Blain’s Morning Porridge, Jan 9th, 2026 – The Risks of Cascading Sugar Rush Policy
“When sorrows come, they come not single spies but in mighty battalions.”
The frenetic pace of activity in Washington this week has left the commentariat stunned while dulling the market’s sensitivity to momentous events. Some of it is madness, while much of what Trump is doing makes curiously perverse sense – but what are the risks it all spectacularly unravels?
Shakespeare was right. This morning’s quote is from the Danish play! It sums up the reality of the Cascade Effect – how events, (events dear boy), have a habit of running riot as their consequences, and the cascading instabilities they conspire to create, gather momentum. The scale and impact of cascading crises tend to be directly proportional to how widely their roots are spread.
President Trump has demonstrated a remarkable genius for dominating the entire eventsphere. After his success in Venezuela, he’s now embarked on a deluge of new announcements – which his detractors have dismissed as the actions of a Toddler on a Sugar High.
I can’t remember anything like it in the first week of a new year. Whether its kidnapping foreign leaders, his ICE praetorians murdering citizens and justifying it as a war against leftist domestic terrorism, privateering vs Russian flagged tankers, banning institutional housing investment, threatening to split Nato by seizing Greenland, withdrawing from all international organisations, capping defence industry salaries and bonuses, and then announcing a 50% increase in the US “War” budget from $900 bln to $1.5 trillion per annum, it’s no wonder everyone is wondering what Trump will do tomorrow?
The never-ending deluge of policy quakes has bred a curious lack of concern about the implications and consequences in the markets… we just assume much of it will not happen, that its strum et drang, bluff and bluster. It’s just Trump. He’s just saying it for effect. That’s a dangerous assumption. Consequential tidal waves oft start as small ripples.
When it comes to how widely the roots of potential crises are spread – the perimeter doesn’t extend much further than Trump’s potential impact. In any normal world his outbursts would trigger immediate Risk-Offfears about their impact of the likely consequences. However, markets are showing little concern – they are rolling with him!
But there are no guarantees the good luck that’s allowing him to apparently get away with it won’t soon be tested. And if one pillar of the Trump mythos collapses – what happens to the others? What if he moves too fast or steps too far and is bloodied or rebuffed in a way that shakes the markets’ current indifference to the Consequences of Trump?
The first rule of being a Trump Watcher is not to underestimate the Man. He truly is extraordinary and unique. Although many consider him detestable and beyond the pale, he is not the idiot, stooge or fool fellow sufferers of Trump Derangement Syndrome believe him to be.
There is a great article on him in New York Times, a 2-hour interview The President gave to journalists from the paper. He played them brilliantly, coming across animated, engaged, informed and aware, able to helpfully answer their questions across a wide range of topics, and letting them sit in on a call with the President of Columbia. Trump is said to make 100 phone calls a day – he is not the bumbling old man, suffering multiple morbidities many would wish him to be. Apparently. That does mean he is a good person – which is not in the presidential job description.
Neither does it means he is right. Trump is clever and cunning – which makes him far more dangerous and influential than a mere fool.
While Trump is extraordinary, is he a great leader? Napoleon, a similar inveterate gambler of his nation’s future and fortune, had the good sense to surround himself with a Marshallate of other brilliant soldiers – not all of whom agreed with him or gave him unquestioned loyalty. (Bernadotte became King of Sweden and led his nation against his former Emperor!) The French Emperor knew how the world works: “I would rather have a general who was lucky than one who was good.” (Luck of course is something that comes with experience and ability – “the harder one works; the luckier one gets.”)
Unlike Napoleon, Trump has surrounded himself with flunkeys. He values slavish obedience and slavering adulation over ability. Some of his cabinet are frankly embarrassing. Although Trump’s core team believe themselves bonafide geniuses above reproach or criticism – their lack of expertise, bounding self-confidence and lack of critical facilities raises the likelihood of regime policy mistakes.
Witness the appalling comments by homeland Security Secretary Kristi Noem accusing Renee Good of “weaponizing her car” while mounting a “domestic terror attack”. It sickened me and many others. The poor mother of three would have died in mortal fear and panic as the Ice thug pumped three bullets into her head through the car’s side window as she tried to pull away. I challenge anyone to have reacted differently.
Essentially, Trump is like every powerful autocratic leader of the last 250 years, gambling on his perception of his power and influence, and his coin is American Credibility. If, and I stress if, it goes wrong… the loser will be the USA.
Will it fail because Trump and his team of sycophants get it wrong? That’s a big call to make – but we know that across all aspects of the American economy there are genuine experts warning of the risks. Are they crying wolf, or are they correct to warn about the consequences of mass immigrant deportations on jobs, the politization of the Armed Forces, or the severing of long-established alliances?
Thus far Trump has been lucky. His big gambles, like tariffs, have not spectacularly gone awry and wrecked the economy. The success of the military in Venezuela (think Arsenal vs Accrington Stanley) has empowered him. Where does it stop? What happens if his bluff is called, or his hand of deuces is revealed? Autocrats tend to push too far. Ask Napoleon what he thought of Moscow in October 1812.
On Wednesday Trump promised to spend $1.5 trillion defence in 2027. I am all in favour of stronger defence – but I doubt building the laughable Trump Class Battleships will deter aggression.
