper left quadrant of Pax Americana to the bottom right quadrant of America First.

I wish I could tell you that what’s happening right now is just a movie scene, but it’s not. This is real life. This is the Great Ravine. Will a lot of these specific tariff policies be reversed or negotiated away? Yes, I’m sure they will, because otherwise the economic engine of the entire world seizes up and can’t be restarted. But we can never return to where we were before! We are on a road to a permanently lower ‘sticking point’ for growth, productivity, wealth, standard of living … because that’s what the America First competition game brings … and it’s not an equilibrium that can be negotiated or wished away. What we have to do from here is adjust to the new global regime where the US is just another country, albeit the most powerful of those countries, and figure out how to manage our portfolios and our lives as best we can under these circumstances. Easy? No. But when was it ever.