What Good Is 15% Growth If It’s Matched With 15% Unemployment?

By Michael Every of Rabobank

Mr. 15%: Trump stated if Fed Chair Warsh does his job, US growth could be 15% or higher. It’s unclear if that’s annual, exceeding China’s early spurt, or over the remaining two-and-a-half years of his presidency, so higher than China today, or nominal or real. Yet the key signal for those who called Warsh a ‘hawk’ is that the Fed is going to run the economy hot. That’s as the FT notes, ‘Bash All Day, Buy All Night’, explaining “Why foreigners keep pouring money into America” despite attacking it verbally all the time.

For now, signals are ice cold and red hot. The Wall Street Journal claims ‘Job Hunters Are So Desperate That They’re Paying to Get Recruited.’ However, France and Germany’s next-generation fighter jet project is ‘dead’’.

On the broader European push to decouple from the US – as it signs up to a US critical minerals plan which implies the complete opposite– the FT reports ‘EU failing to implement economic fixes as single market withers’, and ‘European alternatives to Visa and Mastercard ‘urgently’ needed’; yet Politico claims this week will show ‘Macron sells a vision of ‘Made in Europe’ that Merz and Meloni aren’t buying’, while ‘European industry revolts over EU plan to weaken carbon border tax’ (Politico), which argues the opposite What is the EU grand macro strategy, exactly?

For now, it appears defensive in a different sense. As Politico also notes, ‘Bank of France chief’s surprise exit stokes suspicion among Macron’s opponents’, and the “Governor’s departure allows the French president to future-proof the central bank against a far-right government.” That’s as the Economist underlines that the far right, at 24%, is now the joint largest single faction across European elections.

Equally, while has a plan to challenge the dollar’s global role’, “The sticking point is… changing established practices in third countries using dollars… As a next step, the Commission proposes to “obtain a better understanding of the obstacles for the Euro’s wider use, while fully respecting national choices regarding monetary arrangements.” Markets will be very happy to explain it to them.

Mr. 1.5%: UK PM Starmer said he’s “not prepared to walk away” after calls for his resignation, but that doesn’t mean he won’t be pushed by his cabinet or the Labour Party. Former Deputy Leader Rayner, under investigation for her tax affairs, briefly had a ‘Rayner for leader’ website up, showing this process is underway. Markets are unhappy about another bout of UK political instability, combined with a possible populist left policy direction ahead.

Mr. 1.5%: In Australia, the RBA just forecasted the worst medium-term economic growth ever – 1.6% annual average through to 2028. Given expected population growth, that’s almost nothing per capita. Even if it’s the Aussie opposition, not government, that’s in turmoil for now, that may not stay the case for long.

Mr. 1.5%: Canadian PM Carney is reportedly discussing the idea of an early federal election to secure a majority. That’s as Trump threatened to bar the new US-Canada bridge from opening. One can see the election platform there already. What one cannot see is a growth model that hits even 1.5% sustainably, and per capita, if US-Canada tensions remain that high.

Mrs. 1.5%: After Japanese PM Takaichi’s landslide election win, where will she go on fiscal, defence, and foreign policy – and what will the BOJ do in response? Will we see crucial, controversial constitutional change to allow for broader rearmament and military deployment? One thing is for certain: Japan will be part of the Trumponomics geoeconomic and geopolitical nexus… and does that imply it can grow at what for it would be the giddy heights of 1.5%?

What %?: China warned its banks to reduce US Treasury holdings (selling to whom?) over worries about market volatility ahead (why now when one looks at recent vol in gold and Bitcoin, etc?). It also officially banned any form of private sector CNY stablecoins from being issued, making the dividing line with soon-to-emerge US dollar stablecoins crystal clear.

What %?: The Fed’s Waller said Trump-induced crypto euphoria may be fading, Bostic said confidence in the US dollar is coming into question, and Miran added the Fed should do QE in a crisis, but not otherwise. What constitutes a crisis?

What %?: Saudi Arabia’s $925bn sovereign wealth fund is set to announce a strategy revamp that will emphasize industry, minerals, AI, and tourism, while scaling back mega projects. That kind of investment reallocation is being seen globally in most, but not all, places: what GDP growth rates will it record in doing so?