Month: August 2025

We are often told that capitalism will eventually collapse under the weight of its own contradictions. So I get highly amused when I see things like rugged Floridian Republicans socializing property insurance, the crony capitalism of export licenses for computer chips and now, the idea of state capitalism with Trump in charge:

Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick confirmed on Tuesday that the US government is considering an extraordinary investment in struggling chipmaker Intel. But they gave different answers about what the Trump administration sought to do with that stake.

Such a deal, if it were to happen, would mark an unusual arrangement that would see the Trump administration use taxpayer money to take a stake in a private American business.
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The reports and Bessent’s comments also come after chipmakers Nvidia and AMD said they would pay 15% from their chip sales in China to the government in exchange for export licenses. If the government does take a stake in Intel, it could also serve as a model for other Trump administration investments, two people familiar with the White House discussions on the matter told CNN last week.

These are indeed interesting times.

Canadian inflation was basically flat in July:

Canada’s annual inflation rate eased to 1.7 per cent in July from 1.9 per cent in the prior month as lower year-on-year gasoline prices kept the consumer price index low, but core measures of inflation stayed sticky. Analysts polled by Reuters had forecast the annual inflation rate at 1.8 per cent and the monthly inflation rate at 0.3 per cent. The CPI increased by 0.3 per cent in July from 0.1 per cent in June on a monthly basis, Statistics Canada said.
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To gauge underlying price pressures, the Bank of Canada keeps a close eye on its preferred core measures of inflation, which did not ease in July, continuing to hover around 3 per cent annually.

However, BMO chief economist Douglas Porter noted that the three-month annualized trend for those measures eased to 2.4 per cent in July.

The money market thought the news was a little dovish:

Money markets are now pricing in odds of a rate cut on Sept. 17 at about 38 per cent, up from 32 per cent prior to the data, according to LSEG data. They are also still pricing in a full quarter point rate cut by the end of this year – but no more. The Bank of Canada has stayed put at 2.75 per cent at its last three rate decision meetings.

Here’s how implied probabilities of future interest rate moves stood in swaps markets moments after the 8:30 a.m. data, according to LSEG data. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

I continue to be fascinated by the impending drying up of US Social Security and there was a decent review on CNN today:

“Today, we celebrate that 90th anniversary of one of the most significant pieces of legislation ever signed into law, the Social Security Act of 1935. And we’re going to make it stronger, bigger and better. … During the campaign, I made a (pledge) to our seniors that I would always protect Social Security, and under this administration, we’re keeping that promise and strengthening Social Security for generations to come,” Trump said.

But in citing what he said were his administration’s successes, Trump made some false and exaggerated or unverifiable claims. Among them:
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Claim: Social Security’s finances are better

In praising the accomplishments of Social Security Commissioner Frank Bisignano, who was standing next to the president for the proclamation signing, Trump said that while the media has reported that the program was going to “go bust” in less than a decade, “Not anymore it’s not.”

But in fact, the program still faces the prospect of not being able to pay 100% of promised benefits by 2034 in the retirement and disability programs if lawmakers don’t act to address the pending shortfall, according to the latest annual report from Social Security’s trustees. By that point, unless changes to the system are made, payroll tax revenue and other income sources will only be able to cover 81% of scheduled benefits.

And with the estimated reduction in tax revenue from Trump’s One Big Beautful Bill Act, the Committee for a Responsible Federal Budget estimates that the insolvency date will now be a year or two earlier.

There are several longstanding reasons for the funding shortfall, including demographics and other spending and tax legislation passed under Republican and Democratic administrations. But, to close that gap, lawmakers (as they’ve known for years) will need to come up with a package of fixes that may include raising more in Social Security taxes, raising the retirement age, changing the formula to reduce the amount of initial benefits a person receives at retirement, and changing how benefits are annually adjusted for cost of living, according to CRFB.

I fail to understand why the Democrats aren’t banging the drum on this at every opportunity.

And the PPI for July came out:

The latest Producer Price Index, which measures the average change in prices paid to producers, jumped 0.9% from June, lifting the annual rate to 3.3%, according to Bureau of Labor Statistics data. PPI serves as a potential bellwether for the prices consumers may see in the months ahead.
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Excluding food and energy, core PPI also shot higher by 0.9%, sending the annual rate to 3.7%, the highest level since March.

