Why Crashing the Economy Won't Work

The secret plan behind crashing the economy—and why it can’t work 😴

The anticipation of and uncertainty around Trump’s tariffs have caused the stock market to plunge rapidly since Wednesday. Most people would view this as a bad thing. But it’s possible that this is the explicit goal of the Trump administration.

The national debt is the source of much criticism from the administration. The purpose of DOGE is to cut the federal government of “waste, fraud, and abuse”, which combined with tariff revenue, is purported to reduce our national debt. So far, these claims are illusory.

The national debt itself is not a big deal, but the interest payments are. They have ballooned in recent years, and much of the treasury debt is due to be rolled over at higher interest rates than when the bonds were initially issued.

These interest rates are related to the yield of the treasury bonds. The yield is inversely related to the price, since the actual payoff of the bond is fixed. When bonds are in high demand, the price rises, and the yields fall. If the yields are low when the bonds are refinanced, we could see hundreds of billions in savings on interest payments.

What might cause bonds to be in high demand? As a safe harbor, people want to buy them when they are reducing risk. When the stock market tanks, bonds should see higher demand as investors flee from equities to safer shores.

So that’s the idea: crash the stock market, increase demand for bonds, reducing yields, then refinance our debt at the lower interest rates.

There are some significant problems with this theory, however.

For one, it’s not coming true. Although 10 year yields briefly dipped right after Liberation Day, they have risen back to previous levels.

China also plays a strong role here. They hold a giant amount of treasury bonds. If they wanted to, they could sell those bonds en masse, massively increasing the supply, driving down the price and spiking yields. And with the way the US has been threatening them, it’s not an impossible scenario.

There’s also the strong possibility that with political volatility in the US, bonds will no longer remain a safe investment. Equities and bonds in other regions like the EU are becoming more attractive, especially as countries like Germany begin to rev up their economies to stop relying on the US.

Bottom line? Tariffs crashing the economy might be the real plan to reduce the national debt, but they won’t work compared to real political decisions like taxation and spending cuts.