When financial markets shudder and bubbles burst, it is tempting to search for a convenient culprit. For many commentators, particularly in liberal circles, Donald Trump has long served that purpose. His rhetoric, disdain for multilateralism and protectionist instincts are often seen not merely as symptoms of a larger malaise but as its cause. Yet this interpretation misses the deeper picture. The tremors rattling the American, and global, economy predate any single presidency; they stem from structural imbalances that have shaped modern capitalism for decades.

The evidence of dysfunction is visible. In 2024, credit-card delinquencies rose to multi-year highs, while corporate bankruptcies reached levels unseen since the aftermath of 2008. These are not aberrations introduced by a particular administration, but the culmination of years of over-financialisation, an era in which cheap money and rising leverage have displaced productive investment and wage growth. American equity markets, now capitalised at around $64 trillion, roughly half of global GDP, increasingly reflect financialisation rather than real-economic strength.

The result is a precarious equilibrium: household consumption sustained by credit; public finance tethered to bond markets; and a central bank cast as both arbiter and captive of global capital flows. Meanwhile, wealth and risk have become more concentrated. The top 10 per cent of Americans now drive around half of consumption, a sign not only of inequality but of how dependent the broader economy has become on a narrow cohort of consumers.

The overextension of credit and the concentration of both wealth and consumption are not isolated phenomena; they are features of an increasingly fragile economic model. In such a system, the average household, once able to maintain a modest standard of living through wages alone, now turns to credit to sustain everyday consumption. It is an economy that has rewarded capital far more readily than labour.

Recent policy debates, from re-industrialisation to supply-chain reshoring, reflect a growing recognition that something fundamental is misaligned. Calls to rebuild domestic capacity, reform trade exposure and strengthen industrial policy are not nostalgia; they signal awareness that the balance between production and finance has tilted too far.

Ambitious plans to refinance nearly $28 trillion in federal debt illustrate the magnitude of the challenge. Unlike their predecessors, today’s policymakers must contend with a tightening capital environment, wary investors and a Federal Reserve cautious to avoid overstimulation. The opportunity lies not in rolling over liabilities, but in reorienting policy toward productive capacity, fiscal credibility and what some now term “economic sovereignty.”

The idea of debt as a strategic instrument is hardly new. Alexander Hamilton envisioned public borrowing as a tool for nation-building: financing infrastructure, incentivising industry and consolidating national strength. “Public funds answer the purpose of capital,” he wrote. Over time, that purpose has shifted. Today, government debt often feeds sectors such as finance, insurance and real estate, which generate financial value but limited productive capacity. The question is not whether debt should exist, but whether it funds renewal or merely perpetuates leverage.

Critics argue that renewed industrial strategy risks a return to mercantilism. Yet there is a case for pragmatism, for recognising that an economy reliant on financial assets and service exports alone is vulnerable to shocks in both liquidity and confidence. The real risk lies not in reassessing economic orthodoxy, but in clinging uncritically to a model that has lost its ability to deliver broad-based prosperity. Rate cuts in early 2024, coinciding with an election year, have only heightened scrutiny of the Federal Reserve’s independence and its delicate balance between market stability and political neutrality.

At its core, the Trumpian challenge to economic orthodoxy is not just about tariffs or interest rates. It is about who governs the economy: elected officials or unelected central bankers; capital markets or the public interest. The President cannot remove the Fed Chair, but he can still attempt to set a new direction – one that prioritises production over portfolios.

In this, Mr Trump stands less as an innovator than a reluctant inheritor of a broken system. The bubble did not burst because of him. It burst because it was a bubble. His break with liberal economic orthodoxy may be erratic, even opportunistic, but it gestures toward a deeper truth: that the post-1980s consensus – globalisation without guardrails, deregulation without discipline, monetary stimulus without reform – is running on fumes.

The question is no longer whether change is coming, but how it will be managed: through foresight or by default. Will the transition be strategic, grounded in sober reassessment, or reactive, driven by short-term pressures? In the excesses of past decades, from credit-fuelled consumption to inflated asset markets, lies an opportunity to rebuild on firmer ground.

This is not a call for retreat, but for renewal: of policy, purpose and the role of the state in shaping markets rather than merely serving them. The consensus of the last generation has lost its grip on both economic performance and public trust. The challenge ahead is not only financial or political, but conceptual – to rethink what sustainable prosperity means in an era defined by scarcity, competition and technological acceleration.

At Arbra, we view these shifts not as causes for alarm but as catalysts for adaptation. The rebalancing of markets and policy will reward patient capital, disciplined strategy and the willingness to look beyond convention. In moments of structural transition, clarity and adaptability become the rarest forms of advantage – and the most enduring.