Is the White House trying to engineer a recession? This Wall Street pro explains the vision.

[j brown's body]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

 

[trumptman]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

 

[Mr Person]

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

Slavish dumbassery.

It's not a "correction" if the President intentionally causes it with anti-American policy, especially when its goal appears to be repeating something that has always failed to work and hoping it will magically work this time (classic right wing ****ery):

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending.​

https://finance.yahoo.com/news/white-house-trying-engineer-recession-140100768.html

Supply side tax cuts, to which our deficits since Reagan are entirely and directly attributable.

 

[Gozaburo]

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

Its ceases the amaze me to see what convoluted narratives you people will come up with to cope with poorly planned, poorly executed policy.

 

[trumptman]

Its ceases the amaze me to see what convoluted narratives you people will come up with to cope with poorly planned, poorly executed policy.

You can do plenty of searches for terms like "everything bubble" and the dates will be before Trump came to office.

When you also read articles about "investers sitting on cash" it is because all the investments in the market are not priced appropriately.

We aren't talking about take your money and move it from tech stocks to housing or from housing to bonds or from bonds to... dividend stocks.

It's all in a bubble.

I own several paid off investment properties in California. My wife and I were out with another couple at a show. She was complaining that the property taxes on her rental property alone were $700 a month. My wife asked me later how their property taxes in California could be that high (on top of every other tax)

I said simple. You take $750k, multiple it by 1.25% and divide it by 12 and that should get you the round figure she is talking about.

California Housing Market: 2025 Home Prices & Trends | Zillow

The average home value in California is $796,255, up 1.3% over the past year. Learn more about the California housing market and real estate trends.

www.zillow.com

Then you insurance companies trying to charge for insurance when every home is 3/4 of a million dollars.

What's the capital gain rate on those stock gains?

The real issue is blue states are swamped with taxes, regulation and obligations and it is a giant house of cards waiting to collapse.

We need a strong and swift market correction. Just like diet, exercise, and many other improvements the pain is worth the gain.

 

[trumptman]

Slavish dumbassery.

It's not a "correction" if the President intentionally causes it with anti-American policy, especially when its goal appears to be repeating something that has always failed to work and hoping it will magically work this time (classic right wing ****ery):

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending.​

https://finance.yahoo.com/news/white-house-trying-engineer-recession-140100768.html

Supply side tax cuts, to which our deficits since Reagan are entirely and directly attributable.

Your definition of "causes" means no longer supporting the forces that allow the mis-allocation of resources.

 

[upsideguy]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

The very wealthy generally do very well in recession... they buy up distressed properties and distressed businesses

 

[j brown's body]

You can do plenty of searches for terms like "everything bubble" and the dates will be before Trump came to office.

When you also read articles about "investers sitting on cash" it is because all the investments in the market are not priced appropriately.

We aren't talking about take your money and move it from tech stocks to housing or from housing to bonds or from bonds to... dividend stocks.

It's all in a bubble.

I own several paid off investment properties in California. My wife and I were out with another couple at a show. She was complaining that the property taxes on her rental property alone were $700 a month. My wife asked me later how their property taxes in California could be that high (on top of every other tax)

I said simple. You take $750k, multiple it by 1.25% and divide it by 12 and that should get you the round figure she is talking about.

California Housing Market: 2025 Home Prices & Trends | Zillow

The average home value in California is $796,255, up 1.3% over the past year. Learn more about the California housing market and real estate trends.

www.zillow.com

Then you insurance companies trying to charge for insurance when every home is 3/4 of a million dollars.

What's the capital gain rate on those stock gains?

The real issue is blue states are swamped with taxes, regulation and obligations and it is a giant house of cards waiting to collapse.

We need a strong and swift market correction. Just like diet, exercise, and many other improvements the pain is worth the gain.

Often external factors get in the way of diet, exercise and many other improvements.

A number of economists are skeptical of the effectiveness of this policy.

I guess we'll have to wait and see. It's quite possible it could be all pain and no gain.

 

[MamboDervish]

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

Yeah .... it's called a correction because Trump needs to be corrected!

 

[Visbek]

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

Good grief, what a load of nonsense.

Trump doesn't give a s**t about any of that. He's going to try to bully the Fed into cutting rates, no matter what's going on in the economy. I am certain he does not understand monetary policy and international trade well enough to understand what a "weak dollar" means, let alone how his actions are potentially triggering a recession.

 

[Tensor101]

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

I disagree with this whole thing. Trump thinks he can apply tariffs to these countries with no side effects. He is not aware that tariffs raise prices for consumers and they buy less because of it. The companies make less money and their stock goes down. During the campaign he said that China and others would have to pay the tariff right into our Treasury. I heard him say that in his first term as well. Republicans are weak on the Economy and it's too bad Harris did not take advantage of it. Then, we would not have all this uncertainty in the markets. Y/N

 

[Tensor101]

I disagree with this whole thing. Trump thinks he can apply tariffs to these countries with no side effects. He is not aware that tariffs raise prices for consumers and they buy less because of it. The companies make less money and their stock goes down. During the campaign he said that China and others would have to pay the tariff right into our Treasury. I heard him say that in his first term as well. Republicans are weak on the Economy and it's too bad Harris did not take advantage of it. Then, we would not have all this uncertainty in the markets. Y/N?

