Prepare for Implosion, or, This is America’s Brexit Moment

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Hi guys. I’m going to keep it short and sweet, because this one’s urgent. Friends, gather round, you will need to understand what I’m about to discuss.

Trump just announced tariffs of 25% on Canada and Mexico and a little less on China starting…tomorrow.

What’s going to happen?

Americans don’t have much experience with tariffs, with macroeconomic changes and transformations in general. So it’s OK not to know. And I’d expect the country to be wayyyyy more alarmed, but it isn’t, because it doesn’t understand what’s about to hit it, which is going to be…

Absolutely catastrophic.

See how people are already “shocked” and “surprised” by what’s happening (all over again)? They aren’t listening and learning. Please, take a second to understand all this, urgently and seriously. This is why I write these long essays. You are going to be affected, and I don’t want you and your loved ones to get hurt.

Chaosterity

What do tariffs of 25% mean? 

They mean that everything that’s imported from Canada and Mexico is going to rise in price, many things by a lot more than 25%. What’s imported from there? Food, vegetables, fruit, lumber, all kinds of basics. Why will it rise, in some cases more than the tariff rate? Because of course distributors and the entire value chain needs to make money in order to operate.

So we are going to see a ruinous wave of inflation. When I say ruinous, I mean it. 25%? That’s an enormous rate for a tariff. Normally, if want to discourage trade or investment, we’d set that rate at maybe 5 or 10%. Not only do these guys have no idea what they’re doing, they have no idea what kind of ruin they’re about to unleash.

In short order, Americans are going to be catastrophically more for nearly everything on the shelves. They already can’t afford it, which we know because of course credit balances are skyrocketing and living standards are falling.

But that’s only sort of the small story. This isn’t just “about tariffs,” but an approach to the economy which also appears to include attempting to lay off the entire government.

I called it Chaosterity the other day. Tariffs hurt people, and the people they hurt the most are those who have the least. In this regard, while attempting to lay off the entire government is austerity, deciding you’re going to have 25% less stuff (which is another way to think about 25% tariffs, at an equivalent price level), is going to result in chaos, a kind which most living Americans have never really seen. We’re talking 1930s level consequences.

Because what all this does next is…what blunders like this do next…they accumulate and begin cascades, vicious spirals. Let me continue.

The best lens to understand what just happened is what Britain did to itself via Brexit.

What Brexit Did to Britain

Today, just 3 in 10 Brits think it was a good idea. Back then, when it happened, the nation was gripped by this weird mania.

Economists and intellectuals would try to warn people about the effects of tariffs. Of breaking up with your biggest trading partners. For a country that imports nearly everything.

Sound familiar?

What happened next to Britain? It suffered the longest, steepest, sharpest fall in living standards in history.

But even that’s not really the worst part. It’s economy is shrinking, and it will never recover. To what it was before Brexit. That is because of course now it has to reach a much smaller equilibrium, since it has less investment, capital of all kinds, whether financial or human, less trade, less commerce.

Sound familiar?

Today, British incomes have stagnated so long and hard that people wonder why they’re earning such pittances. The differences are stark, and almost unbelievable. The same jobs in America will pay 3 to 5 times as much, and in Europe, 2 to 3 times as much.

Britain turned itself into a much, much poorer country. It will never recover. The losses are now permanent.

Meanwhile, because it’s economy now has had to become much smaller, it’s once vaunted social contract is in tatters. The NHS is dying. The BBC is already dead. The streets are full of trash and crime, local authorities are bankrupt, and there’s a sense that nothing works, and there is no future. 

There isn’t.

The government’s plan, to “kickstart growth”? To build…another runway at Heathrow. Go ahead and laugh. This is what’s left—this level of incompetence and this paucity of vision.

Brexit cost Britain everything. It destroyed its future so severely that we don’t have a word for “rich country that made itself poor and a pariah.”

Go to Paris, compared to London, and the streets are clean, people are happy, and things are generally flourishing. In London? People dress in modern-day rags, the pain and despair are etched on their faces, and the poverty is everywhere.

This is what happens next.

America’s Brexit Moment

Breaking up with your largest trading partners in this way is incredibly catastrophic. Britain’s example teaches us that. But Americans don’t really grasp what’s going to come, in the same way Brits didn’t, for the same reasons—they have little experience with deconstructing systems that took a century or more to build.

So the consequences of all this for America will be just what they were for Brexit Britain. Let me summarize them. A catastrophic wave of inflation. Higher interest rates. People stretched past breaking point. A wave of bankruptcies. Shortages and supply chain breakdowns. A much smaller economy. Fewer jobs, and smaller incomes.

I understand that many people won’t get this, even though I’ve pointed it just happened to the last nation that tried it. So I urge these sorts of people to think for once in their lives.

Now. Brexit’s catastrophic effects took several years to unfold. It was a slow-motion train wreck and it still is. Britain’s economy will continue to shrink probably for the next five to ten years, as it reaches a new equilibrium in which it doesn’t trade as much, employ as many people, can pay far less, has far, far fewer competitive companies, as its public sector must now choose, do we save the NHS, or public housing, or do we just sell it all off?

