Make US stocks and crypto suffer a bit more—Trump is deliberately engineering an economic recession
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Make US stocks and crypto suffer a bit more—Trump is deliberately engineering an economic recession
It's both a risk and an opportunity; once the Federal Reserve officially begins large-scale rate cuts, it will usher in a boom for both U.S. stocks and the crypto market.
Navigating Web3 tides with focused insightsBy TechFlow
Recently, both the U.S. stock market and the cryptocurrency market have experienced a major pullback. On one hand, increased tariffs have kept inflation elevated, leaving the U.S. dollar index at high levels. On the other hand, weak U.S. economic data have unsettled investors, suggesting that a "recession trade" may indeed be approaching.
According to GDPNow forecast data from the Atlanta Federal Reserve on March 3, the projected growth rate for U.S. GDP in the first quarter of 2025 has plummeted to a contraction of 2.82%. Just five days earlier—on February 26—the model had predicted growth of 2.32%. In only five days (two business days), expectations for U.S. Q1 GDP were slashed by 510 basis points.
This marks the worst quarterly GDP forecast by this model since the onset of the COVID-19 pandemic in 2020.
Yet, some Wall Street figures see this as part of Trump's deliberate strategy. Larry McDonald, former Lehman Brothers trader, stated in his latest podcast that Trump is attempting to intentionally trigger an economic recession—to force the Federal Reserve into cutting interest rates and reduce the U.S. government’s interest expenses.
"You can't suppress inflation through massive fiscal spending—Trump's team knows this. They need a recession because only then can they lower interest rates and refinance debt maturities. The Trump administration is implementing 'financial repression,' pushing interest rates below inflation. This is the only way out of the $37 trillion debt trap, short of defaulting," he said.
Related reading: Podcast Transcript | Interview with Former Lehman Brothers Trader: Why Trump Needs a Recession to Fix the Economy
Trump's strained relationship with the Fed has long been public. While the Fed cautiously resists rapid rate cuts in its efforts to tame inflation, Trump demands immediate easing—to reduce government debt servicing costs. Wanting to maintain political strength ahead of midterm elections, he needs lower rates to stimulate the economy, boost market liquidity, and relieve pressure on American borrowers.
Estimates suggest that if current rates persist, U.S. debt interest payments next year could reach between $1.2 trillion and $1.3 trillion—far exceeding defense spending. Consider that total U.S. fiscal revenue is around $4 trillion, with mandatory expenditures totaling approximately $3.5 trillion, including $2.6 trillion on healthcare. Once interest payments are added, total spending would approach roughly 1.7 times annual revenue.
This forces the U.S. to continue financing debt with more debt under high-interest conditions. Market liquidity remains constrained, and the cost of U.S. Treasuries continues to surge rapidly.
Thus, in Trump’s eyes, failing to cut rates equates to sabotage—an act of opposition against him.
A master negotiator by trade, Trump is now staging a "palace coup"—leveraging tariff wars and DOGE staff reductions, even threatening audits and personnel overhauls at the Fed. By temporarily pushing the U.S. economy into recession and allowingU.S. stocksto fall, he aims to pressure the Fed into rate cuts. At the same time, he can blame prior administrations for the downturn and later claim credit when markets rebound.
Additionally, Nomura Securities analysis suggests the Trump administration may deliberately seek to induce a "mild recession" through reduced government spending and employment, along with higher tariffs—aiming for a structural shift of the economy away from government reliance toward private-sector leadership.
In the short term, this strategy may intensify downward economic pressures. The long-term goal, however, is to break America’s prolonged dependence on government spending, positioning the private sector as the primary engine of growth and reshaping the foundation of U.S. economic expansion.
Regardless, amid the power struggle between Trump and the Fed, U.S. equities and crypto markets must endure hardship in the near term. Yet danger brings opportunity—once the Fed officially launches large-scale rate cuts, bothU.S. stocksand the crypto market could enter a new era of prosperity.
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