Threading the Needle

May 30, 2025
Doug Leyendecker

Welcome to This Week’s Leyendecker View

People who cannot recognize a palpable absurdity are very much in the way of civilization.
Agnes Repplier


FAVORITE READS OF THE WEEK

AI White-collar Bloodbath Is Coming
How to Survive AI
Why Americans Don’t Understand Putin

FAVORITE WATCH OF THE WEEK

The Intricate Circuitry of Our Oceans


THINKING OUT LOUD

Threading the Needle
Can Team Trump pull off an economic turnaround?

I’ve been talking about our upside-down economy for years. I call it a Keynesian Trap. 

The basic premise is that our economy has become dependent on constant fiscal and monetary stimulus.

Okay, time to ask an AI helper…

Me: What is a reasonable amount of annual government deficit spending as a percentage of GDP?

ChatGPT: “In normal times 1% to 3% is broadly seen as a reasonable and sustainable level.”

Me: Okay, then what has been the US annual government deficit spending as a percentage of GDP for the last ten years?

ChatGPT: “2015: 2.4%, 2016: 3.1%, 2017: 3.4%, 2018: 3.8%, 2019: 4.6%, 2020: 14.9%, 2021: 12.5%, 2022: 5.4%, 2023: 5.8%, 2024: 6.5% (est.).” 

And more from ChatGPT: “The Congressional Budget Office projects further increase due to rising interest payments and aging population.”

A concluding point from the rest of my conversation with ChatGPT: “Over the past decade, the U.S. moved from sustainable (2015–2017) to structurally high deficits (2018–2024). While pandemic deficits were justifiable, the current trend (~5–7% of GDP) is above the safe range and could lead to an unsustainable debt-to-GDP ratio unless economic growth outpaces interest rates or policy changes address the revenue-spending imbalance.”

As you can see, ladies and gentlemen, we are way out over our skis on government deficit spending.

Numerous bright people, including the president’s team, have recognized this. Finally! 

So now we’re close to $37T in debt. And now it seems the global savings glut is over, which means we may have fewer investors to purchase our debt, which would mean we’re going to have to pay a higher rate of interest to attract capital. And if the government has to pay a higher rate of interest to attract capital, businesses and individuals will have to pay a higher rate of interest when borrowing money. 

Today’s 10-year T-bill interest rate is around 4.55%. ChatGPT says we need GDP growth above that rate to have a sustainable economy. The last time we had GDP growth above 4.55%, outside of the anomaly that was the 2021 Covid bounce back year, was in 1999, when it was 4.8%. Got it. So 1999 was the last time GDP growth was above our current government borrowing rate.

Okay, so economic growth is not going to outpace interest rates anytime soon. That means we need policy changes to address the revenue-spending imbalance.

Team Trump seems to understand our predicament. They’re pulling out all the stops to try and restructure our economy.

Team Trump is using tariffs as a negotiating tool to get better deals with other countries, as well as to inspire more investment in US factories that can increase our economic capabilities and resilience.

The mainstream media’s response seems to be that we’re hurting our trade partners and that trying to rebuild US manufacturing is a joke. Is the media helping our cause?

Consider my essay, “Why Manufacturing Matters,” from a few weeks ago. Manufacturing has a significantly higher economic multiplier effect than do services, which today dominate our economy. It’s no wonder our federal government is in so much debt. Services can’t carry the load, so Washington has had to throw more and more funny money into our economy.

The US economy needs more manufacturing! Team Trump is trying to get us there.

DOGE is another tool Team Trump is using. Cutting the fat at government agencies. Cutting out foreign aid to countries that don’t even like us. Cutting out the massive grift that’s become part of the whole system of running the government and supporting foreign countries. Cutting out all the waste and thievery in Medicare, Medicaid, Social Security and more.

How many news stories have you read about the good DOGE is doing versus the stories of people losing their jobs, people losing government handouts and babies going hungry in some African country?

Does mainstream media understand the seriousness of our economic predicament? Does it even understand the predicament? Does it care about the country? Or does it only care about its profits?

Team Trump is also trying to get NATO’s European members to pay their fair share as a way of reducing the US costs of subsidizing global conflicts.

Why is the US spending billions of dollars in Ukraine when it’s a European problem? Is Europe going to reimburse us for that money we’re spending to help protect it? Is Ukraine? Is Russia? Where are we going to get payback for our “investment” in Europe’s safety?

In 2006, every NATO country agreed to contribute at least 2% of its GDP to NATO. Since then, almost none has, and Germany, Europe’s largest economy, has failed to come remotely close to its commitment.

For years, the US’s contribution to NATO has been well above our 2% agreement. By contrast, Europeans have contributed below to far below the treaty’s set condition. Hey, Europe! You owe us money. Pay up! You think Europe is going to pay us back?

You think China is going to send us money to cover the economic challenges we have because of that little Wuhan accident?

Team Trump is trying to fix all manner of things that will reduce government expenditures, inspire faster economic growth and increase government revenues. Because if we don’t, the cost of interest on our debt could become unaffordable. 

This is a gargantuan effort. But Team Trump is hell-bent on doing it. We should hope and pray they can thread the needle.

THE RANDOMS

OpenAI wants us to have another gadget. Do we really want another gadget? Maybe if it makes us a ton more money.

GDP for Q1 just came in slightly negative. Is this something we should blame on the Trump administration? Or should we realize that all the free Covid money has finally run its course through the economy?

