There are a lot of things going on, including a change in investors’s estimates of the risk of holding long Japanese bonds. But there is a “sell America” trade based on the erratic US policy. The way I read it, starting in April the dollar enters a trading range. That coincides with the bat-shit crazy tariff announcements. But it’s not an abandonment of the dollar in any way. However, with the President saying he’s fine in the dollar falling, that’s giving folks the green light to sell dollars.

This hourly chart shows how quick this has happened. As of the time I write this, it may not result in a ‘real’ breakout from the range. It could just be a reaction down and a reaction back up. But it does show there is real energy to pull the dollar down.

What happens when the dollar falls? Metals and oil tend to go up with a falling dollar. In a sense oil, gold, silver, and to a lesser degree copper, operate as a currency. As the dollar sinks against other currencies, those commodities become more expensive. As do imports, which are already tariffed. Which is pro-inflationary. However, it does help make US exports more attractive. Of course the real drop occurred because of the statement below by the orange moron.

I’ve seen a lot of folks on the left glom onto an idea that wasn’t in Carney’s speech, that the entire post war system was a sham. It was far from perfect, but certainly not a sham. At its best, it saw respect for the rule of law to a degree that dictators could move their assets to the “West”, where they could defend them from seizure by the courts in those countries. Not because people in those countries especially like dictators, but because as gratifying as it would be to return their ill-gotten loot to the countries they looted, but because the rule of law was more important.

Of course there are many interpretation of the same series of events. We are biased against seeing what is counter to our narratives. Like the shooting of Alex Pretti demonstrates in real time, some people will always refuse to believe their lying eyes. They will discount 100% of the information they do not like and see the information they like as the totality of the truth. Just like I see many take the view Carney was saying the old international order was a sham. Was the post World War II based order flawed and subject to abuse? Yes, of course it was, just as people have abused every institution. And it’s hard to ignore the benefits of trade the post WWII order has brought to countries as large as the United States and as small as Singapore.

For decades, countries like Canada prospered under what we called the rules-based international order. We joined its institutions, we praised its principles, we benefited from its predictability. And because of that we could pursue values-based foreign policies under its protection.

We knew the story of the international rules-based order was partially false. That the strongest would exempt themselves when convenient. That trade rules were enforced asymmetrically. And we knew that international law applied with varying rigour depending on the identity of the accused or the victim.

When I listened to, and read, Mark Carney’s speech, I did not take away the admission by an insider that the system was a sham, but rather the imperfect but beneficial system was coming to an end. I would agree with Nesrine Malik, for example, that there were evident cracks in the system going for quite a while, and that a sitting US President justifying the use of forms of torture considered to have been war crimes in 1945, was one of those cracks. In Carney’s remarks there’s an acknowledgement of a system that functioned imperfectly, but not a wholesale condemndation. While the rules sometimes did not appear to apply to some countries, they did generally apply. And that facilitated trade, relations, and a growth in global wealth. The fact that imperfect system is dead is not a good thing, which I think is also implied by Carney. But maybe we need to think about how we got to this moment.

In 1945, most people in their 40’s, 50’s, and 60’s that were in power, had seen or fought in two horrible wars. In the first war, a generation of young men in Europe had been gutted. They were left dead in the mud in France and on the Italian border. There was a hope, in 1918, that such a horrible war would never happen again. If you were in your late 40’s or early 50’s, you might have served in the Great War or known someone who died, or a family who lost someone in those wars. It was hard to imagine anything worse. But in 1945 you find yourself left standing in an even more ruined, horrified, and murdered world. Something had to change.

That was why we initially put the signs in the window. Did it work? Most times it did, even if we had to stumble and find the way while not every country was a willing participant. It did not work well for every country in the world, but we developed an international system of commerce that has lifted billions of people out of poverty. India and China alone have seen the most brutal, horrible poverty fall off to a large degree. While much of Africa has not fared as well, many countries have see significant and sustained improvements for their populations. All made possible by secure sea lanes, mechanisms for settling international disputes in courts, and the ability to enforce their rights even in their offender’s courts. The French, English, Portuguese, and Spanish were forced to divest from their colonies, in part because of the United States¹ as well as the Soviet Union.

