

#231 Chris Whalen: Fed 'Playing Chicken' with Liquidity as High Debt Levels Persist, Balance Sheet Shrinks
26 snips Feb 4, 2025
Chris Whalen, chairman of Whalen Global Advisors and author of The Institutional Risk Analyst blog, discusses critical economic issues. He critiques President Trump's return to 19th-century tariffs and predicts limited impact on the economy. Whalen warns that the Fed is 'playing chicken' with liquidity amid soaring deficits. He anticipates a housing market reset by 2027-28 and highlights the Treasury's funding challenges. The conversation dives into risks beneath buoyant markets and the limitations of mixed economic data for investors.
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Tariffs as Political Tools
- Trump is using tariffs as a political tool to gain traction for the midterm elections.
- This tactic is similar to 19th-century tariff strategies used to protect American industries.
Historical Tariff Context
- Historically, tariffs were a common Republican tactic, while Democrats opposed them, fearing inflation.
- The Smoot-Hawley tariffs of the 1930s primarily aimed to help the struggling agricultural sector, not to cause deflation.
China's Tariff Strategy
- Chinese businesses prioritize market share over profit, internalizing tariff costs rather than raising prices.
- They will work to maintain market share, even absorbing additional expenses.