All That Is Gold Does Not Glitter

By Michael Every of Rabobank

With the BoE Governor warning about pre-2008 bubble conditions in private credit; UK public-sector borrowing coming in higher than thought; Canadian CPI hotter; yet gold -6% Tuesday, its biggest sell-off since 2013, with silver -8.7%, and both -2% again this morning; and Bitcoin soaring as gold fell, then dropping in tandem, there is a lot going on. And I don’t mean GOP leaders are eyeing a new stopgap spending measure to end the government shutdown. Rather:

“Bessent’s Plan Runs Short on Time to Line Up Argentina Financing’ (Bloomberg) where the market doubts he can find the second $20bn of his $40bn package from the private sector before Sunday’s key election as ‘The US Is Trying to Drive a Wedge Between Argentina and China’ (WSJ).

“China eyes 3-way currency swap with Japan and South Korea amid Trump’s tariff war’ (SCMP) as “Beijing seeks to strengthen regional financial ties and boost yuan use as US trade pressures weigh on East Asian economies”. This would be the same Japan and China rearming against threats from each other, and the South Korea focused on North Korea that is now friendly with China again? Moreover, Blomberg says Ethiopia is in talks with China to convert its dollar loans to CNY, which follows the lead set by Kenya: lower rates – and different pressure points.

Politico underlines ‘Greenland could become the biggest car crash in Atlantic relations’, as “If the US President presses ahead… others can and will follow elsewhere.” Yet what could Europe do given the situation Lane just underlined and its need for US exports, LNG, tech, and arms?

Plans for a Trump-Putin summit in Budapest have been shelved, as Trump said it would be a “waste of time’’ given Russia is clinging to territorial ambitions that make a peace deal with Ukraine impossible. So, more war, with more tit-for-tat blows to Russian and Ukrainian energy infrastructure: and elsewhere? Colombia’s president embraces war of words with Trump’ (AFP), saying “President Trump doesn’t like us being out of his control… they want a coup against me.” We still wait to see what the new, “substantial” US tariffs on Colombia will look like.

“Trump Sees Successful Xi Meeting, But Allows It Might Not Happen” (Bloomberg), again underlining 155% tariffs are going live from 1 November if he doesn’t get the deal he wants.

“How US-Australia rare earth deal aims to loosen China’s grip on critical minerals market’ (SCMP), as ‘China fires warning at Australia over ‘bloc confrontation’’ (Australian) for doing so.

The EU is to stockpile critical minerals amid supply chain threats. From whom, when they aren’t easily available right now? That’s as the ‘Dutch seek solution to stand-off with China over chipmaker Nexperia, while carmakers fret’ as ‘VW says production pauses planned, denies chip crunch as reason’ (Reuters). If chips aren’t available soon then that correlation will be obvious.

“South Korea Senior Officials to Visit US Again for Tariff Talks’ (Bloomberg) as Seoul said it wants to produce more of its own weapons – who doesn’t? And with whose rare earths?

Transcending all of the areas above, the FT reports ‘US army taps private equity groups to help fund $150bn revamp.’ On one hand: “This special military operation was brought to you by Snickersnacks.” On the other, as a French mega opinion poll in Le Monde notes “France’s democratic crisis is showing increasingly alarming symptoms.” Indeed, the numbers are shocking:

Of those surveyed, 96% feel dissatisfied or angry about the state of the country; 90% believe it is in decline; 81% don’t think democracy is working for them; 66% think most politicians are corrupt; 71% think their living standards are getting worse; 57% have trouble making ends meet; 85% think France ‘needs a real leader to restore order’; and 63% say they don’t ‘feel at home any more’. That sounds like FT-friendly technocratic centrism leads to populism, as was flagged way back in 2019’s ‘The Age of Rage’ – and this survey was taken before France’s crown jewels were humiliatingly stolen from the Louvre in minutes, with no official resignations in response yet.

FT chief economics commentator Martin Wolf, we are *still* waiting for your promised blueprint for a global economic system that works sustainably and inclusively for everyone: don’t keep us in suspense any longer!