Is the Second Republican Great Depression Knocking at America's Door?

History warns us: every major economic crash has led to a world war. Trump’s corruption, debt, and tariffs may be lighting the fuse…

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In three weeks, on my birthday May 7th, it’ll be exactly 80 years since Germany signed terms of surrender at the headquarters of US General Dwight D. Eisenhower in Reims, France.

That year, 1945, also signaled the official end of the Republican Great Depression. And May 7 of this year may well signal the beginning of the Second Republican Great Depression, the fourth major economic crash in our history. Troublingly, every one of the prior three financial crises also tripped off a major war.

As Neal Howe points out in his book The Fourth Turning Is Here, it was roughly 80 years or four generations from the Credit Crisis of 1772 which provoked the American Revolutionary War until the Panic of 1857, which set the stage for the Civil War.

Another 80 years passed between the end of the Civil War in 1865 and the end of the Republican Great Depression (which triggered WWII) and May 7, 1945. And here we are, exactly 80 years later, on the verge of another depression and possibly a third world war.

Howe posits that 80 years is how long it takes for the generation that made the mistakes that produced the last depression to die off and thus not be available to warn about those same errors being repeated. And depressions almost always lead to wars.

(While recessions typically last months to a year and involve modest declines in stocks and increases in unemployment, depressions typically last years and cause massive losses with unemployment as high as a third of all Americans.)

But it’s not just the passage of eight decades that indicates the Second Republican Great Depression — and possibly America’s next Great War — is upon us. For that, we find the same conservative greed and corruption that provoked the Credit Crisis of 1772, the Panic of 1857, and the Republican Great Depression of the 1930s.

All three were caused by wealthy speculators interacting with a corrupt administration (in 1772 it was the Brits), which is exactly what we’re seeing again today in the most corrupt administration in US history.

Give Trump and his corrupt cronies millions in campaign cash or purchases of his digital “coins” and he’ll give you and your industry an exception to his tariffs; hell, give him enough money to win an election and he’ll even let you take over and then gut the American government and fire all the people conducting investigations into you and your companies.

Advertising revenue is the earliest of the early warning indicators: Last week, the CEO of the advertising agency that sells ads for my radio show called to let us know that advertisers are pulling back, across the board, on pretty much every form of media in every sector. They can see that consumers are themselves pulling back — anticipating a combined recession and tariff-driven inflation — meaning advertising will produce smaller revenue returns.

Meanwhile, both JPMorgan and Wells Fargo tell The Financial Times (for an article titled (“Warning lights flash for US consumer strength as credit defaults rise”) that they’re seeing significant and concerning defaults across the system among their credit card holders. And tourism to America, which is a massive industry representing about 4% of our GDP, has collapsed.

Today. Now. In other words, it’s already begun.

Since consumer spending drives about 80 percent of America’s GDP, this is a disastrous turn of events that feeds on itself: As people buy less to build up their savings, companies suffer from lower sales. That causes them to lay off workers, who then can’t buy anything, further deepening the recession.

China isn’t taking Trump’s little trade war lightly, either; they’re right now crippling the UK steel industry (which they largely own because the conservative Boris Johnson administration stupidly sold it to the Chinese) in “an act of hybrid warfare designed to punish the UK and Donald Trump” as the headline in the Express cites.

And forget about tariffs; the Chinese government is blocking “direct exports of major U.S. commodities including beef, poultry and liquified natural gas through an array of bureaucratic blocks and tricky third-party sales deals.” Additionally, they’ve blocked the export of vital rare earth minerals we need to manufacture chips, displays, and advanced weaponry.

The goal is to cripple America economically in response to Trump’s threats and bluster, and it’s working.

Most concerning, though, is what’s happening to the bond markets and the dollar; this is where the signs don’t just point to recession but possibly a Second Republican Great Depression that could explode unemployment and last years.

The yield on the 10-year Treasury note jumped from 4% to over 4.5% within a week this month, marking one of the sharpest increases on record. This is an warning that the rest of the world is losing confidence in the US as a “safe haven” for their money.

You’ll recall that when the bond market went “wobbly,” Trump paused his major tariffs on every country in the world except China. That’s how frightening the event was.

The backstory is that he was apparently forced into this by Canadian Prime Minister Mark Carney, himself the former Chairman of both the Bank of England and the Bank of Canada (the equivalents of our Fed).

Carney reportedly got together recently with leaders of Europe and Japan to plan their response to Trump, and — being a former central banker — knew the biggest threat he and other democracies in the world could wield against Trump would be a 1929-style collapse of the US bond markets.

