Greetings all. Sending along a new conversation with noted economist Rob Shapiro. The video is above and a rough transcript is below.
I asked Rob to come by and talk to us before Trump’s humiliating climb-down today in Davos. As Rob explains in this sober discussion Trump’s retreat cannot undo what has been done these past few weeks, and the costs now to our economy and security are going to be extraordinary. Here’s how Politico described today’s dramatic events in a new article, Trump steps back from the bring on Greenland. But the damage has been done:
After two weeks of escalating threats toward Europe, President Donald Trump blinked on Wednesday, backing away from the unthinkable brink of a potential war against a NATO ally during a speech at the World Economic Forum in Davos.
Trump’s vow not to use military force to seize Greenland from Denmark eased European fears about a worst-case scenario and prompted a rebound on Wall Street. And his declaration hours later after meeting with NATO’s leader that he may back off of his tariff threat having secured the “framework” of an agreement over Greenland continued a day of backpedaling on one of the most daring gambits of his presidency to date.
But his continued heckling of allies as “ungrateful” for not simply giving the U.S. “ownership and title” of what he said was just “a piece of ice” did little to reverse a deepening sentiment among NATO leaders and other longtime allies that they can no longer consider the United States — for 80 years the linchpin of the transatlantic alliance — a reliable ally.
“The takeaway for Europe is that standing up to him can work. There is relief, of course, that he’s taking military force off the table, but there is also an awareness that he could reverse himself,” said a European official who attended Trump’s speech and, like others interviewed for this report, was granted anonymity to speak candidly. “Trump’s promises and statements are unreliable but his scorn for Europe is consistent. We will have to continue to show resolve and more independence because we can no longer cling to this illusion that America is still what we thought it was.”
Here is how Rob describes the incredibly dangerous position our addled, idiotic, reckless, vainglorious leader has put America in:
What this does is it creates significant reasons for European investors to question the future value of their investments in the United States. And keep in mind that, you know, when we say European investors, it includes government as well as private investors. But private investors account for 90% of all European holdings of U.S. stocks. They account for 50% of all European holdings of U.S. Treasury securities. You know, we might be able to kind of calm the governments and say, look, this is really going to hurt you as much as it hurts us, and you need to hold back in response. But that won’t work with private investors. That won’t work with hedge funds. That won’t work with European insurance companies, European pension funds. These are the holders of U.S. stock, U.S. corporate debt and U.S. Treasuries.
And if those private investors decided to sell off one third of their U.S. holdings, we’d be looking at a market crash that would recall 1929, not 2020 or 2008.
What has Trump has done these last few weeks may be the most dangerous and destructive actions taken by an American leader in our history. It should be leading to a very serious discussion about him needing to step down and turn things over to J.D. Vance. Not for he is addled, or a criminal, or corrupt, but because he just may have made the single greatest policy mistake in our history, one that would in a parliamentary system cause his government to collapse.
Whatever he was a few weeks ago today Trump is an historic, titanic fuck up now, an object of global scorn, and the only way we as a nation can lessen the extraordinary damage he’s done to the country is forcing him to walk away.
Here is something I wrote in November in an essay, Is It Time For Trump To Go?
…….I think we have to start visualizing, and socializing, the idea that it just might be time for him to go. I’ve put together this initial working list for why it just might be time:
Cover up of his involvement in notorious sex trafficking ring
Unprecedented corruption, self enrichment
Tariffs are historic, unprecedented abuse of power
Illegal desecration of most important global symbol of American democracy
abandonment of Ukraine and our European allies, appeasement of Putin
extraordinary assault on our health care system and the public’s health
lighting the engines of our prosperity on fire, ceding the future to China
starving Americans to gain leverage in Hill negotiations
killing of 15 million of poorest people in the world through vaporizing of USAID
use of Marines against Americans, trampling of due process, disappearing innocent people to foreign gulags
illegal killings of dudes in boats on the high seas
profound physical and cognitive decline, often appears confused and frequently confabulates
high likelihood he is compromised by a hostile foreign power, or hostile foreign powers
weaponizing DOJ to pursue his political opponents
Let’s here at Hopium lead this visualization and socialization of the idea that it is just time now for him to go. For the good of country, our democracy, our freedoms, and our future it is something we must work towards now.