 

[What if...?]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

Nothing has ever trickled down from above that anybody would want to get on them.

 

[What if...?]

Your definition of "causes" means no longer supporting the forces that allow the mis-allocation of resources.

“Mis-allocation”-any capital that flows to the unwashed instead of into the hands of their betters.

 

[bongsaway]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

No problem, you won't have to wade into those weeds at all, trump will be throwing most of us into them himself.

 

[ashurbanipal]

You can do plenty of searches for terms like "everything bubble" and the dates will be before Trump came to office.

When you also read articles about "investers sitting on cash" it is because all the investments in the market are not priced appropriately.

I'm trying to follow your argument here and not having much luck. I sometimes see figures that there is around $7tn in money market accounts, and the idea is that that money will flow into the stock market if the fed cuts rates further. However, historically speaking, as a portion of GDP, the cash to securities ratio is lower than it has been on average, so it seems unlikely that all, or even a substantial portion, of that money will flow to stocks. Maybe some will. But then, the companies whose stocks are purchased will have more cash to spend, which in turn will drive inflation further. Doesn't seem like a workable strategy for most folks; the wealthy will profit immensely, but everyone else will struggle to buy bacon.

The short of that is that driving the economy into recession at the tail end of a long and pervasive inflation is not great for any but a few economic elites. So if that's what you're saying they're driving toward, sounds to me like you're saying what Trump's critics have been saying all along.

I own several paid off investment properties in California. My wife and I were out with another couple at a show. She was complaining that the property taxes on her rental property alone were $700 a month. My wife asked me later how their property taxes in California could be that high (on top of every other tax)

I said simple. You take $750k, multiple it by 1.25% and divide it by 12 and that should get you the round figure she is talking about.

California Housing Market: 2025 Home Prices & Trends | Zillow

The average home value in California is $796,255, up 1.3% over the past year. Learn more about the California housing market and real estate trends.

www.zillow.com

Then you insurance companies trying to charge for insurance when every home is 3/4 of a million dollars.

What's the capital gain rate on those stock gains?

The real issue is blue states are swamped with taxes, regulation and obligations and it is a giant house of cards waiting to collapse.

We need a strong and swift market correction. Just like diet, exercise, and many other improvements the pain is worth the gain.

It seems to me, and to many others, that the real problem is that people at the top of the economic ladder keep making more and more, and everyone else less and less, as a portion of total GDP over any given interval, and no one is doing anything to fix that problem. Your proposed solution here will only further exacerbate income and wealth inequality.

 

[Ishm]

What a pile of 'do do'. Trump can't even begin to plan like that, and surely isn't. When Trump screws up it is standard maga to suggest that the screw up is all part of some master plan that will deliver something good in the future rather than deliver the promises that were made for today.

What Trump is doing now is irreparable damage to both Americas position in the global order, and to Americas long term economy. We aren't going to get back the trading relationships Trump is currently destroying, and some of our export sectors are going to be permanently harmed. As for the 'disinflation' bs, Trump is doing all he can to drive inflation higher. That means the size of the recession required to get to 'disinflation' would be incredibly damaging. As for weakening the USD, the author has obviously never even looked at what happens to the the value of the USD in a global recession????? And make no mistake, the whole world is economically vulnerable right now, and if the US goes into a recession, so will the rest of the world. It will be really bad!!

 

[trumptman]

The very wealthy generally do very well in recession... they buy up distressed properties and distressed businesses

If only we could find some financial journals that would print articles announcing that the very wealthy were sitting on piles of cash waiting for such an event.

This Chart Could Explain Why Warren Buffett Is Holding $325 Billion in Cash

Warren Buffett's $325 billion cash reserve signals caution amid historically high market valuations.

www.investopedia.com

It's almost like such a wealthy person understands that a correction would allow them to buy a bunch of assets at prices that would net a great return and allow them to keep making money.

Often external factors get in the way of diet, exercise and many other improvements.

A number of economists are skeptical of the effectiveness of this policy.

I guess we'll have to wait and see. It's quite possible it could be all pain and no gain.

There will always be gain. The pain is only those who cannot absorb the downturn and have to cash out.

There will always still be a world out there. If housing values were to drop by 50% a bunch of retirees would be sad but a bunch of 25 year olds would be thrilled.

Yeah .... it's called a correction because Trump needs to be corrected!

Everything right now needs to be corrected.