There is a massive difference between spending an additional $600 bln and spending it well. Again, give Trump credit – on Wednesday he warned the defence primes about stock buybacks and bonuses when their only concern should be delivery and ramping up production. He particularly called our Raytheon for its slow delivery and reluctance to accept direction from the Pentagon. I like that.
But, if Trump truly wanted to demonstrate America’s mastery of the Battlespace and differentiate himself from the feeble Biden, then the way to have done so would have been to threaten to impose an American Sky Shield over Ukraine to enforce an immediate ceasefire on day 1 of his second administration. Putin is acutely aware Russian air defences would prove useless, allowing Ukraine mastery of the skies.
The thing about spending money on defence is its only effective as a deterrent if a nation can demonstrate it not only has the ability, but also the intent to use it. Thus far Trump has proved willing to take on small threats, but shows zero intent to take on stronger, more aggressive, more threatening powers like Russia. The real issue is, of course, China, which probably has the power to negate American carrier-led sea power. No matter how much Trump says he will spend, if the Chinese fundamentally believe he won’t risk using it against them, then its deterrence value is close to zero.
The issue for America and Trump’s dramatic policy shifts are legion. At the back of everything is the mighty dollar and the depth of funding from the Treasury market. Just a year ago Trump’s DOGE promise was to slash spending, acutely conscious of the out-of-control National Debt – see https://www.usdebtclock.org for a reminder of how big an issue it is!
Naturally, defence stocks rallied on the expectation of billions more to be spent. For Trump the budget is not a problem. His Truth Social posts explained the extra $600 bln for the Department of War will come from tariff revenues – still leaving enough for him to pay “middle income patriots” a dividend!
I’m not clever enough to understand the maths of Trumpenomics – if tariffs are raising $300 bln per annum then how can he spend $600 bln more on defence? What I think is tariffs directly impact US consumers through higher prices and damage global trade raising inflation and recession risks… but what do I know…
As a bond trader, when I don’t understand the maths, and I wonder about policy over-reach, then I’m really wondering about the sustainability of the US bond market if the rest of the market concludes the deficit is going to rise, and a shock may be imminent.
Out of time and back to the day job. Have a great weekend
Bill Blain
CEO – Windshift Capital
Author – The Morning Porridge
Partner – Shard Capital
Special Advisor – Spitfire Strategic Capital
8 Comments
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Hi Bill- its worth seeing if the US Supreme Court finally rule on his tariffs today. It could be carnage if they rule against them, with $150bn of tariff refunds stacked up by US importers to date. Maybe a fudge is coming?
Perversely…. a fudge that unwinds tariffs will suit Trump – he can argue all his trade deals have had the desired effect, and it will reduce the inflation impetuous – as long at there are no refunds!
The real effect will be on bonds – no more higher domestic consumption taxes (what the tariffs were) paying down debt, and still his increases in spending!
I agree with most of this – I find Trump truly despicable, but, yes, highly consequential. Change is happening – a lot of it. America will never be remotely the same again; and that’s even if the Democrats somehow manage to regain power.
But in the end, aren’t we witnessing the desperate flailing of a rapidly declining, internally divided empire? So far we’re still in the “gradually” phase of “gradually and then suddenly”. What triggers the “suddenly” phase, I don’t know. But it will happen as night follows day..
FWIW, I strongly suspect Trump and Xi already have an “understanding” about Taiwan, and that the US won’t defend the island when the Chinese strike (most probably blockade, first). Trump is nothing if not a schoolyard bully, and bullies only pick fights with the weak.
We are in a period of hegemonic change. It happens every 2 Kondrattief cycles as Empires rise, become exceptional, and are then replaced by the next thing. We saw that happen to the UK in 1910s, and now it’s happening to the USA. How they respond to the changing reality is fascinating – hence Trump trying to declare the Don-Row doctrine that the USA should have unlimited power in the Western (American) hemisphere. But even that may fail if the pushback is hard enough.
There is a serious risk China will use its current weapons capability gap over the American carrier groups to attack anyway – to demonstrate that are in control. However, I expect what they need (and really want) is further economic growth through trade and to win this war to become global hegemon without fighting – classic Sun Tsu!
He’s clever in as far he learned he can get say anything with impunity. Beyond that he is just a bully that takes a wrecking ball to anything that comes in this path and enjoys seeing he can get away with it and the hurt it’s causing. Even hinting he is a mastermind fills me with disgust. He and his henchmen should be removed from public office immediately, let’s hope the midterms will happen.
Es ist Sturm und Drang, Herr Frühstückmeister. The mighty dollar? There is a theory that Trump is happy with or even wants a US dollar declining in value, as part of a plan to introduce a gold or commodity-backed reserve currency before the Global South/BRICS countries manage to do so.
He should be careful what he wishes for. As a frenchman once pointed out, by being the medium of global exchange, the dollar benefited from being in high demand to settle every global trade and that dollar balances held in banks tend to get reinvested (partially) into US treasuries. As the share of goods and commodities being traded Yuan to Rupee, etc, increases, there will be fewer dollar balances to fund Treasuries… And if folk no longer trust or believe in the dollar… that process accelerates.
Trump doesn’t seem to know that every time someone trades away from dollars… a US factory closes…. (Appologies to JM Barrie)
‘There’s a divinity that shapes our ends, Rough-hew them how we will’.