“I think the good parts are the Trump economy, and the bad parts are the Biden economy because he’s done a terrible job.” Donald Trump’s words, Meet the Press interview, May 4, 2025.
Today, a single chart provides a view of Trump’s first 100 days. Readers may evaluate the statement made by the president for themselves. The chart is sourced in market-based prices (Bloomberg terminal data).
A market-based price is simply the price at which a buyer and a seller agree to make an exchange. No one has to say why they are a buyer or a seller. The price speaks for itself. There are many opinions about why a price is what it is. But the price-setting mechanism reports only the results. All the rest is interpretation.
Here’s the chart, courtesy of Cumberland Advisors.
Here’s what the chart depicts. The United States is like any other debt-issuing country, company, individual, or enterprise. There is a market-based pricing mechanism to score the creditworthiness of the debt issuer. This mechanism is different from the opinion of a rating agency like Standard & Poor’s, Moody’s, or your personal credit score. This mechanism is an actual transaction price.
In the case of the United States, and other countries, the mechanism is the credit default swap (CDS). The CDS is a complex derivative contract, but what it does is very simple in concept. If the US pays, there is no default. If the US defaults, the defined default is the trigger. The referee is a global organization called ISDA, which stands for International Swaps and Derivatives Association. ISDA determines if there is a default by a published set of rules. ISDA has a reported 960 member institutions from 78 countries.
One party in the CDS contract collects a fee. (Think of that fee as an insurance premium.) The other party pays it. When there is an actual default, the insured party gets the settlement payment. If no default occurs, the insurer keeps the fee money. What you see in the chart is the pricing of the transactions by date on one of the CDS that insures the credit of the United States. The pricing in this chart is measured in basis points; each basis point is 1/100th of 1%.
Please note that, until now, the United States has never defaulted. We have noted a few dates on the chart to identify elements that may have changed the market pricing of the CDS.
The actual CDS trades are done worldwide and in the over-the-counter (OTC) market. CDS are not listed on American exchanges. The volume covered is in the billions. The US is a large-volume country because the US is the world’s largest debtor nation. About $29 trillion is the total marketable US Treasury debt, and that debt comes in various denominations from a very short maturity of only a few days for a cash management bill to as long as 30 years in the form of a bond. All American government debt is publicly known and is reported, audited, and monitored worldwide.
The takeaway from this chart and others like it is simple.
The behavior of Donald Trump in his first days as president has raised the cost of borrowing for the entire array of all federal agencies and all arms of the US government. The price shown is of one of the credit maturities.
The charts of the other maturities look about the same. Some key political dates and events are noted in the annotations. Readers are invited to draw their own inferences.
Here’s my bottom line in response to the president’s self-serving quote about how he is perfect and everything wrong is Biden’s fault. Trump has now achieved a market-based price for the creditworthiness of the United States that exceeds the single worst price on the single worst day of the Biden administration. There is one exception. That was the day before then-House Speaker Kevin McCarthy and then-President Joe Biden reached a handshake about avoiding a US debt default.
Note that, this time around, there is no imminent default risk. The so-called X date for the US Treasury is expected to arrive in August or September.
We have written ad nauseum about the disastrous economic tariff policies rolling out of the Trump 2.0 administration and how they are being advanced by the scandalous economist Peter Navarro. We have noted the worldwide broadcast of a mathematical error in a chart held by the president in the Rose Garden. Nothing is more revealing than that monster error when we are evaluating the economic policy of the US under President DT 2.0. (See “Math Gaffes,” https://kotokreport.com/trumps-math-gaffes/.)
I thank readers for their many emails and comments about our series on the impact of Trump tariff policy and Trumponomics.
There are some who still believe in him, as I have seen from reader replies. Others are now doubting their decisions about Trump.
IMO, this is all Trump now. He can finger-point at Biden all he wants. Biden, IMO, was weak and disappointing, and Biden didn’t act when he could have. But Biden is now gone. This is Trump. All Trump. And his enablers are accountable since he is a lame duck president who will do whatever he wants when he wants and as he wants without any apparent restraint.
The market-based prices of global CDS for the United States are saying that this is a dangerous time with a rising risk for the United States. I hope they’re wrong. I fear they may be right.
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David R. Kotok, May 7, 2025
(The above was first published on The Kotok Report website and via LISTSERV. For details, and to subscribe to The Kotok Report, visit https://kotokreport.com/.)