Keep working hard all. We often talk about there being good days and bad days here. Let’s work to make tomorrow a good one - Simon
Transcript - Simon Rosenberg and Dr. Robert Shapiro (1/21/26)
Simon Rosenberg:
Hey, welcome everyone. Simon Rosenberg, Hopium Chronicles, back with a special event today. Joining us in sort of a wild news environment, Dr. Rob Shapiro, our dear friend, noted economist, former Under Secretary of Commerce, commentator, columnist for Washington Monthly and other places. Welcome, Rob. Thanks for joining us today.
Dr. Robert Shapiro:
Pleasure. Always a pleasure.
Simon:
I wanted you to come by today in our ongoing, never-ending conversation we’ve been having for many, many decades about our wonderful country… before we do this, let’s bring up the post from Bluesky because there’s been some breaking news.
In the last few minutes, and you can see this was posted at 12:17 Eastern time in the US, Gavin Newsom was supposed to speak at an event inside what's called the USA House which is where all the American companies are in Davos. And it was a Fortune hosted event. Gavin was going to use this as a response to Trump's disastrous speech a little bit earlier. And he was denied entry to the House by whomever, by the White House, by the government… you know, clearly the White House put pressure. So there would have been a formal response from Newsom to Trump's speech today. And because the desperate, addled, pathetic, weak, cowardly leader of our country couldn't handle somebody responding to him, they shut it down.
It's just a sign of the gravity of everything that's happening right now in Europe and here in America. And Rob, going back to our regularly scheduled programming… what I wanted you to talk about is this idea that as a way of the Europeans pushing back on Trump's economic aggression, political aggression, potentially military aggression, that they are threatening to dump U.S. Treasurys and stocks. Can you just talk a little bit about that and what it means?
Rob:
Sure. They certainly should. And the reason is the U.S. and Europe are deeply interdependent economically, and particularly financially. European investors hold about 15% of all U.S. stocks. They hold about 10% of all US Treasurys. They hold about 12% of all U.S. corporate bonds. That's corporate debt that's floated on the markets, not borrowed from banks, which means they have stakes in U.S. financial markets that are great enough to move those markets very abruptly and on a large scale. The next question is why are foreigners, generally, who own about a third of U.S. stocks overall and about a third of US Treasury securities and 27% of all U.S. corporate debt, so heavily invested in the United States?
Well, the reason is that they believe that the U.S. economy has been and consequently will continue to be stronger than other advanced economies, more stable than other advanced economies, and more secure than other advanced economies. So they want to invest here. And the attack on Greenland and the potential breakup of the alliance directly attacks those three pillars of European and foreign investment of the United States. You know, a trade war between the United States and Europe and all of the uncertainty associated with a breakdown in that relationship would weaken the U.S. economy. But more important, it would destabilize the U.S. economy. If only because a trade war and the tariffs, which could then go both ways, would weaken the dollar. And that means higher inflation.
But the most important effect is the security of investments in the United States. If you have a government that says we will no longer respect the most fundamental international alliance the United States has had since World War II… that is the NATO alliance… if the NATO treaty is not secure, then what commitment by the United States is secure? If the independence of the Federal Reserve is not secure, then what basis is there to believe, first of all, that U.S. inflation isn't going to increase and reduce the value of all those holdings? And that any institution is not secure?
What this does is it creates significant reasons for European investors to question the future value of their investments in the United States. And keep in mind that, you know, when we say European investors, it includes government as well as private investors. But private investors account for 90% of all European holdings of U.S. stocks. They account for 50% of all European holdings of U.S. Treasury securities. You know, we might be able to kind of calm the governments and say, look, this is really going to hurt you as much as it hurts us, and you need to hold back in response. But that won't work with private investors. That won't work with hedge funds. That won't work with European insurance companies, European pension funds. These are the holders of U.S. stock, U.S. corporate debt and U.S. Treasurys. And if those private investors decided to sell off one third of their U.S. holdings, we'd be looking at a market crash that would recall 1929, not 2020 or 2008.
Simon:
Rob, let me read to you. This is a CNBC piece...
Danish pension operator AkademikerPension said it is exiting U.S. Treasurys because of finance concerns as Denmark spars with President Donald Trump over his threats to take over Greenland.