What has broken down? The worst of the rot has been in China and America. I think if it is not clear at this point that China has no interest in the rule of law or international rule of law, you are horribly deluded. While their wealth was enabled by that system, now that they have wealth, they do not feel bound to that system. The experiment that a developed China would liberalize and join other nations in that order has been a devastating failure. Their trade policies and grossly self-serving foreign policy have made the US and all of Europe more than a little wary.

America’s break down is different, and the result of internal rot. And it is not without a counter-part in Europe. Much like the UK, America is very different depending where you reside. The “blue” parts enjoy longer life expectancy, better services, and more income. And to the degree these benefits are present in the wealthy parts of America, they are absent in much of he rest. The “reds” (rightfully or wrongly) see it as the by product of a system run by international elites and at the expense of their America. Not only has this caused many Americans to abandon their belief in trade and an international, rules-based order, they now question basic American rights and law. A vocal plurality of Americans want half the country arrested and shot or imprisoned by military courts This should be much more frightening and deserving of more attention. And I can’t see why more do not see a bright, clear line connecting it to both a new American Imperialism and a loss of confidence in the domestic system.

The last 25 years have seen once-in-a-lifetime economic crisis after crisis highlighting that few appear to benefit from the current order, while many pay. The 2008 financial crisis was especially damaging with no one facing any accountability². Which Americans believe that rule of law, international alliances, and trans-national legal frameworks are the way forward? Mostly it’s older Americans, particularly in blue states and cities. They are the remaining beneficiaries of that world order, with many red state Americans and people under 40 seeing themselves as the losers³. That is not a winning coalition if you want to see American continue to be an enthusiastic supporter of a wider world order, even if it actually benefits America. Until that changes, America will not participate in that world order. Or at least not in a constructive manner. Much like climate change, US dependence becomes something middle powers need to mitigate.

Will this be a more just world? I have no idea. I’m certain economic development, if not retreating, will become slower and harder to come by. For Canada and Mexico, trade with America should be incredibly cheap. Nothing has to be shipped across a great ocean. Forging alliances with more distant countries requires more energy and work to exchange goods and secure trade routes. Middle powers are forced to choose the less efficient option because it provides a level of insurance when the hegemonic interests of China or America ask for too high a price. This diversity is not prosperity regardless of what the United States or China does, but it prevents complete collapse should the demands become too large. The same will be true for Europe, South America, and parts of Asia. Rather than trading with the lowest cost, most efficient partner, they will need to spend more on defense and infrastructure to fund that insurance.

But there is no alternative. China has little use for the old order, now that it is wealthy, and America is abandoning that order because of necrosis in its social tissues. While I doubt the remnants of NATO will have to fight America any time soon, I see no path to a better tomorrow. The people who knew the horror that begged them to build something better are gone. In fact, those who want to destroy the system adopt the symbols of the worst of the evil to chip away at the last deference to that old order. Whether it’s Stalinist or Nazi memes, the goal is to signify they no longer buy into the dying or dead international order. They are figuratively pissing on the graves of all those who tried to build a better world out of the horror of an older world. The great irony is the way forward may be more international order. That stronger institutions and more alliances are the way forward for middle powers. Until the United States and China suffer some calamity or deterioration that forces them to take a more equitable and less coercive position, I see no other way.

1. The United States has a complicated relationship with colonialism. It doesn’t view Puerto Rico or (at one time) the Philippines as colonies, or US adventures in South America as colonialism, many Americans did not care for European style colonialism. ↩︎
2. In fact, the opposite of equity. The C-suite people sued to get their bonuses, payable because money was injected into their banks. Main street was billed for the losses, while Wall Street got to keep the gains. ↩︎
3. As do a number of Europeans who are not able to find a well paying job or afford a home. It might express itself slightly differently, but it’s the same “we’ve been had and exploited” mentality. ↩︎

In a world where you can’t run a company with US payment systems and US infrastructure, and the US has shown they’re willing to weaponize the dollar and its technology stack¹, the EU can’t just write off their dependence on US infrastructure. This is a complete own-goal by the Trump Administration. It will make it hard for US companies to sell their infrastructure in Europe. Both EU based companies and EU governments, in light of the Greenland fiasco, recognize they are vulnerable.

