The “Sudden Stop” in US Investment

The fallout from Trump’s chaotic, stop-and-go tariff announcements continues to rattle international markets, with traditionally safe assets—the dollar and US Treasury bonds—plummeting in value.

“If you were a foreign investor, would you want to bet on America right now?” Roosevelt Senior Fellow Paul Krugman asked this week. “Would you even want to visit to look at investment prospects, given the risk that you might be imprisoned by ICE because you once sent a text critical of Trump?”

He calls this phenomenon a “sudden stop,” a moment when an entire country—Portugal in 2011 and Argentina in 2001, for example—loses the confidence of international investors, and foreign capital completely dries up. The resulting economic slump is disastrous for the people in those countries.

The United States doesn’t have to go down the same path as those countries, and it has certain structural advantages in the international financial system that could help stabilize its position, Krugman points out. But reversing this trajectory would require a pivot to focusing on policy solutions, an about-face for American leadership that seems unlikely at the moment.

“None of this was necessary. The US economy was doing well before Trump came into office. Trumponomics isn’t a response to real problems. It’s a president who has waged a war on competence indulging his personal obsessions,” Krugman writes. “But America and the world will suffer the consequences.”

Read the post: “Stop! In the Name of Trump!”

What We're Talking About

What We're Reading

• The Economic Security Project’s Chris Hughes appeared on Morning Joe to discuss the legacy of FDR’s New Deal as outlined in his new book, Marketcrafters: The 100-Year Struggle to Shape the American Economy.
  • On Wednesday, Roosevelt Principal Felicia Wong will be moderating a panel discussion with Hughes titled “Are We on the Brink of a New Economic Order?”
• The Hewlett Foundation’s Jennifer Harris explained “The Post-neoliberal Imperative” in Foreign Affairs.
  • Also in the economic realignment idea space, the Vanderbilt Policy Accelerator for Political Economy and Regulation published new proposals for an all-of-the-above approach to increasing housing supply.
• Roosevelt Fellow Graham Steele weighed in on the damage Trump’s threats to Fed Chair Jerome Powell do to the “bedrock of what has made the US such a strong economy and the global safe haven.” 
  • “The Fed chair doesn’t need to be removed in order for some of this damage to be done,” Steele said. “What’s going to give here at the end of the day?”