Economist Paul Krugman is sounding the alarm about the state of the economy and the role Trump’s allies are playing in making things worse. According to Krugman, they’re driving the country towards a major financial crisis, one that could mirror the disaster of 2008.
In his latest Substack post, Krugman outlined how the Trump administration’s “allies and cronies” are having a far greater impact on the cost-of-living crisis than Trump himself. He’s worried that many of the economic safeguards put in place after 2008 are being slowly dismantled, leaving us vulnerable to another financial collapse.
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Krugman wrote, “The MAGA war on financial stability is being waged largely on two fronts. First, there’s an ongoing effort within some parts of the Federal Reserve to drastically weaken bank supervision — oversight of banks to prevent them from taking risks that could threaten the financial system.”
He added, “The second front of MAGA’s war on financial stability is on behalf of the crypto industry. The Trump administration and its allies in Congress — including, I’m sorry to say, a number of Democrats in this case — are moving to promote wider use of crypto.”
One key piece of legislation that’s got Krugman’s attention is the GENIUS Act, passed in July. While it’s meant to promote stablecoins, Krugman argues that these are essentially a weakly regulated form of banking that could make the whole system more unstable.
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As for how much blame Trump himself should take, Krugman isn’t sure yet, but he’s convinced the president simply doesn’t see the full picture. He said, “But here we are in 2025, and 2008 wasn’t that long ago. Many of us still have vivid memories of the gut-wrenching panic that gripped the world when Lehman fell.”
Krugman went on to say that there’s been a steady erosion of the rules that were put in place after the 2008 crisis to reduce the risk of future financial meltdowns. He remarked, “I say ‘allies and cronies’ advisedly,” referring to the people pushing policies that could lead to disaster.
The economist went further, adding, “There’s no indication that Trump himself has any idea what’s happening on his watch. But key players in Congress, within the administration, and, alas, at the Federal Reserve, are apparently determined to make a 2008 rerun possible.”
Krugman is urging the Democratic Party to pay close attention to the financial risks created by Trump’s administration, particularly its tariff policies, and to be wary of Wall Street and the growing influence of the crypto industry.
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He warned, “Along with its many other sins, the Trump administration is doing its best to make a future financial crisis more likely. I hope the Democrats are paying attention and won’t let themselves be seduced by Wall Street and, worse, the blandishments of the crypto bros.”
Krugman’s biggest concern? If the Democrats aren’t careful, they might find themselves managing a 2008-like crash during a Democratic presidency, and we can all guess who would end up getting the blame.