Trump ditches plan to take over Greenland amid state of US bond market

Trump ditches plan to take over Greenland amid state of US bond market

Don­ald Trump this past week abruptly ditched his plan to invade Greenland — and the head-spinning about-face got here thanks to the US bond market.

Yes, you read that proper: It wasn’t diplomacy, and it wasn’t backroom offers among bigwigs inside some posh chalet right here at the World Economic Forum.

Instead, it was the bond market that solved the Greenland disaster, IMHO and in the opinion of my Wall Street sources, persuading the president to accept a “framework” that merely places a few more US army bases on the ice-covered island.

I do know what you’re considering: I’ve jumped the shark on this one, so caught up in my fixation on ­finance that I can’t see the broader geopolitical forces that made it not possible for our president to ship in the Navy SEALs to seize all that strategically positioned tundra.

True, Trump upset the world when he said he sees Greenland as a chunk of the US and aimed to make it occur by any means needed.

While the island is inhospitable and barely inhabited, it’s also a territory of Denmark, a rustic that is a NATO member.

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That means now we have a treaty — ratified by Congress — not to mess with it.

All of which just proves my point.

While The Donald was blowing smoke about sending in troops, he more significantly brandished his most popular weapon of coercion — huge tariffs — on Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland.

They would both hand him Greenland or face a further 10% tariff fee on their items, later ramping up to 25%.

Europe went nuts — however so did the US bond market, with yields spiking and costs falling.

Stocks bought off, too, however their declines might be traced to the more severe tanking of bonds, spurred by the prospect of inflation attributable to tariffs.

Strong sign

When bond costs fall and rates of interest rise, that’s a strong sign that dangerous issues are coming for the economic system.

Higher charges imply larger borrowing prices for customers, who in flip in the reduction of on consumption. It also means we want to pay more cash to finance our huge funds deficit.

We’ve seen this film before.

Remember those onerous “Liberation Day” tariffs?

The motive they never destroyed the economic system as many predicted might be traced to an enormous sell-off in bonds.

Recall that the minute Liberation Day was announced, Treasury Secretary Scott Bessent confronted all of the above.

The yield on the all-important 10-year Treasury bond skyrocketed, heading to 5% — a harmful level that alerts a steep recession even with Trump’s big plans for tax cuts and deregulation.

Traders, so-called bond vigilantes, stored promoting until Bessent ­announced the entire exercise of “liberation” was on maintain.

In fact, bond costs didn’t cease tumbling until Bessent started to lower commerce offers with the world including our arch-nemesis China, taking tariffs to a lot decrease ranges.

The markets then resumed their upward trajectory, put in movement by the president’s deregulation and tax chopping.

We didn’t have fairly the same situation when Trump announced his Greenland tariff scheme, nevertheless it was beginning to head in that path. The 10-year observe spiked to above 4.3% and shares bought off, and laborious.

Exit ramp

That is, until Trump on Wednesday announced right here at Davos that he had a new deal, his Greenland “framework,” or exit ramp — the place he seems to have gotten nothing actually new since Denmark has been largely compliant about letting the US army arrange store on its turf.

Markets didn’t care — in fact, they celebrated.

Bonds recovered, as did shares.

In other phrases, the vigilantes struck again.

Former President Bill Clinton famously summed up the energy of the bond markets years in the past, again in the early Nineteen Nineties, when he was told by one of his financial advisers that he wanted to increase taxes for deficit discount or bonds would collapse and rates of interest rise.

He was flirting with recession.

His precise phrases to Robert Rubin, as reported by journalist Bob Woodward (which I later confirmed with Rubin, then the National Economic Council chief) went like this: “You mean to tell me that the success of my program and my re-election hinges on the Federal Reserve and a bunch of f–king bond traders?”

Rubin said yeah.

Now, those f–king merchants are even more important to Trump and Bessent.

The debt and deficits of the Clinton years have been minuscule in contrast to what now we have now: Annual funds shortfalls of shut to $2 trillion.

Our debt is at $38 trillion, a whopping 125% of financial output.

And that is how a bunch of ­“f–king bond traders” — not a huddle of energy gamers in Davos — solved the Greenland disaster.

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