Since taking office, U.S. President Trump has engaged in various flashy maneuvers that have left the entire market bewildered.<blockquote>A diplomatic storm unfolds at the White House, resulting in a shocking and intense argument.DOGE undergoes massive layoffs, with unemployment in Washington possibly nearing 1 million.The &#34;Mar-a-Lago Agreement&#34; is seen as a variant of &#34;Plaza Accord 2.0&#34;, possibly indicating that the U.S. wants to forcibly change the global financial order.</blockquote>Now the market is beginning to realize that all this turmoil may not be coincidental, but rather that Trump intends to deliberately create an economic recession, targeting &#34;American debt reduction&#34;! Moreover, with U.S. stocks experiencing a &#34;black opening&#34; in March, the market has no choice but to confront the fact that, in Trump 2.0, U.S. debt may be more important than U.S. stocks.In this regard, well-known investor Larry McDonald pointed out in a recent podcast that the $36 trillion U.S. debt issue is already urgent. If measures such as imposing tariffs and massive layoffs at DOGE lead to a short-term economic recession, it could create conditions for lowering interest rates. For every 100 basis points reduction in interest rates, up to $400 billion in interest expenses could be saved, thereby postponing the U.S. debt crisis:<blockquote>So the new presidential team knows this; they need to create a recession to lower interest rates and optimize the debt structure.Every time the market rises, the new president comes out, almost as if he has more &#34;gunpowder&#34; to increase tariffs. They need to lower interest rates by 100 basis points so they can refinance the debt, and then they will save about $400 billion in interest.</blockquote>Furthermore, the reason the debt reduction issue has been elevated to such a height is that the core reason lies in Trump's tax cut plan and the Republican Party's urgent need for support from the &#34;Freedom Caucus,&#34; as macro trend blogger and economist David Woo pointed out in early February.David Woo stated that one of Trump's &#34;trump cards&#34; is to preserve the tax cut policy from 2017. According to Treasury Secretary Basant, extending the tax cut policy is the most important economic issue for 2025. If this is not done, the U.S. economy will fall into a severe recession in 2026.<blockquote>First of all, as Basant said in his testimony—during his confirmation hearing for Treasury Secretary—Scott was right when he said that extending the 2017 tax cut policy will be the most important economic issue for 2025. He was referring to the tax cut policy implemented by Trump in 2017, which is set to expire at the end of this yearWe are discussing personal income tax.If nothing changes and this policy is not extended, then on January 1, 2026, Americans will wake up to find that they need to pay higher taxes. Clearly, if this happens, the U.S. economy will fall into recession—and it will be a severe recession. This is why Bessenet says this is the most important economic issue currently.However, the Republican Party insists on a tax reduction stance, facing the test of the &#34;Freedom Caucus.&#34; They are the last group of fiscal hawks in Washington, whose sole purpose is to stop the continuous growth of U.S. debt. And now, the Republican majority in the House of Representatives is extremely slim, reaching the lowest level in ninety years, and any legislation requires the support of the &#34;Freedom Caucus,&#34; so their voice is significant.The first point I want to make, which may sound a bit strange to some, is that the biggest winner of the 2024 U.S. election is the &#34;Freedom Caucus.&#34;You may not even know what the Freedom Caucus is. It is a group of 31 Republican members of Congress, and I believe they are the last group of fiscal hawks in Washington. Most of these people come from the southern or midwestern United States, and they come to Washington with one purpose: to stop the continuous growth of U.S. debt. They believe that U.S. federal debt is evil and the biggest challenge facing America. Therefore, their only mission in Washington is to stop fiscal waste and save America.The reason I say these people are the biggest winners of the 2024 election is that although Trump won the &#34;trifecta victory&#34;—meaning the Republicans won the presidency, the Senate, and the House majority, the current Republican majority in the House is the weakest in 90 years, and has never been this weak since 1931.In fact, you may remember that the Republicans only won a majority of five seats in the House, and then Matt Gaetz resigned because he believed he would be appointed as Attorney General. Subsequently, Trump pulled three people from the House Republicans to serve in government positions. This means that the Republican advantage in the House is now down to just one seat.In other words, in the current political environment, the Republicans cannot pass any legislation unless they have the full support of the Freedom Caucus. You may ask: Why haven't these people done anything in the past two years? After all, the Republicans have controlled the House since the 2022 midterm elections.The reason is simple: House Speaker Mike Johnson chose to cooperate with the Democrats instead of shutting down the government at all costs or refusing to raise the debt ceiling as demanded by the Freedom Caucus.This is why the biggest irony for the Republicans, and I believe the biggest stain on the House Republicans and Mike Johnson, is that although they have a majority in the House, they have allowed massive fiscal spending over the past two years under the leadership of the Biden administration, just to try to win the 2024 electionBut that is already a thing of the past. The reality is that the Republican Party cannot do anything without the support of the Freedom Caucus.