Anders Schelde, AkademikerPension’s investing chief, said the decision was driven by what it sees as “poor [U.S.] government finances” amid America’s debt crisis.
So, they're now raising something that we talked about the last time you were on… there are a couple of things I want to say to what you just said. Number one is that we already started to see this sell-off and that's part of what, you know, spooked the markets yesterday and probably created Trump to slightly back down from the confrontation, but it's not a full back down there. They didn't say he was going to pull back the tariffs. He said he wasn't going to strike militarily, but there's also no reason to believe anything that he says. He plays deception. He's a pathological liar. There's no reason to believe anything he's doing.
He's already activated 1,500 of our Arctic troops that go and specialize in the coldest areas of the world, which seem like he's on the verge of invading. We already started seeing yesterday the market react to the sell-off in Denmark. We saw another pension fund in another Scandinavian country today drop, selling tens of billions of dollars of American Treasurys. They’re dancing around now and letting people know. And I think that, you know, two things I would say.
One is, you know, there are a lot of ways to describe Trump. But one of them that I like to use is that he's a titanic idiot. And he actually doesn't really understand how a lot of things work. And he's also intellectually uncurious. And isn't interested in learning more. And the arrogance and the puffery and the bluster and the bullshit coming from these guys over the last month in particular, as he's escalated domestically in Minnesota and he's escalated globally in Venezuela and now in Europe… he said in that New York Times interview that the only limit to his power is his own mind. Like, literally, that's what he said. At that moment, there should have been movement to remove him from office because it's so, you know, textbook, holy shit, a this-guy's-crazy kind of remark.
Rob:
Well, it means that he can't distinguish his fantasy from reality.
Simon:
Right. And so what's happening now is they're actually running into the legitimate limits of American power in this interconnected world that we live in. And this sort of fantasy, to your point, this sort of fantasy world of his strength and power… today the Treasury Secretary said that Denmark and what they were doing didn't matter. It was immaterial. There's been just wild, you know, outrage in Europe today over that remark… over dismissing, you know, a NATO signatory, and I can go on. So we've already started seeing, this isn't hypothetical, right? We've already started seeing the beginning of sell-off.
And what do you think happens now, Rob? I mean, what should people, who perhaps aren't as schooled in all of this as you are, watch for in the coming days? And how much of an economic threat… because now let's just be clear about what's been established. To your point, what the Danish pension fund argued is that we were an unsafe investment. Not that Trump was an asshole and they wanted to get out. By the way for the first time in modern history, all three credit agencies have downgraded U.S. debt to the second level down for the first time ever… so talk a little bit about their raising the question about will he obligate contracts and agreements… and all these things… what does it mean that we're now putting on the table the fiscal integrity of the United States as something that's going to be debated?
Rob:
Well, look, what we're what we're looking at is a quantum increase in the risks to the U.S. economy. And when I say the U.S. economy, I mean people's jobs. You know, if Europe were to dump corporate debt, hundreds and perhaps thousands of large companies would go bankrupt. Because no one would buy their debt and their debt would begin to be called. And don't forget that if big players in Europe, which would be the big banks and insurance companies in Great Britain, in France, in Germany, if they begin to sell off, U.S. hedge funds will sell off. And incidentally, the industry with the largest foreign ownership is financial institutions… so on top of everything else, we could see a 2008, 2009 financial crisis.
Will this happen? We don't know. But we do know that there is now a meaningful risk. And the risk is based entirely on the decisions of Donald Trump and his administration. You know, Scott Bessent is smart enough to know that his dismissal of Denmark only exacerbates the anxiety and the anxiety of European governments. And the anger of European business and populations. So why does he do it? Because Trump demands it… and we have seen that the people around him will not tell him the truth. Or if they do, he won't listen, as opposed to his first administration, which was largely kind of a caretaker administration from the point of view of the economy. It also, of course, made wealthy people wealthier through tax policy and everybody else relatively a little poorer, but, you know, that's fairly standard Republican policy. And all of these risks. These new dangers to people's jobs, to people's pensions, to the value of their homes. This kind of meltdown, the kind of meltdown that is now possible, is not limited to stocks and bonds. It terrifies everybody.