The tariff court blowback suggests the “swamp” doesn’t want the world to change. Rather, it wants the US to keep borrowing and borrowing and borrowing. Conclusion: Lawyers don’t understand economics. Maybe there’s something to that old story that lawyers aren’t so great at managing their money. Maybe this is even truer for government lawyers.

The unraveling of globalization may be the primary influence on interest rates staying higher for longer. There is no more deflationary influence from companies finding ever cheaper labor.

For years, I’ve thought that the only way to defeat terrorists is to make them more afraid of you than you are of them. With that thought, how can the US and Europe defeat Putin?

Here’s an idea for food companies and grocery stores—make smaller packages of meat. Single people and empty nesters often end up with too many leftovers and therefore produce more food waste.

What have we lost replacing the knowledge of nature for the knowledge of man?

ECONOMIC NEWS

Economy

The Fed forecasts stagflation
US economy shrinks in Q1
Consumer confidence jumps big
Will the economy be growing at 3% soon?
How about a Japan-US sovereign wealth fund?

Labor

Would a four-day workweek work?
AI is killing entry-level jobs
Gen Z is turning to trade jobs
Jobless claims are rising

BUSINESS

Finance

The hedge fund that’s killing it
Bank lending to private credit swells
Private equity’s silent power
Private credit has too much money
Return of the SPACs

Real Estate

Luxury home sales at decade low
Pending home sales are slumping
While housing starts fall
American homes, shrinking and unaffordable

Tech

Is Apple “Cooked”?
Oracle places $40B Nvidia chip order
Big tech doesn’t want to protect children
Are IP laws outdated?

AI

NYT content to train Amazon’s AI
Gold rush bust is coming
Nvidia is designing a chip for China
Is there enough energy for AI’s future?

Energy Transition

Small nuclear reactor design approved
NY caves in to natural gas needs
GM invests big in V-8 engines
Thermal coal prices at 4-year low
Trump wants to fast-track nuclear

THE NATION

The Washing-Tone

Biden biographers are not being nice
Taxing US dollars that support other economies
Trump supports Nippon-US Steel deal
Will Trump send Harvard money to trade schools?

MAGA

The US Steel “golden share” deal
Buying 100% USA made is hard
Smithey Ironware, Made in the USA
Who’s afraid of “America first”?

The Tariff Effect

GM likes Trump’s tariffs
Trade court invalidates Trump’s tariffs
And then appeals court overrules
The European luxury goods tax
Japan is ready to make a deal
Switzerland protects its farm products

Social Trends

Can US universities survive without Chinese students?
Public trust in health care collapses
Does college still have a purpose?
Texas voted for Ten Commandments in every school

GEOPOLITICS

Global

Argentina’s good momentum continues
Japan’s debt is twice the size of its economy
Africa’s worsening refugee crisis
India’s spiritual tourism boom
Japan’s population reaches tipping point

Europe

The EU needs to cut water usage
Germany is world’s largest creditor nation
Europe’s far right is gaining momentum
Trump demands more EU NATO spending

Ukraine

North Korea supplying Russia with weapons
Putin demands and demand and demands
Russia has created a war economy
US reinforces northern Europe
Germany ready to take the gloves off

Middle East

Trump doesn’t want Israel to strike Iran
Israel keeps the pressure on the Houthis
Palestinian aid effort turns into chaos
Israel tells Europe to butt out

China

China hides its slave labor
Western companies struggle in China
China experiencing EV price war
China improves ability to attack Taiwan
China to establish new military academies

War Creep

China blasts past US in the arms race
Israel is destroying drones with lasers
Autonomous weapons are the new standard
America’s adversaries don’t like “golden dome”
US has a Chinese missile deterrent

MAKING A BETTER YOU

Mind
Get more quiet time.

How to practice intelligent failure
Flawed memories can be healthy
Meaning and the good life

Body
Get more outside time.

Signs that you are aging well
Are seed oils actually bad for you?
One more reason to exercise

FUN STUFF

Let your hair down, baby! Even if you’re all alone.

The Extraordinary

Japan owns the toilet business
Sporting event of the YEAR!
He’s mounted Mt. Everest 31 times!
A roaming, monster black hole is eating stars

It’s Vacation Time

The other great California road trip
5 super great state parks
Europeans are tired of tourists

Music That Found Us

Who is ready for some yacht rock?
Dope Lemon’s “Sugarcat
Maya Delilah’s “Being Again
John Splithoff’s “Far From Here
Shannon Lauren Callihan’s “One Night
Butcher Brown’s “Change in Weather Feat

Worth a Watch

The lovely re-release of The Annihilation of Fish.
Scarlet Johansson directs Eleanor the Great.
A new Soderbergh goodie, Black Bag.
Classic Wes Anderson, The Phoenician Scheme.

The Yum Yums

The best pizza places in NYC
And then there’s garlic…
Garlic butter swim biscuits
Roasted garlic with goat cheese
Garlic broth
Basic aioli
Garlic bread
Garlic chili vinegar
Pasta with garlic oil and anchovies
Garlic butter shrimp scampi

PARTING THOUGHTS

So I feel it’s like being on a boat headed for the rocks in which everyone agrees that we will crash if we don’t change our course, but they’re too hung up arguing which way to turn.
Ray Dalio on our debt and spending problem

IN CASE YOU MISSED IT

Just Say No?
May 23, 2025

The Tyranny of Good Intentions
May 16, 2025

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