The risk isn’t that the US flips a “kill switch”, as the interviewee suggests. The risk is something targeted, such as putting ICC judges on the sanctions list. Except the target may be larger. This could mean generals, politicians, or bureaucrats can no longer access their e-mail, their cloud documents, or any special sovereign clouds or arrangements to support those governments. For example, if the German government has a reason to investigate its far-right parties. Maybe that prosecutor and their office is sanctioned. Maybe the regulator initiating an action against a US interest (such as monopoly abuses by those same technology companies). Or, if the EU company is a competitor to one of the companies where the US government has started buying shares.

They would lose access to data, applications, be locked out of payment systems, and communications. If you are unable to send an e-mail because your account is a Google enterprise account. Or your office cannot pay for salaries, goods, or services.

This is 100% an own goal by the Trump administration. Because they wanted to show how they were willing to disregard norms, the laws, and alliances, they made US technology a vulnerability as much as it is an asset. The writing is on the wall and the mid-term elections won’t hamper some of these actions. Especially since the courts have been giving the administration a pass or a benefit of the doubt. You may get your Office subscription turned back on, but after several months in court. But even if you have precedent on your side, the Supreme Court has shown that it doesn’t really matter.

1. https://www.state.gov/releases/office-of-the-spokesperson/2025/12/sanctioning-icc-judges-directly-engaged-in-the-illegitimate-targeting-of-israel ↩︎

As Rick Wilson points out, the damage to the standing of the US is done. This is going to translate into a reduced role for the US and a discounting of US actions or statements in the future. Even when Trump is gone, and a friendly, likely Democrat, president supportive of NATO in in power, they will only look at the short term benefits. Because they know that the next election could put in someone like Trump. What they get for the next few months, or at most a couple of years, will be the expected benefit to balance against the cost, which can be for decades.

Or it might not be TACO. We might be back here in a month or two after negotiations around this same ridiculous idea to annex Greenland. Or it could be TACO and we will have a completely different unnecessary, invented, highly destabilizing, and unhinged crisis. As Republican congress people line up behind Trump, and the Supreme Court has given him at least one more month of tariffs by delaying the release of their opinion, we have to conclude the Republicans are the autocrat party. And their supporters welcome autocracy. The legislature and courts will help him cement his power. Tying logic into knots of socioeconomic reasons as to why enough people in a given swing state switched to Trump is a useless exercise. It’s because the are garbage people, with garbage educations, and a garbage sense of the world. They operate on a gut level, moving from meme to meme on their phones, thoughtlessly retweeting Russian or Chinese made propaganda. A strong man tickled the part of their brain little changed from our days as lower primates. They mumbled something about the price of eggs, and chose the strong and confrontational white man over the sensible brown woman.¹

The paramilitaries deployed to harass and intimidate cities run by the opposition, using corruption accusations to go after perceived enemies, threatening the media with retribution over factual stories, and removing civil servants when they refuse to break the law, are all hallmarks of an autocrat. The fact the few remaining people in his party who don’t want to go down the path of needless chaos, mostly because they are retiring, push back but then cave shows how little power they think they have. And where does his power come from? Like any autocrat, whether it was Assad in Syria or Qadaffi in Libya, Pinochet², or any number of other autocrats, they rely on a highly motivated base. That’s why they showed up at Charlottesville, and many other protests, with guns. That’s why they cos-play militia on weekends. They want to show they are armed and almost begging for a fight. And, like any autocrat, they do not need broad, popular support as long as they keep the support of their dedicated bases. Trump has a core of support that is armed, intense, willing to use violence, and believes they are attacked when Donald Trump is attacked.