People stop buying houses. People stop buying cars. People stop buying everything. Because you need precaution. You know, they are saving in the event that they lose their jobs. And the fact that a lot of their savings has evaporated. And that pushes the economy further down. And, you know, the controllable part of this is the Trump administration's policies. But what you can't control is the fact that European investors and foreign investors who would follow them, and U.S. hedge funds that would follow them, own a significant enough share of the U.S. economy to tank it. If they lost confidence in U.S. policy and in the security and stability of assets of the United States.
Simon:
Well, let me let me read to you from a Guardian article today reporting on a speech that Ursula von der Leyen, the European President, gave earlier today.
The European Commission President Ursula von der Leyen reiterated that the future of Greenland is only for the Greenlanders to decide, as she warned that Europe needs to transform the ways in which we think and act to step up to challenges posed by the rapidly changing world order. She said that Europe needed to realize that we now live in a world defined by raw power, adding that in this increasingly lawless world, Europe needs to own its own levers of power and abandon its traditional caution to build on its economic might and become more independent.
And the reason that is an extraordinary statement is the implication is that she's green lighting more aggressive action, economic response against the United States that had begun yesterday. Caution… abandoning caution. Because the Europeans feel betrayed by us, having been in this alliance with us for 80 years.
I think that one of the things that's important for everyone watching and listening to realize is… we talk about this all the time in Hopium… is there is no version of Trumpism and Trump's vision of the world where America comes out of this more prosperous, more safe, and more free. It is a question of how much our prosperity is damaged, how much freedom we lose, how much our security is compromised. And that's why this vision that Trump has had, of him breaking the world into pieces and there being great powers again… this great power theory… was always a form of surrender as opposed to a grand strategy. And I think that what we're seeing now is this may be the first real manifestation of what's happened, in the last 24 hours, of how dangerous this new world is going to be to us. Because as you pointed out, Rob, with the additional risks that you're describing, the other part of the world that has now new leverage over us is China.
Rob:
Right. And keep in mind that even if the United States is able to moderate the retaliatory steps of European governments, they have absolutely no control over private investors in Europe. And it's private investors who have a significant stake, ownership stake in the U.S. economy. And actually, you know, another key to the danger here is that between 90% and 95% of the holdings of U.S. assets in Europe and across the world are held in dollar form. And that means that if you have a large and abrupt sell-off of foreign owned US assets, you have a dollar crisis as well.
And that means inflation goes up fairly sharply. And how do we deal with inflation? Well, we raise interest rates. So you get caught in a downward spiral where the responses to each part of the crisis exacerbate other parts of the crisis and the overall crisis. And what happens… we've only seen this frankly happen in modern times once, and that was the early 1930s… what happens is the Federal Reserve can't do anything because they cut interest rates to zero, but everybody goes to cash. That is… nobody wants to invest… regardless of the fact that there are, in real terms, negative interest rates. And the economy stabilizes at a much lower level. That's what happened in the 1930s. That's what creates a depression as opposed to a recession. In a recession, you go down, measures are taken, and you go up. In a depression, you go down, and no matter what you do, you don't go up for some time. You know, the notion that the U.S. would find itself in this kind of economic danger… when as the Economist said it just over a year ago… that the U.S. economy was the envy of the world… takes really unprecedented mismanagement and actively destructive policies. That's what we have right now.
Simon:
Rob, I think what's been interesting, and we're all over the place a little bit today, and I think that's okay because this stuff is evolving and moving quickly… I want to read something I wrote. Because when you listen to you today and you put all this together, if this was a corporation, the CEO would be removed for having such titanic errors and misjudgments. Because he's grossly misjudged. I mean, he was able to go snatch Maduro. And I think that success kind of gave him this belief that he could go after his next big target. And Europe is not Venezuela. And so I'm just going to read something that I'll put in the post when we put it out today. I wrote a piece in November called Is It Time For Trump To Go? And this is what I wrote.
And I'm going to read this because it doesn't even include everything we've been talking about, or disintegrating the NATO alliance, or all the things he's done in the last few days.