PerpetualDiscounts now yield 5.75%, equivalent to 7.48% interest at the standard conversion factor of 1.3x. Long corporates now yield 4.93%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 255bp, unchanged from that reported August 6.

So, the US Inflation number came out:

The Consumer Price Index stayed steady at 2.7 percent compared to the same time last year. On a monthly basis, prices rose 0.2 percent from June. But an important gauge tracking consumer prices that strips out volatile food and energy prices accelerated more rapidly.

“Core” C.P.I., which is closely watched by the central bank, jumped 0.3 percent over the course of the month, or 3.1 percent on a year-over-year basis. That is one of the largest monthly increases so far this year and represents the fastest annual pace in five months. In June, core inflation rose 0.2 percent from the previous month, or 2.9 percent from July 2024.
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Businesses have managed to avoid passing along price increases because of a strategy earlier in the year to stockpile goods that were likely to be subject to Mr. Trump’s levies. Many companies have also sought to absorb the costs themselves in order to avoid driving away customers, some of whom are increasingly under financial strain.

But the July data showed more businesses reaching a tipping point, left with little option but to raise prices following June’s notable uptick. The biggest impact has so far been concentrated in categories such as furniture, appliances and other household wares, as well as recreation goods and footwear.

In July, the broader household furnishings index rose 0.7 percent in June, following a 1 percent increase in June. Compared to the same time last year, those prices are up 2.4 percent. Recreation-related prices rose 0.4 percent. Some of the larger gains in July came in apparel and footwear, categories that are exposed to tariffs on countries around the world, including India, Vietnam and China. Prices on infants and toddlers apparel were up 3.3 percent in July. Footwear was up 1.4 percent.

Speaking of statistics, the new BLS honcho was named:

President Trump announced on Monday that he would nominate E.J. Antoni, an economist at the conservative Heritage Foundation, to lead the Bureau of Labor Statistics. Mr. Trump fired the previous commissioner of the agency after it reported weak job growth.

Dr. Antoni, who would need to be confirmed by the Senate, has previously criticized the bureau and questioned its methods and reports. His nomination underscored Mr. Trump’s attempts to place his own allies in control of a key repository of data about the nation’s hiring, wages and prices.
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“There are better ways to collect, process, and disseminate data — that is the task for the next B.L.S. commissioner, and only consistent delivery of accurate data in a timely manner will rebuild the trust that has been lost over the last several years,” Dr. Antoni posted on X last week.“There are better ways to collect, process, and disseminate data — that is the task for the next B.L.S. commissioner, and only consistent delivery of accurate data in a timely manner will rebuild the trust that has been lost over the last several years,” Dr. Antoni posted on X last week.
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Kevin Hassett, the director of the White House National Economic Council, previously insisted the administration was “absolutely not” trying to shoot the messenger on the heels of a poor jobs report.
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The agency has already seen quite a few departures. It employed about 2,300 people in September 2024, the most recent official data available, but about a third of top positions are currently vacant. And the White House has already weakened outside oversight of the agency’s methods by dissolving an advisory panel of experts in January.

Those changes, along with a diminished budget, will also make it difficult for Dr. Antoni to tackle what economists see as a legitimate problem at the bureau: shrinking survey coverage and declining response rates, which can exacerbate the kinds of large revisions that Mr. Trump cited as a reason for firing Dr. McEntarfer.

In its budget request for 2026, the White House proposed decreasing the bureau’s budget by $56 million.

The new spittle-licker promptly came up with a … surprising … idea:

President Trump’s nominee to lead the Bureau of Labor Statistics is suggesting that the agency suspend its monthly jobs report, an economic staple that is relied upon by the Federal Reserve and U.S. businesses to gauge the health of the economy.

In an interview on Fox News Digital on Monday ahead of his nomination, E.J. Antoni criticized the monthly employment report as flawed and suggested it be replaced with “more accurate, though less timely, quarterly data.”
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“How on earth are businesses supposed to plan — or how is the Fed supposed to conduct monetary policy — when they don’t know how many jobs are being added or lost in our economy? It’s a serious problem that needs to be fixed immediately,” Antoni told Fox News Digital.

