The stock market crash is not our biggest problem
Andreas Cervenka
Reporter and economic commentator
This is a commentary text. Analysis and positions are the writer's.
Updated 17.25 | Published 17.16
Donald Trump has threatened to annex part of Denmark for months.
But it is only when the stock market crashes that world leaders wake up.
Trust in the US as a nation is being destroyed before our eyes and thus the most important foundation in the world economy.
In both Sweden and the EU, crisis meetings have been held in recent days about Donald Trump's tariffs.
The tariffs are certainly a big problem, but a relevant question is: why only now?
Donald Trump talked about tariffs during the election campaign, during his inauguration speech, and has mentioned it basically every day since he was sworn in as president. He has literally been talking about tariffs since the 1980s!
His plans were certainly worse than expected, but there were plenty of signs that something was coming.
But it was only when the stock markets crashed that the real crisis began.
This follows a pattern where the stock market index seems to have become the only thing that can get politicians to jump out of bed and start solving problems. We saw it during the financial crisis, the euro crisis, during the pandemic and now.
It is starting to get a little uncomfortable.
Of course, the stock market plays a role, for people's savings, for our pensions and as a sign of what will happen in the economy.
But even after last week's crash, the Stockholm Stock Exchange has gone up by 45 percent in five years and in 20 years, the stock market, including dividends, has increased in value by 580 percent.
These are not numbers that should trigger a disaster alarm.
Then other problems feel much more urgent.
It is possible to argue that the Swedish government should have sat in a single long crisis meeting ever since Donald Trump, on his first day as president, began talking about taking over Greenland, part of our neighboring country Denmark.
It is a threat that has been repeated time and time again since then.
Imagine if Russia were to use the same rhetoric against Finland?
Where are the protests and extraordinary meetings at the UN, the reprimand of the American ambassador, perhaps even the expulsion of American diplomats?
Instead, there have been mumbled statements that Sweden “stands behind Denmark”.
Perhaps everyone has assumed that Donald Trump does not mean what he says seriously. Then the past week should have come as a useful phone call from reality.
Politicians in Sweden and the EU have often been keen to criticize the destruction of democratic institutions and attacks on freedom of expression in countries such as Poland and Hungary.
Where are these critics now, when Donald Trump is trying to force American universities to follow his every whim and law firms to be loyal to him through blackmail?
Where are the protests when Donald Trump talks about staying in power after his term ends, and when he attacks judges and institutions such as the Federal Reserve?
The list could go on.
In short, the tariffs are just the latest and perhaps not even the worst sign that the United States is heading in a very dangerous direction.
Fundamentally, it is about the view of the United States. Is it a friend or an enemy?
The answer could have enormous consequences for the world economy.
A very large part of the world's total pension capital is invested in the United States.
The dollar is the world's dominant currency and US government bonds can be described as the most important material in the complicated structure that is the global financial system.
The foundation is made up of what was long seen as more solid than concrete: trust in the US.
Signs of cracks are already visible.
During the Cold War, with a latent threat of Soviet invasion, Germany placed a large part of its gold reserves in the US.
According to the German newspaper Bild, politicians in the incoming ruling party CDU are discussing whether the gold should be returned to Germany because the US is no longer a reliable partner.
Just a few months ago, such a discussion would have seemed bizarre.
In troubled times with falling stock markets, such as now, investors usually flee to US government securities, which causes interest rates on them to fall.
In recent days, the opposite has happened, interest rates have risen.
Traders tell media outlets such as Bloomberg and the Financial Times that it could be a paradigm shift in which US securities are about to lose their status as the world's safest assets.
When the United States sold new bonds on Tuesday, demand was unusually low.
The fact that hedge funds have speculated with these securities and are being forced to sell is also contributing, a sign that the financial system is now being stressed to the max.
Billionaire Warren Buffet's mantra has always been "never bet against America," and he has often bought in turbulent times and is known for very rarely selling.
But in recent months he has dumped large stakes in companies like Apple and Bank of America and is sitting on a big bag of cash.
One interpretation is that the America you should never bet against no longer exists.
It's a real crisis.
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