I think we have to start visualizing, and socializing, the idea that it just might be time for him to go. I’ve put together this initial working list for why it just might be time:
Cover up of his involvement in notorious sex trafficking ring
Unprecedented corruption, self enrichment
Tariffs are historic, unprecedented abuse of power
Illegal desecration of most important global symbol of American democracy
abandonment of Ukraine and our European allies, appeasement of Putin
extraordinary assault on our health care system and the public’s health
lighting the engines of our prosperity on fire, ceding the future to China
starving Americans to gain leverage in Hill negotiations
killing of 15 million of poorest people in the world through vaporizing of USAID
use of Marines against Americans, trampling of due process, disappearing innocent people to foreign gulags
illegal killings of dudes in boats on the high seas
profound physical and cognitive decline, often appears confused and frequently confabulates
high likelihood he is compromised by a hostile foreign power, or hostile foreign powers
weaponizing DOJ to pursue his political opponents
I mean, the case for his removal is extraordinary and powerful. And what I’m pleased by is that the socializing part of maybe it’s time for him to go has started vigorously in the national discourse in the last 24 hours. And I think this is part of how we have to respond to this because, look, it was important that Gavin Newsom was in Davos raising the flag. It was important that Chris Coons led this bipartisan trip to both… for people who don't know… both to Denmark, but also many of those people stayed over and went to Davos… earlier days of Davos. They're not there now because Congress is back in session. To sort of raise the American flag.
But the Europeans, and we heard this from Mark Carney this week, Rob, the Europeans, the Canadians, our traditional allies, are wondering where is the opposition in America? Where is the Democratic Party? Where are those sane voices reigning in Trump and trying to reestablish and maintain this relationship? And I think the thing we all have to recognize, and really in the last 48 hours, the Europeans have declared independence and have accepted that the Western Alliance, the 80-year-old Western Alliance, is now no longer. And it is a dramatic moment.
You and I are, you know, very traditional liberals, and this is a world that we imagined, and helped maintain and grow. You helped extend as a visionary economist… helped extend the American economic system to the rest of the world after the Cold War ended. And all of this is unraveling at unbelievable speed leaving America less secure, less prosperous, less than we've been in many generations with the worst leader that we've ever had who is not mentally capable of running the country anymore. And I do think that as part of what do we do now… the question like in any other enterprise, if the leader makes catastrophic errors, the question of whether or not he should continue needs to be put on the table, I think, in a far more aggressive manner.
Rob:
I certainly agree with that. And we've discussed this… I have no confidence that the American system, in its most essential qualities, can survive three more years of Trump. I think we'll have a different economy, a different political system, a different judiciary, a different media system if he stays, if he finishes his term.
The one thought I'd like to leave everyone with on our discussion today about the economics of this is that breaking the political alliance… the political alliance between the United States and Europe is accompanied by an economic alliance. That the interrelationships and interdependencies that occur on a political level are replicated on the economic level. And you cannot break one without breaking the other.
Simon:
Well, the same is true for North America. I mean, the truth is that Canada and Mexico are two of our three largest trading partners. We've torched the alliance with Canada. Mark Carney has been very vocal about that. Mexico is in a slightly different position, but Trump is threatening to invade Mexico now, which would be torching, so he's not only torched the transatlantic relationship and the NATO alliance, but he also has torched the North American alliance and project, which had integrated our economies and moved, in essence, our border, our defensive border, many, many thousands of miles farther than it was.
What we've talked about at Hopium is that I describe his agenda as one of sabotage, plunder, and betrayal. That's the line that I use. The sabotage is becoming a little bit clearer today than it had been. The sabotage began with the attacking of our research institutions, and our academic institutions, and starting to burn down one of the chief engines of our prosperity. That was a sabotage. He's in the process of breaking the health care system in the United States. He's obviously destroying our labor mobility and the labor force in the United States, which is gonna retard growth and make it more difficult for us to proceed. And now he's burning down the American brand all around the world, which will have profound consequences for all of our companies trying to sell in countries where instead of the American goods being cool and everybody wanting them, they're going to be stuff that's going to get burned in central squares all across the world.
I mean, we're facing an unprecedented moment here where, as opposed to being the good guy of the world, we're being led by a Bond villain that is turning the world against us in a very profound way. And so part of our job, Rob, is that in our response to this, people need to see vocal aggressive opposition coming from the pro-democracy movement, or they're going to further believe that America has been permanently altered. And that there is no reason to believe that we're going to sort of snap back to any earlier version of what we were.