America’s Brexit-level effects will take mere months to unfold. They will unfold at lightning speed.

That will leave people in shock. They will not be able to comprehend and grasp what is happening to them.

Tariffs of 25% starting tomorrow? On America’s largest trading partners? That make up the vast majority of its imports? The imports that make up the basic stuff of life?

That means that over the next couple of weeks, prices will skyrocket. Maybe here and there companies and distributors will try to absorb costs, but don’t kid yourself, American capitalism’s pretty cutthroat, and I have my grave doubts about that. Most likely, basics of all kinds on the shelves will see an explosive wave of inflation.

That will mean that the Fed can’t drop interest rates. Doesn’t sound like a big deal? Let me explain why it is. Both the labor aka job market and the housing market are currently frozen. That is because interest rates are still relatively high, especially compared to the median level of wealth, income, and debt. 

So job markets and housing markets will stay frozen. Think it’s a good idea that people won’t be able to get jobs for a year or whatever the statistic is already? That houses don’t sell? That is the economy going into shock.

But of course all that’s just the tip of the iceberg, too. In Britain, what happened as the costs of Brexit proved too much to absorb? Scores upon scores of businesses went bankrupt. Small ones, sure, but not just small ones. Many of Britain’s biggest brands don’t exist anymore. Remember Ted Baker? TopShop? And so on? Brexit killed off entire swathes of Britain’s economy, causing a tidal wave of bankruptcies.

And that is part of why incomes are so staggeringly low in Britain right now. Because it doesn’t have globally competitive companies, not nearly enough of them left, to offer people globally competitive salaries and wages. If you destroyed your biggest brands, which offered the best compensation and roles, but now those jobs don’t exist…right alongside smaller businesses, and those jobs don’t exist…see what I mean? This is how British incomes ended up at such astonishingly low levels.

Welcome to Ruin

I don’t say that lightly. Let me put it in context. Over the years, I’ve predicted American collapse. Then I predicted the next phase—implosion. 

That is what happened to Britain. It imploded, unless you think “the sharpest fall in living standards in history” is anything else.

America is now entering the implosive phase. If these plans come to fruition, we are going to see all of the same vicious cycles happen, only much faster. Inflation, frozen markets, bankruptcies, unemployment, plummeting incomes, falling living standards.

This is a recipe for a depression. 

It might not be called one, hey, if the economy grows by 2%, and oligarchs get all that plus another 8%, it’s not technically one, but that’s just a technicality, because for the average person, they’re 10% poorer.

These vicious circles will hit America incredibly fast. It won’t take five years, like it did Brexit to really lay waste to Britain. It’ll take months, and by a year or so, the economy will be convulsing in shock, and it’s already incredibly bad, which is why Trump got elected, because of course living standards have been falling in real terms.

You must understand all this and do what you can to prepare for it.

That doesn’t mean stocking up on eggs. It doesn’t mean disaster prepping. Rather, it means understanding that this is a long-term shift in America’s fortunes, the same that it was for Britain. Brexit destroyed Britain. It will never be what it was again, globally competitive. It won’t be a nice place to live, do business, earn an income, build wealth, because you can’t do a lot of those things there anymore.

America is going to suffer incredible consequences of the same sorts of magnitudes. Americans don’t understand this, I want to emphasize that, because they have never experienced anything remotely like it, and so it’s hard to comprehend just how fast all this can happen, how severe it can be, and how consequential it will be. 

That was true for Brits, also. That’s why most of them regret Brexit now, and just a slim margin are left who think it was a good idea. Of course the problem is that it’s far too late to do anything about it (and no, you can’t just “rejoin the EU,” because there are issues of trust, credibility, and complexity, not to mention that Britain is just much poorer and less stable now.)

Americans, too, will regret the staggeringly poor choices they’ve made, and I don’t include you obviously if you’re not in that pool. They’ll regret it even more than Brits, because of course in America, no money, you die. 

Let me try and summarize. The consequences of all this are going to be a) much faster b) much more severe b) much more turbulent and c) much more catastrophic than almost anyone in America can comprehend right now.

I know, I know, that’s the kind of sentence that used to get me in trouble. Way back when people used to tell me I was wrong. Before my predictions all came true, I guess.

Now, I think, you should be smart enough to take my warnings, especially when they’re this grave, very seriously.

So this isn’t about stocking up on eggs. It is about understanding that if all this comes to pass, then the next few years will be catastrophic, genuinely so. The kinds of implosions that will take place will stagger most people in America, just as the consequences of Brexit staggered most Brits. And many simply won’t make it—they’ll lose everything, as the bottom falls out, as bankruptcies soar, as businesses shutter, as jobs are destroyed for good, as prices skyrocket. 

Don’t be caught in that gyre.

Think long and hard on that level. 

And then make some tough choices about what to do next.

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