Will or won’t?

August 23-29, 2025

Big news. It has nothing to do with the economy. It was Trump’s attempt to fire Fed board member Cook. She refused to leave and a sharp conflict arose. It was sharp because the FOMC meeting (Cook is a member) is in three weeks and no one doubts that its outcome will depend on how this conflict ends.

If Trump finishes off the situation and Cook leaves, then the rate will almost certainly be lowered. If Cook fights back, the rate will not be lowered, moreover, for objective reasons it may even be raised. Powell left both options possible in his speech at Jackson Holes.

From the point of view of ten years ago, the situation is wild. But the crisis continues, and, accordingly, the opportunities for a subtle resolution of the situation are becoming fewer and fewer… There is no escape.

Macroeconomics. Italy’s GDP unexpectedly returned to decline (-0.1% per quarter) due to confusion with exports to the US:

Canada’s GDP is -0.4% quarterly, excluding Covid, a 9-year low:

Turkey’s production capacity utilisation is at 73.5%, excluding Covid, the lowest in more than 10 years:

Trump’s tariffs send Swiss economic sentiment index to worst ever level in survey:

The tariff mess had an even bigger impact on Canada’s balance of payments. Canada’s current account deficit in Q2 was the largest on record:

Japan’s new housing starts continue to decline:

It is already below the 2009 lows and generally at historically weak levels:

Japan Retail Sales -1.6% MoM: Worst in 5 years, worst in 7 years excluding Covid:

Japan’s job postings-to-applicants ratio remains at a 10-year low (excluding Covid) –

Chicago Fed’s US National Activity Index has been in the red for 4 months in a row:

Trump also has objective data to support his position.

Sales of new buildings in the US have fully recovered from the Covid growth and returned to 2017/19 levels:

And pending existing home sales continue to hover near record lows:

US Home Prices (FHFA) +2.6% per year, weakest performance since spring 2012:

Australia’s private sector lending is up 7.2% per year. Excluding the 2021/23 inflation spike, this is the highest since 2008:

French consumers are the most pessimistic in 2 years:

Unemployment in Germany remains at its highest in 5 years (including Covid) or 10 years (ignoring Covid)

South Korea’s central bank leaves monetary policy unchanged, concerned about weak economic growth coupled with a pickup in mortgage lending:

Main conclusions. It is simply amazing, but the macroeconomic picture is the same as it was a month, three months, and six months ago. We have already explained many times that this is the specificity of a structural crisis, but it looks amazing, since everyone is used to the fact that a crisis should accelerate and then turn into growth. And here it is a slow, tedious decay.

Yes, of course, statistical agencies lie and we regularly write about this, showing with specific examples how this effect works. But even taking into account optimistic corrections, the overall picture does not look very good … Well, let’s add two more points to the overall picture.

The first is a bubble in “artificial intelligence” companies:

One company, the leader of the AI ​​boom, Nvidia, has almost reached the capitalization of the entire Japanese market. We will not even comment on anything.

The second picture describes this bubble on a historical scale:

Here, in general, no comments are required either. But the most important circumstance: the growth of capitalization is not accompanied by an adequate growth in sales. Not for Nvidia (everything is clear with it, it sells chips to other AI companies), but for those who sell artificial intelligence products.

Those who read “The Decline of the Dollar Empire and the End of Pax Americana” remember that it described the phenomenon of the “new economy” and said that the linear growth of sales during the “boom” leads to an exponential growth of capitalization. If this thesis is reversed, then the growth of capitalization leads to a logarithmic growth of sales. That is, it does not support the growth of capitalization in any way.

At the same time, the standard of living of the population is falling … So the volume of sales is objectively limited. And there is no escape from this …

In general, we wish our readers a pleasant time these last weekends of summer and do not be afraid of the upcoming problems; our reviews are always with you!