And that's what would generate more aggressive disinvestment… right, this conclusion that there aren’t any forces in the US that can derail or change the current direction… like, if it's going to be this way for the next three to five years, we got to get out of here, right?
Rob:
Right.
Simon:
And that's why the pro-democracy movement needs to rally itself and not believe that the election in 2026 is going to be about affordability and health care. It's going to be about freedom, democracy, and the standing of the United States and the world, and that we can do all these things together in our calculation.
Rob:
And an economy almost certainly in a recession. You know, the difference in economic terms between his attacks on Canada, and our trading relationship with Canada and Mexico, and our trading relationship with Europe is that Europe's as big as we are. We are not the big kahuna in a fight with Europe. It's two gorillas, and when you have two gorillas fighting, both of them get badly injured.
Simon:
Well, part of what I'm going to start introducing is that if the sell-off continues, there's one obvious thing we have to do. It’s that he needs to step down. And I'm not saying that's going to happen. But we actually have a mechanism to slow down the economic attack on the United States. There's an obvious and clear, immediate mechanism that we have to deal with this.
Rob:
Yes, though that goes to what has been the key to his impunity, and that is his control over Republicans in Congress. By weaponizing the MAGA movement against potential opponents within his own party, or potential critics, potential dissenters, people who don't happen to want to vote with him. And look, I agree with you, but in order to get there, his hold on the Republican Party has to be broken.
Simon:
I know, and we have work to do there. We've seen his hold is fraying. It's not what it was six months ago, but it's not what we need it to be, and we have work to do.
Rob, thank you as always for your insights. Folks, I won't say like this discussion because I'm not sure it's possible to like this discussion. But this is real-world talk here. I mean, we knew that Trump represented a danger. And now that danger between what he's doing in the escalation that we've seen in Minneapolis and the lawlessness of ICE… now the threat to our security and our economy that's coming from his reckless leadership on the global stage, the threat that he represents to the country, are becoming more clear. And I'll just tell you, Rob, if you read Hopium today, what's been interesting is that you started seeing movement in polls that came out late last week. The Greenland stuff only really started in earnest early last week. But by the end of the week, the polls that came out towards the end of the week were showing their biggest gaps, wherever they were starting from… then today, in the last two days or the last three days, we've seen three polls that have confirmed this trend that he's eroding. And that his standing is eroding.
And the thing that I showed in Hopium today… the chart that they all look at every day… the White House and the Republicans in Congress and the Republican senators… they go to RealClearPolitics and they look at Trump's job approval. And in that graph, he's gone from -8 to -13 in the last two weeks. It's dramatic movement against him, the most dramatic movement of his time in office. So what Republicans are looking at, who are already looking at a very hard 2026… these guys that are going to be running competitive races… [is that] Trump's position in the country has eroded dramatically. Or it has eroded, I won't say dramatically, but it’s eroded significantly in the last week to a week and a half.
So that's the other part of the dynamic that we're going to be facing as Congress comes back, is that this stuff is being rejected by the country. They understand what's going on. His approval rating on immigration has plummeted, you know, in all polling. And he's now even weaker than he was before. And so we're entering a very challenging period for politics.
Rob:
And of course when that happens, he becomes enraged because he’s a narcissist. And consequently, he lashes out more.
Simon:
Right.
Rob:
And it may very well be that Greenland is in part a response to his declining support.
Simon:
Yeah, I believe that. And what's interesting is that every time he escalates, he gets further and further away from the electorate. So I call it this vicious cycle of a declining strongman. That his impulse is to escalate and to lash out. And when he does it, it makes him even more unpopular so he does it even more. So we're in this feedback loop where, you know… there's not been one time since the intervention in LA… that was the beginning of the strongman muscle that he was using… every time he's done anything, bombing Iran, escalation in Minnesota, it's immediately rejected by a majority of the American people and his numbers decline. It's been this constant pattern since the spring of last year. And that's why, yes, these next week to 10 days in American politics are going to be incredibly consequential.
Rob, thank you again, as always. And thanks, everybody, for being here today.
Rob:
Happy to do it.