I disagree with this whole thing. Trump thinks he can apply tariffs to these countries with no side effects. He is not aware that tariffs raise prices for consumers and they buy less because of it. The companies make less money and their stock goes down. During the campaign he said that China and others would have to pay the tariff right into our Treasury. I heard him say that in his first term as well. Republicans are weak on the Economy and it's too bad Harris did not take advantage of it. Then, we would not have all this uncertainty in the markets. Y/N

The side effect will be investment in the United States and domestic production.

“Mis-allocation”-any capital that flows to the unwashed instead of into the hands of their betters.

Spoken like a true socialist.

 

[ashurbanipal]

If only we could find some financial journals that would print articles announcing that the very wealthy were sitting on piles of cash waiting for such an event.

This Chart Could Explain Why Warren Buffett Is Holding $325 Billion in Cash

Warren Buffett's $325 billion cash reserve signals caution amid historically high market valuations.

www.investopedia.com

It's almost like such a wealthy person understands that a correction would allow them to buy a bunch of assets at prices that would net a great return and allow them to keep making money.

So yeah...you are literally and self-consciously arguing for an economic policy that makes the wealthy elite a ton of money and screws everyone else. I'd say "unbelievable" but it's all too believable these days.

 

[trumptman]

I'm trying to follow your argument here and not having much luck. I sometimes see figures that there is around $7tn in money market accounts, and the idea is that that money will flow into the stock market if the fed cuts rates further. However, historically speaking, as a portion of GDP, the cash to securities ratio is lower than it has been on average, so it seems unlikely that all, or even a substantial portion, of that money will flow to stocks. Maybe some will. But then, the companies whose stocks are purchased will have more cash to spend, which in turn will drive inflation further. Doesn't seem like a workable strategy for most folks; the wealthy will profit immensely, but everyone else will struggle to buy bacon.

So first point, and we have character limits here so remember that, I'm not talking up the stock market nor saying anything about stocks reflect overall economic health. When you purchase a company's stock they don't have more "cash to spend".

Recessions correct misallocation of capital. However in this, the misallocation is the massive printing of dollars to prop up failing and zombie investments through out almost the entire economy, hence everything bubble.

The short of that is that driving the economy into recession at the tail end of a long and pervasive inflation is not great for any but a few economic elites. So if that's what you're saying they're driving toward, sounds to me like you're saying what Trump's critics have been saying all along.

There's a lot of disconnect in what you're saying here. A recession would certainly help stop inflation.

It seems to me, and to many others, that the real problem is that people at the top of the economic ladder keep making more and more, and everyone else less and less, as a portion of total GDP over any given interval, and no one is doing anything to fix that problem. Your proposed solution here will only further exacerbate income and wealth inequality.

Your concerns here are social, not economic.

 

[trumptman]

So yeah...you are literally and self-consciously arguing for an economic policy that makes the wealthy elite a ton of money and screws everyone else. I'd say "unbelievable" but it's all too believable these days.

That wasn't the point at all. The rich are going to do what they are going to do. I just told you what they are doing to do. You can make the same play on your scale or you can sit back and cry.

If we are playing football and I tell you I'm going to pass the ball you can either play pass defense, pass the ball on your downs or you can sit on the bench and cry.

 

[Chomsky]

It's called a correction for a reason and it could be sharp and swift which would allow a propert long and strong recovery.

We're already in a "proper long & strong" recovery.

 

[ashurbanipal]

So first point, and we have character limits here so remember that, I'm not talking up the stock market nor saying anything about stocks reflect overall economic health. When you purchase a company's stock they don't have more "cash to spend".

Not in every case, but in many cases, yes they do, through two avenues. First, companies regularly either split stock or make secondary offerings and sell shares directly on whatever exchanges they've listed, in which case, the sale of those shares raises capital directly. Secondly, and more commonly, companies own a certain share of their stocks directly and can sell those without making a secondary offering. Anything that drives up the price of those shares leads to unrealized gains in their available capital--most usually, companies will simply seek loans against the value of those shares.

Recessions correct misallocation of capital. However in this, the misallocation is the massive printing of dollars to prop up failing and zombie investments through out almost the entire economy, hence everything bubble.

You'll have to define what you mean by "misallocation" before I can comment.

Your concerns here are social, not economic.

So the income/wealth gap can be cured by non-economic means? Seems obviously false, but I'll be interested to hear it if you can explain what you mean.

 

[multivita-man]

Its ceases the amaze me to see what convoluted narratives you people will come up with to cope with poorly planned, poorly executed policy.

I don't believe that the administration is necessarily trying to cause a recession, but I do think it's possible that they are so committed to their economic and political agenda that they don't necessarily care if one happens, and they may be confident that we can climb out of it. Think Reagan's supply side economics in 1981, which contributed to a very deep recession in 1982-83. The obvious difference is that in 1981 we weren't that far removed from the 1970s stagflation. In 2025, while we have a serious debt problem and a moderate inflation problem, our economy right now is generally in better shape than it was when Reagan took his wrecking ball to FDR's New Deal.

 

[CaughtInThe]

We could have had sane and normal instead of 4 years of chaos.