Unraveling of the Global Order? | Rana Foroohar

Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today we are exploring the continuing saga of the Liberation Day tariffs. On the show today, I have a traditional finance commentator, Rana Faruhar. She's a FT columnist, she's a CNN economic analyst, and she has a wealth of knowledge on capital markets and geopolitics. We start the conversation today discussing Donald Trump attempting something that no one has ever attempted before, which is materially, credibly attempting to unwind the global world order by upending the Triffin dilemma, threatening the US dollar as a global reserve currency, and for the first time in decades, making material pushes to restore manufacturing back to the United States.

Is this good or bad? What are the costs of doing this? Do they outweigh the benefits? What are the stock market, the bond market, and the dollar strength index signaling about these strategies?

Rana alikens the decisions of Donald Trump to treating America's capital markets much more like an emerging economy, and we discussed the consequences of that, both good and bad.

Rana is not the usual commentator that we typically have on Bankless, but she nonetheless delivered a particularly educational and insightful interview. And it was an honor to have her on the show. So let's go ahead and get right into the interview with Rana Faruhar. But first, a moment to talk about some of these fantastic sponsors that make the show possible.

Bank Coast Nation, I'm here with Rana Faruhar. She is a journalist, an author, an economic analyst.

She serves as the global business columnist and associate editor at the Financial Times. And she is also CNN's global economic analyst. Her work focuses on the intersection of business,

economics, politics, and technology. Rana, welcome to Bankless.

Thanks for having me.

Okay, Rana, I want to set the stage a little bit because I think all of our listeners are all glued to the screens of this.

With tariff debacle, tariff drama, whatever's going on in the macro markets. Yeah. This is uh a subject that we have been following over the years at Bankless. Um,

really, as we are understanding uh why and how Donald Trump got elected in the first place in 2016, not this most recent election,

but he really just flipped some key blue states in the Rust belt uh to red

uh by his appeal to voters that experienced substantial manufacturing job losses. These are state uh jobs and states Michigan, Pennsylvania, Wisconsin, Ohio, Indiana.

It was really the manufacturing story that elected Donald Trump

in the first place in 2016. Now he's back.

And he kind of believes that he just has this mandate to restore manufacturing in the United States.

And

we understand that there's this thing called the Triffin dilemma. We have covered this on Banklist a handful of times. That because we have the global reserve currency,

That is what we produce. We export dollars. We buy manufactured goods elsewhere. And then we import those goods. And that contributes to the global trade imbalances that Donald Trump seems to have such an incredible problem with. This

order has worked for most of America, but not for Donald Trump's base, from what I can tell.

And it is clear that Donald Trump seems to be more intent in unwinding this global order than we've ever really seen before. No one's really incredibly tried to unwind this global order. And I think that is how I would set the context for the significance of the events.

of last week is we are seeing the largest credible attempt at unwinding this global order that we have seen. That is how I see this. I wanna pass the conversation to you. Do you see this as that? And how do you also just set the the stage for this conversation at hand?

Yeah, for sure. No, I mean I think you did a really good job sort of outlining the key macro issues here. Um, you know, I think that this process in in some ways

We began to be uh a little bit suspicious, I would say, in 2008, some of us did, that, uh-huh, maybe we need a new global order here. You know, the entire financial system just collapsed. We have a very financialized economy in America. And by that I mean that it's based on asset price growth rather than, you know, making things in factories, let's say, and bolstering wages. And then you start thinking about, well, why is that? And part of it is down to the fact that the US dollar is the global reserve currency. So everybody wants to pour money into the US, sort of regardless of what the real story on the ground is. Um, that's helped along by the fact that you've had 40 years of falling interest rates, which again just increased the money flow and.

You know, kind of lubricate the system, but oftentimes in a in a bit of an artificial way. And then, you know, as you go on past the financial crisis and you see that the problem of debt isn't being solved, it's actually getting bigger. So there's more debt out there in the world than ever before. There's, there's, there's actually, you know, the risk moves from the financial system to the private uh shadow banking system, hedge funds, private equity, et cetera.

But the problem doesn't change. Then

you get the pandemic and you get the war in Ukraine. And then you begin to see, oh, wow, not only are there these distortions in the financial system, there are distortions in supply chains. You know, we've got these supply chains that are set up to work really well if nothing bad is happening in the world. But the minute that,

you know, China needs its PPE back, suddenly you have a shortage in the US. Or if uh Russia invades Ukraine, you have a global grain crisis overnight. Um so I think that became this wow felt experience for a lot of Americans that there's fragility.

