My message to panicking Wall Street traders is what on earth did you expect to happen when Donald Trump became the 47th US President with his sidekick, Elon Musk? Trump and Musk are doing exactly what they promised to do.
As I will describe below, Musk, who is now reportedly sleeping in the White House, looks to use his unique skills to digitise US government, with huge savings.
Watch out Australia.
Meanwhile, Trump’s skill is deal-making, and he is throwing tariffs into the Canada, Mexico and China rings, looking to do a deal. Mexico responded quickly by sending troops to prevent people crossing the border. First deal done. Tariffs were shown to be a devastating weapon. Later Mexico deals will require more concessions from Mexico.
China and Canada now know Trump is open to a deal.
Wall Street traders who panicked have also learned that if Trump fails he may start a trade war. But what Wall Street sees as a trade war, Trump sees as a way of taxing goods and services, enabling him to lower income and company tax. It’s a GST on imports.
But we also saw that, whereas Trump looks to use tariffs as a weapon in any such situation, his ego is vulnerable to big falls in the S&P index. That’s his weakness and others may seek to exploit that weakness.
Enormous planning has gone into this Trump/Musk exercise. And if they succeed, America will be a much stronger economy and the chances of a global shooting war will be greatly reduced.
Now to Musk.
Musk is reported to be sleeping in the executive office of the President so he can be hands-on in his unprecedented plan to digitise the American government. That’s exactly what he did at Tesla, SpaceX and X (formerly Twitter).
Like Trump, he may fail, but the advance planning is breathtaking, and already he claims to have found around $US1 trillion in savings.
He is halfway to his target. That was made possible because Musk’s Department of Government Efficiency team – which includes top business people who have donated their time – now has access to the vast federal payment system responsible for handling trillions of dollars in government expenditures. Musk can now see exactly where the money goes and what he has to digitise.
But the Musk process requires two elements – a slimmed down workforce that is totally dedicated to the digitisation task, plus the application of Musk’s remarkable “idiot index” which I’ve described in previous commentaries.
The FT reports that last week, two million federal employees were asked to resign if they did not want to come into the office (and, by implication, embrace the reforms Musk is planning). The White House apparently expects 5-10 per cent of staff to take the offer, saving $100bn annually. And to reinforce the message, Musk even dispatched the same “Fork-in-the-road” meme he used when he fired staff at X.
But while in the commercial area Musk is in total control, in government the Democrats are urging staff not to take packages as a way of stopping the digitalisation of US government activities.
In addition, Musk may have gone too far. He has vowed to unilaterally cancel hundreds of millions of dollars worth of government grants – a move that prompted the sudden resignation of senior department officials. Musk may not have that power.
But I agree with the FT that if DOGE/Musk can actually unleash digital reform in the US government, in a non-corrupt manner, that would be an unambiguously good thing for the world (and the US).
In Australia, Peter Dutton is under vigorous attack by the ALP, which claims he will abandon the social benefits that the Albanese government has bestowed.
Dutton should have people based in the US studying exactly what Musk is doing so that the Coalition is able to go to the polls vowing to keep most of the Albanese goodies.
The difference will be that they will be delivered efficiently with huge administrative savings. For Dutton, it would be an important step towards the Lodge. But adapting Musk to Australia won’t be easy.
Back to Trump the deal-maker. In due course he will seek to do with deal with Russia and Ukraine, a Middle East deal and one with China plus Canada and Mexico.
Those watching the markets need to remember that most of the American press hate Trump and want to bring him down, so bias is part of the game. But he is getting encouraging signs from the most unexpected places.
Former Australian Prime Minister Paul Keating is encouraged by Trump’s China policy. Russian President Putin says that had Trump been in power at the time, he would never have invaded Ukraine. Hostages are being released in the Middle East and Israel’s Prime Minister is flying to Washington to help map out a deal that goes beyond Gaza. The Trump/Musk edifice may collapse into chaos but it could go beyond what most thought possible.
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