Original author: TechFlow
Recently, both the U.S. stock market and the cryptocurrency market have experienced a major correction. On the one hand, the imposition of tariffs has made it difficult for inflation to fall for the time being, and the U.S. dollar index is still at a high level. Secondly, the poor economic data in the United States has also made investors feel uneasy, and a trading recession may really be coming.
According to the GDPNow forecast data of the Atlanta Federal Reserve on March 3, the forecast of the US GDP growth rate in the first quarter of 2025 has plummeted to a contraction of 2.82%. On February 26, the model predicted a growth of 2.32%. In just 5 days (2 working days), the US GDP forecast for the first quarter was quickly lowered by 510 basis points.
This is also the worst result the model has predicted for US quarterly GDP since the 2020 coronavirus pandemic.
However, in the eyes of some Wall Street people, this is Trumps open conspiracy. Former Lehman Brothers trader Larry McDonald said in his latest podcast that Trump is trying to deliberately create an economic recession in order to force the Federal Reserve to cut interest rates and reduce the US governments interest expenses.
You cant suppress inflation through massive fiscal spending, and the Trump team knows it. They need a recession to lower interest rates and extend the maturity of debt. The Trump administration is implementing financial repression to push interest rates below the inflation rate, which is the only way to get out of the $37 trillion debt dilemma. There is no other way except default.
Related reading: Full podcast | Dialogue with former Lehman Brothers trader: Trump needs a recession to fix the economy
For a long time, the disagreement between Trump and the Federal Reserve has been on the table. In order to reduce inflation, the Federal Reserve has many concerns and hopes to cut interest rates slowly. Trump, on the other hand, demands a quick rate cut to reduce government debt spending. He wants to avoid losing out in the midterm elections, so he must cut interest rates to boost the economy, provide the market with sufficient liquidity, and reduce the pressure on American borrowers.
According to estimates, if interest rates remain at current levels, the U.S. debt interest will reach $1.2 trillion to $1.3 trillion next year, which is much more than the U.S. defense spending. You should know that the U.S. fiscal revenue is only about $4 trillion, of which the national hard expenditure is about $3.5 trillion, and its medical insurance expenditure is about $2.6 trillion. If you add interest expenses, the total is basically about 1.7 times the fiscal revenue.
This requires the United States to continue to use debt to finance debt in a high-interest rate environment. The depletion of market liquidity continues, and the cost of U.S. debt is still soaring rapidly.
Therefore, in Trumps eyes, not lowering interest rates is equivalent to being an enemy and going against him.
As a businessman who is proficient in negotiation, Trump chose to force the palace at this time, through the tariff war and DOGE layoffs, and even threatened to audit and optimize the Federal Reserve, so that the US economy will temporarily fall into recession and the US stock market will fall, thereby increasing pressure on the Federal Reserve to cut interest rates. At the same time, he can also put the blame on the previous government, and when the US stock market rebounds, he can brag about it as his own political achievement.
In addition, Nomura Securities analysis pointed out that the Trump administration intends to trigger a mild recession by reducing government spending and employment, and imposing tariffs, in order to achieve a structural transformation of the economy from government dependence to the private sector.
This strategy may exacerbate downward economic pressure in the short term, but its long-term goal is to break the U.S. economys long-term dependence on government spending, promote the private sector to become the dominant force for growth, and reshape the U.S. economic growth model.
In any case, in the game between Trump and the Federal Reserve, the U.S. stock market and cryptocurrency market can only suffer first. It is a danger as well as an opportunity. Once the Federal Reserve officially starts a large-scale interest rate cut, the U.S. stock market and cryptocurrency market will also usher in a prosperous moment.