All they’d have to do is to begin to carefully dump their holdings of US treasuries, and it could force Trump to back down to avoid a massive market crash and freeze of the dollar-based system of international finance.

About $8.5 trillion of the US’ $36 trillion national debt is held by foreign governments (as treasuries), including $350 billion by Canada, $1 trillion by Japan, an estimated $1 trillion by China, and between $1.5 and $2 trillion by the EU.

If they were to coordinate the process of dumping their bonds, he reportedly suggested, it would flood the market with US bonds and make it harder for the American Treasury Department to sell new debt issues, forcing us to increase the rate of interest we pay.

This would drive up US mortgages (which just jumped above 7%!) and other credit, make it harder for companies to finance expansion and new operations, while increasing the $1+ trillion annual interest cost to the US government to fund our own debt. The result, if sustained over even a few months, could be devastating.

And, sure enough, it appears that’s exactly what they did this past week when bond yields shot up, forcing Trump to put a 90-day pause on most of his tariffs.

On top of that, the dollar is falling at the same time bond yields are rising, something that hasn’t happened since the last Republican Great Depression.

This bond dump threatens America’s position as the holder of the world’s reserve currency, as well as possibly producing a liquidity crisis similar to what had Treasury Secretary Hank Paulsen’s hands trembling when, in 2008, he announced that the nation’s banking system had “frozen up” and needed a multi-trillion-dollar bailout from Congress and our Fed (which Bush gave to the banks and their executives).

And if you think that’s an exaggeration or fear-mongering, consider this headline from The Financial Times yesterday: “US dollar’s haven status under threat, fund managers warn.” The article cites numerous credible sources, all arguing in one way or another that Trump’s erratic behavior is threatening to throw America into an existential fiscal crisis that we may not recover from for years.

Should Carney, et al, continue dumping US debt and China jump in by bailing on their known $760+ billion in treasuries while continuing their boycott of US goods, it could bring our financial system to its knees.

And this, just as Republicans in Congress are trying to raise the debt ceiling by $5 trillion (which will have to be borrowed by selling that amount in additional treasuries) to fund their planned $4.5 trillion tax gift to Elon Musk and America’s other billionaires (including Trump and the 13 billionaires in his cabinet).

Highlighting the danger, the headline in Friday’s Financial Times is, for finance experts, a virtual primal scream: Liquidity worsens in $29tn Treasury market as volatility soars. At the same time, our nation’s debt has crossed the “100% of GDP” threshold, a dangerous and expensive reality that increases the risk of a financial crisis here in America.

And, taking that out of our own hands, fully 30% of that debt is held outside the US and could be dumped without regard to its impact on America (or because of that impact, if punitive).

Republicans are entirely responsible for this loaded debt gun that’s now being put to our heads. Reagan’s tax gifts to billionaires (which is still in effect) have cost America at least $20 trillion; Bush’s have cost us around $6 trillion, plus another $6 trillion for the two illegal wars he lied us into to win the 2004 election; and Trump’s last tax cut cost us an estimated $5 trillion. That’s $37 trillion, and our national debt right now only stands at $36.22 trillion.

And they did it all because of Jude Wanniski’s “Two Santas” theory from 1976, which argued that when there’s a Republican in the White House he should spend like a drunken sailor (which stimulates the economy, creating the appearance of good times) to drive up the national debt.

Then, Wanniski argued, when a Democrat comes into office, Republicans should scream and squeal about the national debt “that our children will have to pay” to force Democrats to “shoot their Santa” of Social Security and other social programs in the face.

Every Republican president since Reagan has followed the plan, and the result, in part, is that as Trump’s stupid tariff policies push us to the edge of another depression we now are so deeply in debt that we lack the tools to respond.

Donald Trump has bankrupted or thrown into crisis virtually every business he ever started prior to jumping into crony capitalism politics in 2016. He’s truly that much of an incompetent bumblefuck. And now he’s doing it to The United States of America.

After all, as I’ve written before, if you want to bring manufacturing back to the United States with tariffs you do it gradually, sector by sector, product by product, through Congress (as the Constitution specifies) so businesses know those tariffs will last longer than a presidential whim.

Making that point and highlighting the danger and stupidity of Trump’s actions, famed investor Ray Dalio told NBC’s Meet the Press this weekend:

“Right now we are at a decision-making point and very close to a recession. And I’m worried about something worse than a recession if this isn’t handled well.”

Batten down your financial hatches and get ready; this is going to be rough for everybody except the morbidly rich, who are rubbing their hands with gleeful anticipation at the upcoming “buying opportunity of the century” to acquire everything from small companies to real estate to stocks, all on sale at massive, depression-era-level discounts.

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