In the highly globalized, highly concentrated order where business has essentially been taught, and the US policymakers have encouraged business to think this way, that all you have to do is move things from point A to point B to point C as cheaply and fast as possible. And it doesn't matter if you're outsourcing jobs, it doesn't matter if you're offshoring risk. What matters is asset prices going up.

Consumer prices going down. Now,

that neoliberal order made people like me, for example, that have a lot of money in the financial markets extremely wealthy, you know, relative to many Americans. My house price, um, which has doubled since I bought it 18 years ago in Brooklyn,

is down to the fact that we have a highly financialized economy and we allow people to write off jumbo mortgages.

But

That paradigm also resulted in the outsourcing of much of the manufacturing base to China, which is now the biggest strategic adversary of America, according to the US military.

This is a problem. This is an imbalanced system. And the way that I sort of pulled the lens way back is I think about political

pendulums and how they shift. And, you know, basically every political economy is kind of purpose built for its time. You can go all the way back to the 18th century and look at mercantilism and say, yeah, that kind of worked.

Until it didn't. And then you get laissez-faire and the hyperglobalization of the 19th century. But then you get too much speculation and you get the financial crisis of 29 and the Great Depression. And then you get more public uh involvement in the market. So the pendulum begins to swing. And then

eventually we get to the 70s, and there's been, you know, too much public involvement. Maybe markets are a little sclerotic. Maybe you need some more animal spirits. And then you get the Reagan Thatcher Revolution. So the pendulum

shifts again.

Well, by the time you get

2008.

Uh, the the 20, you know, the the the financial crisis, um, the election of Trump, you're beginning to see the pendulum

really reaching its tipping point. And I would argue now it's swinging back the other way as we realize on both sides of the aisle

that

this neoliberal system of globalization

was really great for a certain class of people asset owners, knowledge workers on the coast, but there were a lot of people living in many other places.

That did far less well. And that creates this fundamental problem, which is the disconnection of the global market system from the interests of the voting public.

Mm-hmm. And so I wanna get your opinion on

The relationship between the nature and the decisions of Donald Trump versus the correction of that pendulum. I think largely we are we are understanding that this pendulum is in a suboptimal place and we should find a more optimum place for that pendulum to lie. Like maybe the global globalization has done, has brought its good to the world. And now we are seeing that start to invert. And maybe, maybe now the costs of globalization are starting to rear its head. And so we should fix things. And that's what's what Donald Trump understands what he wants to do. Also, Donald Trump's strategy is also something to consider here. And so I want to get your take on uh it sounds like you are generally aligned with, yeah, we need to.

we need to fix the fix the the equilibrium. We need to fix the milieu of the globe. Uh and then there's also, you know, the actual strategy for for doing that. So how how would you just reflect on his choices versus uh what could have been?

Right. So I would, I would um

differentiate between Trump one and Trump two there. So Trump, Trump one,

you know, you got Bob Leithyser, who was the USTR, coming in and saying we need a reset of the global trading system. You know, it was, it was a little bit outre at the time, but a lot of people now agree with that.

Tariffs on China. Again, a lot of people agreed with that. You then get Biden coming in, continuing the tariffs on China, but layering an industrial strategy on top of it and saying, we need more resilience for the reasons I just talked about. You want to make masks, you want to make pharmaceuticals, you want to make semiconductors, you know, not just in Taiwan, but all around the world.

Then you get Trump coming in for the second term. And what's interesting is

he just throws the entire chessboard up in the air. And um

Even his advisors, I think, were shocked at how chaotic the tariff rollout was. There were people in the administration, you know, Marin, who's the head of the Council of Economic Advisors,

Scott Besson, who I think were like, yeah, we need to reset up global trade, but let's do this with allies, let's do this a little bit more slowly. We want to weaken the dollar, but we don't want to just, you know, crash the markets.

Well, Trump was basically listening to Peter Navarro, who's the most extreme China hawk and is for tariffs on everybody, adversaries, allies. And so suddenly the entire Bretton Woods system is up for grabs, and the markets just did not know what to make of it.

And by the time the dust had settled,