The 4 Horsemen of Economic Apocalypse

Sympathetic vibration. Not a term many of us use on a regular basis—if ever.

My bet that is that, unless you’re a structural engineer, you’ve probably never used those two words together.

In very simple terms, sympathetic vibration is a phenomenon in which something in nature causes a structure—we’ll be using a bridge as an example—to vibrate at its natural frequency. And if you’re not a physicist, then you should know that all things are comprised of particles, and that all particles are in constant motion, so they vibrate.

Harmonize the vibration through external forces and bad things can happen.

Such was the case back in November 1940, in Tacoma, Washington, just a few months after the Tacoma Narrows Bridge opened for traffic. The bridge spanned a stretch of Puget Sound, just south of Seattle.

As the wind ripped through the narrows that November day, the vibrations matched the bridge’s natural vibration and suddenly those vibrations began to intensify. The bridge began to sway and lurch and buckle in ways horrifically unnatural to anyone who’s ever driven across a bridge.

Within minutes, the vibrations had torn the bridge apart in dramatic fashion and sent it plunging into the sound below.

This lesson from history is applicable to today’s dispatch because it brings us to the idea that complex systems are inherently risky and prone to failure because, well, humans don’t always get it right.

Sometimes, the failure that ensues is minor. Maybe no one but the designers know, and they’re able to fix it before any damage manifests.

Other times, catastrophic failure is the end result.

What I’m getting at here is the increasing likelihood that the US monetary system faces a catastrophic failure.

And I write that only in terms of presenting to you a possibility, and hoping you see the warning as a reason to prepare… just in case I’m right.

Since about 1987, the US financial system has relied heavily on the Federal Reserve stepping in to save the day. That was when the 1987 stock market crash happened, which saw Alan Greenspan’s Fed step in to save the stock market by lowering interest rates and injecting liquidity into the market to prop up plunging stocks.

Since then, the Fed has played the role of M*A*S*H* surgeon—always on the frontline, ready to save the market from self-inflicted and government-inflicted wounds.

The result is that the US has built up an increasingly fragile monetary system ripe for a Tacoma Narrows moment.

Granted, it might not look fragile from a cursory glance at the world’s most important economy. But below the surface the vibrations are noticeable because the Fed’s actions have created a cycle of risk-taking and dependency, in which market participants feel fine taking on extreme levels of risk because they know that the Fed won’t allow anything bad to happen.

All of which has led us to a point where America struggles with:

• Debt Accumulation: Unnaturally low rates the Fed supported over the decades has fueled extreme levels of borrowing, which in turn has led to unsustainable levels of debt taken on by households, companies and, particularly, the government.

• Moral Hazard: Investors, banks, et al., have taken on large risks, assuming that the Fed will always step in with a bailout when necessary. That helped drive speculative bubbles in dot-coms in the ’90s and housing in the early 2000s.

• Asset Inflation: The Fed’s continual and repeated interventions have helped inflate asset prices, especially stocks and real estate, and have disconnected prices from economic fundamentals.

• Delayed Reckoning: In rushing to put a fluffy mattress beneath the market every time investors and banks make stupid investment decisions, the Fed has delayed or even prevented market corrections that are necessary for purging waste from the system… creating an ever-larger problem when a crisis finally erupts that the Fed cannot control.

Let’s call them the Four Horsemen of Economic Apocalypse.

But that last one—the delayed reckoning—is really what I am on about today.

As I’ve noted over various recent dispatches, the US monetary system and the economy under the second Trump administration is a helter-skelter mess of confusion, chaos, and conflicting messages that’s causing countries all over the world to simply back away from America and the US dollar.

This is not a popular sentiment, but my bet is that the dollar loses reserve currency status before the end of Trump’s current term.

I’m not saying the dollar will be a meaningless currency in the world. Certainly not. The dollar will still be valuable, just less valuable to the world… which means the dollar loses ground relative to other currencies. And that has some painful implications on the home front—namely rising consumer prices.

For his part, Trump keeps insisting that the dollar will always remain “the currency of choice,” and that “if a nation said that we’re not going to be on the dollar, I would tell you that within about one phone call they would be back on the dollar.”

Trump always offers Big Dog comments like that, but the truth is he simply doesn’t have the power he likes to think he has.

If Germany and the EU decide they want to trade directly with China in a euro/yuan swap, Trump can’t prevent that. And threats of taking away military protection and the imposition of yet more tariffs are no longer going to work when Germany and the rest of the EU are already beginning to rebuild and rearm their militaries, and seeking an end to tariffs with other big trading partners like China.

If the EU, China, Japan, Canada and other major economies in the world get together to design a basket of currencies they want to use as a new global reserve, Trump has no power to stop them.

Ultimately, what we have right now is the beginning of sympathetic vibrations in the dollar.

Countries are done with Trump’s America.

And even Team Trump is looking for way to kill the dollar as a way to try to bring manufacturing back to America. That in itself is a hugely complex undertaking, particularly with Trump’s insistence that the world remain loyal to the greenback as global reserve.

The system is simply becoming too complex.

Already the Fed is on the verge of stepping in yet again instead of letting the system correct the imbalances that have built up. Per Forbes:

Fed Official Confirms Trump Tariff Bailout Is Ready Amid $30 Trillion
Market ‘Panic’ Warning

The dollar’s days of primacy are fast approaching their termination.