From the Washington Post Editorial Board:

More than 80 percent of Swiss voters rebuffed a referendum that would impose a 50 percent inheritance and gift tax on assets above 50 million Swiss francs, or about $62 million. The Young Socialists party that proposed the new law says the money would be used to fight climate change. Yet it was so resoundingly rejected that it may deter others on the continent from following suit.
Switzerland is a wealthy country, but most people do not have a fortune so large that would be directly affected by this referendum. Instead, the electorate made a rational decision to keep what helps make the country so wealthy: a stable and predictable business climate with relatively low taxes. The Swiss understood that taking that away would hurt even those without huge inheritances.
Switzerland has a wealth tax administered locally, but its rates are minuscule and apply to almost everyone. In 2023, the country’s tax-to-GDP ratio ranked 31st out of the 38 countries in the Organization for Economic Cooperation and Development. Even a sniff of a massive inheritance or wealth tax had the country’s richest residents looking for other options to take their capital, such as Dubai, Abu Dhabi and Singapore.
The top 10 percent of asset holders generate 86 percent of wealth tax revenue. The top 10 percent of salary earners contribute 53 percent of that revenue. Not all these people would leave, of course, but only a portion of them departing would devastate the country’s finances. This is why the federal government opposed the initiative.
An inheritance tax is also complicated and inefficient. How does one value exotic assets like fine art? And if someone privately owns a large company, succession planning becomes a nightmare when the government is taking a share of the firm upon death. Some taxation is necessary, but levies on property and other forms of consumption are far fairer. Taxing work is not ideal, but an income tax is easier for a government to maintain than claiming unrealized gains that are part of someone’s estate.
America’s federal inheritance tax kicks in this year at $13.99 million for individuals, and some states add a levy on top of that. This will increase to $15 million in 2026 under the One Big Beautiful Bill Act and will be adjusted annually for inflation starting in 2027. Something all 2028 presidential candidates, Democratic and Republican, should be willing to answer: Do they think this tax should go up, down or stay the same? Do they, like the Swiss, want to prioritize healthy public finances, or do they want to make a political point of taxing the ultra-rich? It will be a telling indicator of which direction both parties are headed.

Can anything stop the stock market? The U.S. economy recently weathered the worst pandemic in 100 years, the worst inflation in 40 years, and the highest interest rates in 20 years. Yet from 2019 through 2024, the S&P 500 grew by an average of nearly 20 percent a year, about double its historical average rate. Despite President Donald Trump’s erratic economic policies, which include the highest tariffs since the 19th century, the market is already up by about 8 percent in 2025.

As the stock market soars ever higher, the theories of why it rises have suffered the opposite fate. One by one, every favored explanation of what could be going on has been undermined by world events. The uncomfortable fact about the historic stock-market run is that no one really knows why it’s happening—or what could bring it to an end.

-Rogé Karma, staff writer at The Atlantic.

---

Monday, Aug. 11, 2025
S&P 500: +8.6% year-to-date.
Nasdaq Composite: +11.1% year-to-date (new all-time high).
Dow Jones Industrial Average: +4.8% year-to-date.

We do know that the US stock market is overvalued— but by how much?
Rogé Karma closes out his excellent article by noting that the explosion of passive funds* over the past 15 years could explain why the market has become less sensitive to real-world shocks and headwinds.

It might keep going up, or something unforeseen may bring it down dramatically.

*A passive fund is an investment fund, like an exchange-traded fund (ETF) or index fund, that aims to match the performance of a specific market index, rather than trying to outperform it.

Happy Friday.
It’s not a happy Friday on the economic news front.
Only 73,000 jobs were added to the US economy in July, and the numbers for May and June were revised down dramatically.

Trump Administration Live Updates: Uncertainty Looms Hours Before Tariff Deadline

President Trump held a news conference at the White House without providing clarity about what will happen to the global trading system in less than eight hours. As of midnight, the stiff tariffs that the president announced on April 2 would go into effect, unless the president signs an executive order to stop them.
– Ana Swanson writing for the New York Times live blog, 2.00 pm EDT

“It’s really not at all clear what it is we should do”
– Fed Chair Jay Powell explaining at a news conference this week why the Federal Reserve Board decided to keep interest rates steady (instead of cutting them)

---

We are 30 days into the 90 day-hold that was announced by Trump for the (ridiculous) reciprocal tariffs on April 9. Now he ‘might’ lower the rate from 145% to 80%.

And what were the tariffs before all of this insanity?

Average US tariffs on Chinese exports now stand at 124.1 percent. These tariffs are more than 40 times higher than before the US-China tariff war began in 2018 and are already 6 times higher than the average US tariff on China of 20.8 percent when the second Trump administration began on January 20, 2025.
[Source: Peterson Institute for International Economics]

The U.S. economy shrank in the first three months of 2025, contracting by an annualized rate of 0.3 percent — a stark reversal after nearly three years of solid growth, as tariff-related uncertainty upended spending patterns and raised fears of an impending recession.
– Abha Bhattarai writing in the Washington Post

Another Monday, and another big down day in the US stock market.
The latest is that Trump is threatening to fire Fed chair Jerome Powell. (Can he do that? Powell, has repeatedly stressed that his firing is not permitted by law, but I don’t think that will stop Trump).