</blockquote>In other words, if the Republican Party wants to implement tax cuts, it must make progress in reducing the deficit. Therefore, 2025 may become a special moment in American history, where the market will truly see the implementation of fiscal tightening.David Woo also predicts that in 2025, the &#34;Freedom Caucus&#34; will form a powerful alliance with Elon Musk, as the world's richest man and Washington's most powerful political faction are about to come together:<blockquote>My biggest prediction for 2025 is that the Freedom Caucus will form a powerful alliance with Elon Musk.You have to understand that Musk himself is a fiscal hawk; he wants to cut federal spending by $1 trillion. In Congress, both Democrats and Republicans believe that cutting $1 trillion in spending would be catastrophic for the American political system. Therefore, you could say that the only group in Congress that might support Musk is the Freedom Caucus.From this perspective, it is a match made in heaven— the world's richest man and Washington's most powerful political faction are about to come together, or rather, they have already come together.In this scenario, the third key figure is Basant. If he becomes the next Secretary of the Treasury, it will be very noteworthy. You may not know that Basant is actually a hidden fiscal hawk. Of course, he cannot show this publicly right now because he still needs to gain confirmation from Congress. But he is definitely a fiscal hawk.Think about it, why would Trump nominate a fiscal hawk as Secretary of the Treasury?This can only mean that Trump himself is also starting to shift towards a fiscal hawk position.A few months ago, Basant stated in an interview with Bloomberg that every time he talks to Trump, the question Trump is most concerned about is: What do we need to do to reduce the deficit?We must understand that the American political system is inherently inclined to continuously increase the deficit. The Republican Party only cares about tax cuts, the Democratic Party only cares about increasing spending, both parties verbally support fiscal responsibility, but in reality, neither party will actually do anything.However, 2025 may be a special moment in American history, where we may see the implementation of fiscal tightening.</blockquote>And how long will this &#34;recession action&#34; last? Secretary of the Treasury Basant recently provided a key timeframe: 6-12 months.According to Basant, his action plan is to drag the economy into recession as quickly as possible within 6-12 months, then package it as a legacy issue from the previous administration, allowing him to start fresh. Meanwhile, he can also use this recession to lower interest rates, reduce interest expenses, and achieve the goal of debt reduction, which is truly killing two birds with one stone.<blockquote>I do believe that we are experiencing the &#34;aftereffects&#34; of excessive spending during Biden's administration. We will privatize the economy again. When we cut government spending and allow the private sector to operate again, it may not be a completely proportional relationship, but I am confident that this will happenPresident Trump said a few days ago that someone asked, &#34;When will this become your economy?&#34; He said it might be six to twelve months later. I think I agree with this view.When economic recession becomes a strategic tool, and people's livelihood data becomes a bargaining chip for policies, this gamble with national credit at stake is no longer limited to the power games in Washington.Decision-makers in Washington may have forgotten: the cost of dancing on the edge of a knife is never just the blood of the dancer. Those fragments of dollars that fall into the folds of history will eventually turn into sharp blades piercing ordinary people on some morning—just like the specter of stagflation in the 1970s, which never truly disappears before dawn</blockquote>

Trump 2.0, is the U.S. debt more important than U.S. stocks? Has the market thought about it?

- The article discusses the economic strategies of President Trump, highlighting his potential intention to create a recession to manage U.S. debt.  
- It emphasizes the role of the Freedom Caucus in shaping fiscal policy and the implications of extending the 2017 tax cuts, which are crucial for avoiding a severe economic downturn in 2026.  
- The piece concludes that the upcoming collaboration between the Freedom Caucus and influential figures like Elon Musk may lead to significant fiscal tightening in 2025, marking a pivotal moment in U.S. economic policy.

U.S. stocks plummet, the White House is in chaos, DOGE layoffs, Mar-a-Lago agreement... all because of "American debt monetization"!