He added, “Until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data.”
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Responding to the BLS’ employment surveys is voluntary for businesses, while the federal government’s Office of Management and Budget directs the BLS to release “robust” data on basic economic indicators in a “timely” manner. But that’s become more challenging as fewer people and institutions respond to surveys, experts say.

“Response rates have declined for nearly every top-tier government statistical survey over the last decade, a trend that accelerated during the pandemic,” Goldman Sachs economists wrote in an Aug. 11 research note.

He then promptly illustrated the administration’s penchant for thinking about things only after the tough-guy talk:

President Donald Trump’s pick to head the Bureau of Labor Statistics, who previously proposed scrapping monthly jobs reports, is now backing off that idea, according to a report.
Trump tapped EJ Antoni, the chief economist at the conservative Heritage Foundation, for the role after firing the agency’s last commissioner following her release of a poor July jobs report.
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He has since walked back on that proposal, CNN reported. Antoni will continue to issue monthly jobs numbers if confirmed, Heritage Foundation economist Stephen Moore told CNN Tuesday.
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It’s not immediately clear what may have changed his mind. The Independent has reached out to the Heritage Foundation for more information.

Just wait until these clowns find out that doing a good job costs money, spent largely on staff to negate the DOGE firings. Lots and lots of it. They’ll be so surprised that they’ll insist on getting a few Nobel prizes for discovering the concept.

Incidentally, WordPress fans, it turns out that having an unbalanced number of ‘bolding’ formatting statements causes all sorts of peculiar things to happen with the layout. For the last ellipsis in the last blockquote, I had bold-ellipsis-bold instead of bold-ellipsis-unbold and this caused … problems that were not very obvious. Thanks, WordPress!

It’s a red-letter day! A Trump appointee has said something sensible!

Hassett, in subsequent interview on Fox News Sunday, said that if he ran the BLS and had “the biggest downward revision in 50 years, I would have a really, really detailed report explaining why it happened.”

Imagine that! Wanting a thorough understanding of how the revision happened before taking tough-guy action! Will wonders never cease?

Of course, this guy Hassett has a history:

I started doing some digging on Hassett after lunch and discovered that he had coauthored a book called Dow 36,000.

Written in 1999, Dow 36,000 argued that for structural reasons, the stock market was wildly undervalued and was poised to take off like a rocket. Hassett and his coauthor, James K. Glassman, said that 1999 represented a unique moment during which stocks were, as an asset class, undervalued by something like 350 percent:

[The s]ingle most important fact about stocks at the dawn of the twenty-first century: They are cheap. . . . If you are worried about missing the market’s big move upward, you will discover that it is not too late. Stocks are now in the midst of a one-time-only rise to much higher ground—to the neighborhood of 36,000 on the Dow Jones industrial average.

You may remember 1999 as the eve of the dotcom bust. Rather than being poised to make a big move upward, the stock market was at the top of an irrationally exuberant5 bubble.

When Dow 36,000 was published, the Dow Industrial Average was 10,273. That was October. Three months later the bubble popped. By October 2002 the Dow was 7,286.

So, take it as you will. Hassett is a leading contender for Fed chairman, God help us.

Speaking of jobs numbers, Canada’s July number was pretty awful:

Canadian job seekers and young workers are struggling through the dog days of summer even as the labour market shows limited strain from U.S. tariffs.

Statistics Canada on Friday reported 41,000 job losses last month, while economists had expected a slight gain.

The unemployment rate was unchanged at 6.9 per cent in July as StatCan said the number of job seekers held steady month-to-month.

The economy lost 51,000 full-time positions in July, and the bulk of the losses were in the private sector. The information, culture and recreation sector led the drop in employment, followed by construction.
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Average hourly wages meanwhile rose 3.3 per cent on an annual basis in July, up a tick from June.

Darcy Keith reports:

Money markets are pricing in modestly higher odds that the Bank of Canada will cut interest rates at its upcoming policy meetings this year following surprisingly weak Canadian employment data this morning.
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Here’s how implied probabilities of future interest rate moves stood in swaps markets moments after the 830 am ET data, according to LSEG data. The overnight rate now resides at 2.75 per cent. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

Pre-release Money Market

Post-release Money Market