Wall Street's Not-So-Golden Rule
April 21, 2025·32 comments
Tariff reversal might be coming. It won't matter. The suspicion that triggered capital flight from the United States was never really about trade policy. It was about credibility. Once Wall Street sees cracks in the credibility of the US government itself, the rules that governed the last seventy years stop applying, and the orderly line out the door becomes a run.
- The real bank run started, not with a policy announcement but with a loss of faith. Foreign and domestic capital holders are moving money out of the United States and into developed markets like Japan and Europe. It doesn't matter if tariffs get reversed because the virus isn't a tariff. It's doubt about whether the US government can fund itself.
- This has happened before and people who watched it happen understand the mechanics perfectly. Scott Bessent witnessed the 1992 Bank of England crisis. The trajectory is always the same: suspicion spreads, capital flows accelerate, then there's a violent devaluation. The script is known.
- Once everyone in the business of Money knows the rule, they all follow it at once whether they want to or not.Even patriotic American investors and advisors are already shifting allocations away from US assets. It's not ideology. It's self-preservation. And once the shift starts, it accelerates.
- The thing that makes this self-fulfilling is the thing that makes it unstoppable. Capital flight happens because people believe capital flight will happen. That belief becomes proof of itself. The more credible the government looks in trying to stop it, the fewer people flee. The more desperate the responses become, the faster they leave.
- The question is no longer if this happens but what desperation looks like when it's happening. Capital controls. Short-selling bans. Trading halts. Yield curve control. Gold sales. Maybe Bitcoin purchases. Everything on the table. The US government has leverage most governments don't have, but leverage deployed out of panic looks nothing like leverage deployed out of strength.
The Why of Epsilon Theory
- Make more informed decisions as an investor and citizen.
- See through the nudges of Big Politics and Big Media.
- Become a better consumer of news.
- Maintain your autonomy of mind in a swarm of narratives.
- Join a community of more than 100,000 truth-seekers.
Unlock instant access to this and hundreds of other evergreen essays that explore the world of narrative through hard science and human wisdom.
Looking for Deeper Insights?
Unlock exclusive market intelligence, trade ideas, and member-only events tailored for investment professionals and active investors with Perscient Pro.
VISIT PRO
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.
