Here’s an attention grabber — Why China Can Collapse the U.S. With One Decree. It’s by David Dayen at The American Prospect, so I’m inclined to take it seriously,
When Donald Trump reacted to China’s export restrictions on rare earth minerals—a group of 17 chemical elements used in almost all electronics—by threatening a new 100 percent tariff on Chinese goods, Wall Street investors who had yawned at most of his erratic announcements for six months finally took notice. It was the same stock-tanking pressure that led Trump to climb down from his Liberation Day tariffs; sure enough, by Sunday, the TACO (Trump always chickens out) vibes started kicking in.
“I have a great relationship with President Xi … he’s a great leader for their country, and I think we’ll get it set,” Trump told reporters on Air Force One on the way to Israel. “Don’t worry about China, it will all be fine!” he exclaimed on Truth Social. Next thing you know he’ll be apologizing in Mandarin like John Cena.
Here’s an explanation of the John Cena reference if you’re like me and didn’t get it.
Holding the president of the United States on a tight leash is certainly a lucrative asset. But investors should probably be more wary of the situation. America has made an unusually directional economic bet that is at this moment totally dependent on Chinese rare earth exports. The circumstances that brought us here long predate Trump and are rooted in decades-long failures to retain our technological know-how and channel it into industrial production. It’s never too late for a wake-up call, but the country is in a terribly vulnerable position where China can snap its fingers and snuff out the only thing propping up our economy.
Our economy is currently being propped up by what’s looking like an AI bubble. “Close to half of the gain in gross domestic product this year will come from data center construction, and around 80 percent of stock market gains are attributable to a handful of AI-heavy tech companies,” Dayan writes. And then he goes on to describe how we got here. This is the accumulation of a lot of business and government decisions going back many decades. But now that business karma is getting ripe we’ve got a perfect moron in charge of our economy to steer us through the crisis.
Paul Krugman has a post up about technology bubbles that’s partly hidden behind a paywall. But here’s another article that explains what Krugman wrote.
In his newsletter on Monday, Krugman said that Trump’s tariff announcements six months ago were “a massive betrayal of the world’s trust,” noting that previous tariff reductions were achieved “through many rounds of international negotiations, in which the U.S. and other nations solemnly agreed not to backtrack.”
Krugman said Trump now appears surprised that other countries are retaliating, referring to China’s new export controls on rare earths, which include several vital inputs for U.S. industry.
Reacting to the administration’s hypocrisy on the matter, Krugman said, “Gosh. Aggressive unilateral trade action is a ‘moral disgrace.’ Who knew?”
Krugman said that there is “one big difference” between the trade strategies of the two countries, and it is that, unlike the U.S., “the Chinese appear to know what they’re doing.”
China has us by the boy parts, thanks to Trump.
See also Robert Reich, Beware the Oligarchs’ Two Bubbles. The two bubbles in this case are AI and crypto. Regarding AI, Reich notes that the big players all seem to be way over-leveraged. They’re tottering on the edge, so to speak.
Frankly, I don’t care which giant corporations or ultra-wealthy investors strike it big and which lose their shirts.
I worry about the economy as a whole, about working families who could lose their jobs and savings. The losses when the AI bubble bursts could ricochet across America.
Trump has put David Sacks, co-founder of an AI company and, of course, a fierce Trump loyalist, in charge of AI and cryptocurrencies. So far, Sacks has killed any restrictions and regulations that might stand in the way of either.
The Trump regime has been opening the doors for trillions of dollars in pension funds to be invested in crypto, AI, venture capital, and private equity. Even 401(k) plans have joined the flood.
There are times when being poor seems almost an advantage. But collectively we are in a terribly precarious place right now. If you have investments you might want to check for vulnerabilities. A bit later, Reich continues,
The flood of money into these two opaque industries — AI and crypto — has propped up the U.S. stock market and, indirectly, the U.S. economy.
AI and crypto have created the illusion that all is well with the economy — even as Trump has taken a wrecking ball to it: raising tariffs everywhere, threatening China with a 100 percent tariff, sending federal troops into American cities, imprisoning or deporting thousands of immigrants, firing thousands of federal workers, and presiding over the closure of the U.S. government.
When the AI and crypto bubbles burst, we’ll likely see the damage Trump’s wrecking ball has done.
I fear millions of average Americans will feel the consequences — losing their savings and jobs.
See also Jared Bernstein and Ryan Cummings in the New York Times, Warning: Our Stock Market Is Looking Like a Bubble. (Gift article.) While they throw in disclaimers about how maybe AI is not a bubble, they go on to say it has all the hallmarks of one.
I just hope the bubbles burst sooner rather than later. At least it could destroy most of what is left of Trump’s support.
All this technology data-center building is also putting huge demands on our water and power resources that I doubt we can afford. Reich says that crypto is basically a Ponzi scheme, and I am inclined to believe him. AI may very well have useful business and other applications, but large parts of it currently are just being used to generate slop turning up on social media. At the very least it’s going to have to be tightly regulated at some point.
On another note, last night Letitia James spoke at a rally for Zohran Mamdani. In any match between James and Trump, I’d put money on James.
Update:
Trump says he’s being called “the greatest president of them all. Does that include Washington and Lincoln? Yes it does.”
— Aaron Rupar (@atrupar.com) October 14, 2025 at 2:26 PM
Of course.
Just my opinion, but there's a lot of money at the top. More than at any time in the last century, or more. Individuals, families, and corporate monsters have more money than they know what to do with. Inflation is here, which means they lose money by leaving cash in the bank. IMO, the stock market is overvalued (in part) because it's going up faster than inflation. Investors may know it's overvalued and think they can cash out if/when the crash starts.
Crypto is designed to be a bubble. Or someone tell me about any crypto that's been around longer than a decade with no crash. (I define crash as an oscillation of over 70% of the previous value in 90 days.) Crypto guys are in jail for engineering the crash (sometimes). You start the company, issue the crypto, create a phony rush of sales, sucker buyers on the prospect of multiplying in value, decide when peak is, sell out for maximum gains, and let it crash. Rinse and repeat.
AI strikes me as phoney. I went to Wendys and a machine took my order. I asked at the window, WTF, and the girl told me it's an AI ordering system. But it was too stupid to explain that Wendy's was out of chili. So a system that can't do what a HS dropout can do is gonna revolutionize the world. Impressed I am not.
Musk keeps promising self-driving cars. It works, sometimes. It crashes, sometimes. May the force be with you in a Tesla. Or on the same road as a Tesla. Impressed, I'm not. I think self-driving cars can work with roads engineered for self-driving cars. I do not think the 'judgement' is there in a car to deal with dynamic situations. Yet.
Economic crash in Trump's term? I would say there's a 90% chance. It was the opportunity that gave FDR the support to rein in the banks, regulate Wall Street, reform taxes…. So I hope it's bad enough for a progressive president to have the clout to implement real change.