The market popped this morning because they believe it was just TACO all along. We’re not going to blow up the transatlantic relationship. We’re not going to use force against an ally. We’re not going to piss off the Europeans to the degree they would eject our troops (but likely keep all the free shit we’ve staged over there). But like enough shots on goal, eventually one gets through. Maybe the next shot on goal will be something in Korea, Japan, or Brazil? Some time in the future it won’t be TACO. As we se the stakes escalating, like some unhinged reality television show trending to the mid-season cliff-hanger, the cost of TACO not coming to the rescue become serious. At this stage, we should be thinking about preemptive mitigation.

Carney cutting a deal with China and the EU with South America is a start. Pressure might be applied by replacing Tesla with BYD in their EV market. But middle powers have to do two things. The first is stop or reduce buying US debt, especially long-dated US debt. In the bizarre echo chamber of the American autocrat party, people are already starting to float the idea of not paying the coupon on foreign held debt. A strange and seemingly fantastical idea? Like invading Greenland? That would also likely be a TACO moment, but maybe the next President feels like Trump’s mistake was not going through with the idea. The autocrat party has shown they’ll fall in line. The non-political people are being gutted from law-enforcement, the military, and the bureaucracy. Some think someone like Scott Bessent can assuage those truly stupid ideas. He’s shown a willingness to put stooges in key positions (another hallmark of an autocrat), so what’s to stop him from putting a moron up as Treasury secretary. The members of his autocrat party won’t stop him.

Next, every piece of technology from either the US or China that can be remotely switched off because of an internet based service hosted or controlled by the US or China should be removed, reverse engineered, or the operator should have a contingency plan. This includes everything from civilian infrastructure, like John Deere tractors, to weapon systems like cruise missiles. As the US has shot its tariff load, the threat of tariffs for backing out of agreements over IP law is a mute point. The tariffs are coming at the drop of a hat, with no push back from either the autocratic party or the ineffectual party. (In fact, I suspect the court has a weasel position that allows the tariffs to effectively stay in place. My, thankfully often wrong, tinfoil hat instinct is the court is delaying the release because it will effectively entrench the power of the executive). Ideally, the UK, Canada, Australia, and New Zealand should start the process, arguing their exposure to Chinese products makes this necessary. This can also be pushed through laws requiring a domestic partner or other forced technology transfers.

Middle countries should have a multi-provider strategy for digital infrastructure and they should limit or tax the penetration of US and Chinese social networks and digital services. X is the social media arm of the autocrat party. Middle powers should change their laws to promote something like Mastodon services but hosted within that country, with forced data portability from US and Chinese based services. This includes AI, where I suspect smaller models engineered around specific tasks will outperform (in terms of cost), massive general models. The EU and Japan have the technical capability and economic capacity to have a domestic AI industry. And while the AI “problem” may resolve itself if the bubble implodes, the social media problem is one of influence and intelligence gathering.

For a long time, the rest of the world could rely on the US as having a bi-partisan and fairly level-headed foreign policy posture. But the internal mechanics of US politics have changed. The Republicans could now be called the Autocrats and the Democrats could be called the Ineffectuals. And what has been laid bare is that even the educated, intelligent members of both parties will fail to push back but for different reasons. The idea Merz could have a meeting with Trump and get it all sorted by discovering a ‘real reason’ or appealing in some way to the cesspool that passes for Trump’s conscience, is ridiculous. He’s negotiating with an autocrat in the process of cementing his power. German, Italian, UK, Australian, Korean, Japanese, etc voters need to vote like they believe the in the idea the US is no longer a reliable partner. That largely level-headed, bi-partisan, foreign policy lead by seasoned professionals is gone. Now it’s just crazy until TACO, or someday not TACO. Even if the Ineffectuals take power in the next election, they will not remove the hacks and shills currently being embedded into the system and rebuild its expertise. If anything of the professional, capable US foreign service is left in three years, the next victory by the Authoritarians will wipe it out.

1. I used to believe it was because Ms. Harris made one or two errors, or she didn’t have enough time, or not enough distance from Biden’s policies. I don’t think that any more. ↩︎
2. Assad has his Alawite militia, Quadaffi and Pinochet’s support came from the military. They realized that if they don’t back their leaders to the hilt, their bodies get burned along side their dictator’s body. ↩︎