Here are excerpts from Heather Long’s opinion piece in the Washington Post, titled ‘There’s only one way the U.S. avoids a recession”

The alarming signs just keep coming since President Donald Trump announced massive global tariffs on “Liberation Day.” The price of gold has soared to an all-time high as people rush for the ultimate safe asset. The U.S. dollar has tanked to a three-year low as investors would rather own about anything that isn’t American. As if the tariff chaos wasn’t enough, Trump is also threatening to “terminate” Federal Reserve Chair Jerome H. Powell, one of the only trusted economic leaders the nation still has.
…
The United States is probably not in a recession today, but it’s looking inevitable that it will be soon unless the White House dramatically shifts on trade. There’s only one way the U.S. avoids a recession: if Trump stops the tariff madness.

Trump has ushered in an economy of distress, even among the rich. His tariffs are the highest since the Great Depression. Americans are terrified that prices are going to spike again, and they might lose their jobs. Businesses are equally alarmed and entering an almost-comatose state as they wait to see what happens with trade, budget cuts and taxes. Traffic at the Port of Los Angeles, the major hub for Asian imports, has dried up so much it resembles early covid days.

…
“I think we’re going into a recession,” said Neil Dutta, head of economic research at Renaissance Macro Research. “What’s the upside case for the economy? Even if we go back to where we were before the trade stuff and Trump just declares victory, so much damage is done, it’s hard to undo.”

There’s no safety net left to stop a downturn. The Fed isn’t going to come to the rescue and cut interest rates to prop up the economy because there’s too much concern about inflation returning. Trump is slashing government spending, especially on many areas that help the poor. Congress isn’t going to do a big stimulus package with “stimulus checks” for most Americans as it did during the pandemic. Meanwhile, consumers no longer have a ton of savings to cushion price hikes or job losses as they did coming out of covid. And the bond market freak-out has only made it more difficult — and expensive — for anyone trying to refinance their loans.

If layoffs really start to pick up, consumer spending will nosedive and a downturn is almost certain. Already, there’s been a surge in Americans who are paying the bare minimum on their monthly credit card bills — an early sign of widespread distress. The number of “minimum payers” is at a 12-year high, according to the Philadelphia Fed.

LONDON, April 9, 3:16 AM PDT (Reuters) – Global markets took a beating again on Wednesday as U.S. President Donald Trump’s eye-watering 104% tariffs on China took effect, and a savage selloff in U.S. bonds sparked fears that foreign funds were fleeing U.S. assets.

---

So what happened today is that the US bond market started to melt down early this morning New York time.  (If you don’t know what that means: investors around the world started to question the global safe-haven status of the United States by dumping their US Treasury bonds. Do we really want a start another 2008-style global financial crisis?).

Trump backed down (some) from the tariffs, and the day ended with the Dow Jones up 7.8%, S&P 500 up 9.5%, Nasdaq up 12.16% today.

What’s not to like about that? Let me tell you.

The original Trump Tariff Tantrum that started all this turmoil is only on a 90-day timeout.
The 10% tariff that remains in place right now with US trading partners, is far, far higher than for any other OECD country.
The trade war that Trump had started with China has arrived at a stunning 125% for imports from China and a stunning 84% export tariff to China. (In reality: a trade embargo between the countries with far and away the world’s two largest economies).

The American consumer is going to get killed.
Apple’s, Walmart’s and the profits of countless other companies big and small, in America and in China, will be obliterated.
Millions of Americans are going to lose their jobs.
The only question to ask is when the 2025 Trump Recession will start.
Or has it started already, because nobody has any confidence that this clown’s show 🤡 will ever end?

The uncertainty and the global stock market rout continued today, as reported by Deutsche Welle.
It’s going to be a long week on Wall Street for those traders on the floor .. and for all of us.

It was hard for me all morning, not to mull over all the turmoil in the US financial markets, and to wonder how this man-made descent into insanity will end.

What the hell? Apple will suddenly start building iPhone factories in the United States— so that Americans will gleefully pay $3,500 for an iPhone?

A good March US jobs report (+ 228,000 jobs, unemployment 4.2%) was eclipsed by ..
.. Dow Jones down another 5.5%, S&P 500 down another 6%,  Nasdaq down another 6% today.

At this rate, it has to be 100% certain that there will be a recession in the United States later this year (and sooner than anyone had thought).

So .. Dow Jones down 4%, S&P 500 down 5%,  Nasdaq down 6% today.

One would think there was another 9/11 or October 7 terrorist attack somewhere in the world, or a new and frightful pandemic breaking out.
But no, it’s just the President of the United States— foisting his kindergartner-level understanding of tariffs and international trade, on America’s financial markets, and the world at large.

What substantive harm has tiny, land-locked and impoverished Lesotho ever done to the United States? Its modest economy is going to be decimated (hit with 50% tariffs, see below).

I’m catching up on yesterday’s US inflation report. The pundits say it’s now 50-50 that we get one interest rate cut by mid-2025.
(As of today, the federal funds rate is 4.33%. This is within the target range of 4.25% to 4.50% set by the Federal Reserve).

Reporters Alan Rappeport and Colby Smith write for the New York Times:
Inflation figures released on Wednesday showed that consumer prices ticked up unexpectedly, rising at an annual rate of 3.0 percent in January. Core inflation, which excludes volatile food and energy prices, jumped 3.3 percent on a yearly basis. Prices also rose 0.5 percent on a monthly basis.
…
As of January, a dozen eggs averaged $4.95, up from less than $3 several months ago. Egg prices are up nearly 53 percent over the last year. And that’s likely to worsen amid an outbreak of avian flu, which has led to an egg shortage as farmers cull their flocks to prevent the disease from spreading.