Did Trump Blow up Wall Street to Save It?

President Donald Trump's tariff bomb blew up Wall Street like the 1987 Black Monday crash — but what if there's a method to the madness?

I'm not talking 9-D Vulcan laser chess here, but maybe an escape hatch from a sinking ship. Even if the escape itself is on fire.

The last few days and Black Monday are alike only in their scale. 1987 was largely driven by internal factors like program trading and happened in just one day. The current collapse was engineered — although some would say it was more of a bull-in-a-China-shop event — by the White House and unrolled over days. Also, it might be that the worst of the bloodshed has already been stanched if today's early returns are any indicator. The Dow is only down about 1%, and NASDAQ is trading even or slightly up.

Maybe the panic is over already, although we're too soon into the tariffs game to see what will become of the bottom line of corporations both large and small. If Trump's tariffs backfire, a possibility with probabilities unknown, there will be hell to pay both on Wall Street and in Washington.

Any doubts aren't due a some special issue of mine with Trump — last week's Thursday Essay (for VIPs) looked at the potential upsides of his new tariffs regime, and they could be significant. It's just that, as Longtime Sharp VodkaPundit Readers™ know, I'm wary of any government effort to make things better.

Remember Ronald Reagan's nine most terrifying words in the English language? "I’m from the government and I’m here to help." It's been nearly 40 years, but I still live by those. But something had to be done because this was the situation on April 2, the day before Liberation Day:

• Unsustainable deficit spending
• But a GOP Congress without the cojones to cut spending
• Interest rates choking off growth
• But a prime interest rate that, if lowered, might bring back Bidenflation
• Wall Street has been on a sugar high since 2008 (or maybe further back to 2001)
• But where else are you going to put your money?

Tough situation, eh? But maybe there's a way out.

Financial analyst Lyndon Wood noted that tariffs are "causing risk assets like stocks and crypto to dump," forcing Wall Street off its sugar high, "and the money is going into treasuries which are seen as safe." The demand for treasuries is what's forcing interest rates down, which is great for the housing market (caveat: assuming businesses keep hiring!) but, more importantly, for our national debt. The "U.S has to refinance around 30% of its $37T debt within a year or so," and if we can do that at lower rates, it will help bring down the $1 trillion-plus annual interest payment.

Then there's the big Wall Street selloff that has everybody in such a tizzy.

"The tariff roll-out... volatility and all... was a way of creating controlled detonation," of the equities markets, anonymous finance guy Derek posted to X. This is a bit like Reagan giving Fed Chair Paul Volcker the political cover he needed to crash the economy in 1981 for as long as it took to wring out the '70s inflation.

More from Derek:

Wall Street FREAKED OUT and deleveraged themselves.

Now, there won't be any banks or hedge funds who can't afford to pay off their loans because they [are] overleveraged. 

The extreme tariffs are also coming at a time when Bessent sees a recession or depression happening in China. He emphasized this several times with Tucker. 

By boxing in China and shutting down their exports, he's creating the same conditions that led to the big short of the British Pound. 

If the Chinese Yuan collapses, then it'll cause a global flight into US Treasury bonds.

Trump is a finance guy, and so is SecTreas Scott Bessent; none of this is news to them.

Critics argue that the bond markets are just pricing in a recession, and maybe the critics are right. But a recession was an inevitable part of the detox process. Purposefully triggering that recession, if that is indeed what Trump has done, might just be the smart play.

If Trump and Bessent pull this off, they'll go down in history like Reagan and Volcker. If not, they'll just go down. So hang on, as I wrote earlier today at Instapundit, because "this ride isn’t for the squeamish."

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