Unhinged

While civil society in the US may get more unhinged in the wake of the Kirk assassination, financial markets motor on. Stocks resumed their advance on Thursday, influenced a lot more by the latest economic data than the tears of Fox News hosts and Christian conservatives.

Polarization, retribution, revenge, intimidation and violence to the south of us are all making Canada look a helluva lot better. “We are official Trump refugees now,” Jim from Texas texted me yesterday. He and Dale are house-hunting in NS this week and knew I had some connections. “This is the new promised land,” he said, adding six Canadian flag emojis.

Well the odds of an interest rate cut in the States next Wednesday were 90% this morning. The chances of a second cut coming in October are being pegged at 82%. In Canada a majority of economists think we also have two cuts coming before the snow, the first on the 17th.

But, at the same time, inflation is not dead, as made clear in the latest data. The US cost-of-living gauge jumped to 2.9% year/year – the speediest monthly spurt this year, and seriously higher than the official count of 1.7% here in paradise.

The reason, in one word, is ‘tariffs’.

As we all know, rates have been on hold for all of 2025 in both countries because of the orange guy. Nobody knew what the impact of a nine-fold surge in American tariffs would be on the supply chain, producer prices or consumers. So the central bankers bided their time, not wanting to cut the cost of money – which would add stimulus, encourage borrowing and spending and just goose prices further.

Meanwhile Trump has been exerting huge pressure for a mother of a rate drop, dissing the Fed chair and trying to take over his board of governors. Concurrently he fired the head data person at the Bureau of Labour Statistics because he didn’t like the economic numbers. To no avail. The latest employment data sucked. Today’s inflation stat is high. So it looks like the economists are winning.

Those tariffs have started to show up in meaningful ways, including car prices and metals. New and used vehicles are both getting more expensive. Ditto for household furnishings, clothing and food.

Trump says the inflation pain will be temporary. The CB dudes aren’t so sure. And meanwhile the slowdown in job growth is catching a lot of attention. The unemployment rate Stateside is still low at just over 4%, but it’s on the rise as the pace of new hiring stagnates. The country needs 100,000 new jobs every month just to stay steady. Last month the number was 22,000 and in June it was negative. Over the last 12 months revisions to data have shown almost a million fewer hires than originally thought. In other words, the economy was better under Biden – before this tariff and trade war nonsense started.

“The inflation side of stagflation has arrived,” says Bay Street economist Scott Anderson. “The totality of the economic data this morning pushes the FOMC [the Fed’s rate committee] into an uncomfortable position of going into next week’s policy meeting having to defend both sides of the dual mandate. In the end, August inflation was close enough to consensus forecasts to likely allow the Fed to go ahead with a quarter-point rate cut to at least initially respond to a labor market showing increasing signs of distress.”

Yes, the Fed will still cut next week. If not, Trump’s head would explode and the American central bank would end up like the Centre for Disease Control under that quack RFK Jr. Then Mr. Market would have a cow or two.

So down it goes. And us, too.

Canada lost 66,000 jobs last month – a disaster – and over forty thousand the month before. Our jobless rate is 7.1% while inflation is tepid, which means big pressure on the BoC to chop, chop chop.

CIBC economists think the current 2.75% bank rate can be sliced by a full 1%. BMO’s Sal Guatieri says three quarter-point drops are more likely, taking the Bank of Canada to the 2% mark. More clarity is expected next Tuesday when Canada’s latest inflation number surfaces.

In any case, the winds have shifted. The American juggernaut is losing momentum. Canada’s economy needs a shot in the arm (and will soon get two – one from the CB and another from Carney’s spending). Inflation here is under control, but Americans are paying a heavy price for their political choices.

Seldom was that more obvious than yesterday. Poor Charlie.

About the picture: “Hope you’re having an amazing summer,” writes David. “This looks familiar… Last evening I met this very photogenic handsome fella named Gary while enjoying a beautiful evening here in Calgary.  His leash holder and picker upper owner only had time for me to take a few pics with no patting or petting please and thank you.   You can certainly see how that required a lot of restraint.“

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/09/11/unhinged-3/