This week Gold and Silver rocketed, share markets did the rollercoaster and bond markets rallied as markets bet on a FED panic rate cut, and digested the unpalatable news that a Harris win is now on the cards, and therefore the fiscal irresponsibility would continue. And the US federal budget was short US$ 380BLN in August alone.

Ignored was the US encouraging Ukraine to target long range targets deep into Russia, the FED's capitulation to Wall St on Basel III, and the acceleration of the downturn in China.

Breaking

Biden Poised to Approve Ukraine’s Use of Long-Range Western Weapons in Russia[New York Times]

Dutch PM Unveils Toughest Asylum Policy Yet, Wants Opt-out[Barron's]

In Focus

China

10 year bond yields at 2% suggest a real risk of imminent significant deflation. 

China 10 Year Bond Yields Monthly Thanks to Jim Bianco 

Until now there have been many attempts to stimulate the Chinese economy but pretty much no rate cuts. The FED's determination thus far to not cut rates, has crushed the Chinese economy as CNY pegged to USD, transmits the hawkish monetary policy.

Now we see PPI deflation increasing and CPI heading to zero.

China CPI August 2024

China Retail Sales August 2024

All indicators pointing south. The housing situation still hasn't been paused and the stock markets are back to GFC levels. Start-up innovation and investment is now zero.

The country that rescued the western economies from the GFC may well be the cause of the next crisis.

Only depegging the currency can revitalise the Chinese economy.

China’s economy is on the edge. Why won’t Xi rescue it?[AFR]

China urged to spend up to $1.4tn to battle deflation[FT]

How China has ‘throttled’ its private sector[FT]

China’s Unworkable Housing Rescue Math Is Prolonging Crisis[Bloomberg]

China to Cut Rates on $5 Trillion Mortgages as Soon as September[Bloomberg]

Shanghai Composite Monthly

Japan

Japan GDP Q2 2024

Japan PPI August 2024

Like China, but much earlier in the cycle, Japan seems to be slowly slipping away.

USD / YEN finished the weak lower at 141. Markets are braced for a further unwind of the YEN carry trade given that the Bank of Japan wants to hike, and rate setting meeting is on Friday.

Pimco Sees BOJ Hike as Soon as January, Likes Long-Term JGB[Bloomberg]

US Economy

Jamie Dimon says ‘the worst outcome is stagflation,’ a scenario he’s not taking off the table[CNBC]

US Core CPI August 2024

US PPI August 2024

US Federal Budget Balance August 2024

The monthly budget deficit was the big shocker. Nothing more to say.

Macy's Set To Close 55 Stores By The End Of 2024[Zerohedge]

Top Federal Reserve officials leave door open for large interest rate cuts if data worsens[FT]

In The Background

CRE / Banks / CLOs

Werner, Karasick Default On $525M Loan Tied To Landmark Midtown East Tower[BisNow]

A lot more loans written down this week. We're nearing the point at which owners and lenders are going to have to realise the losses. The moment when they all do, because of herd mentality, will either market the bottom or create a spiral effect.

And that moment is really close now.

Bitcoin / US Election

Streamlining the global movement of digital assets and currencies[Swift]

UK Parliament Introduces Bill to Recognize Bitcoin and Crypto as Personal Property[Nasdaq]

Canada

Canada Building Permits July 2024

Building permits certainly suggest that the 3 rate cuts have helped the housing market already. Let's hope for more cuts (certain) to try to lift the stagnant Canadian economy.

England

UK GDP July 2024

More bad news here. The economy is dead. Government seems to have lost 22 billion quid. Are they so incompetent that they can't account creatively for it?

They're taxing pensioners and rumours are of an increase in death tax.

UK government finances are on an ‘unsustainable’ path, watchdog warns[FT]

UK Forecaster Warns Public Debt Will Almost Triple by 2070s[Bloomberg]

Europe

ECB cuts a further 25bps.

Germany CPI August 2024

Less economic data out of the EU this week but deflation now starting and economies are stagnant.

Australia

The Government / RBA polital wrangle persists and the economy is now slowing markedly. The Government is in fact single handedly propping up the economy whilst the RBA worries that this may be creating inflation.

What's Next ?

Markets are laser-focused on FED, Bank of England and Bank of Japan interest rate decisions next week. Will the FED panic and cut 50bps ? If not there are going to be some disappointed traders and investors.

Harris' good performance in the joust with Trump, will futher convince markets that even more irresponsible fiscal spending is on the way.

Maybe we're looking at the start of a massive yield curve steepening?

This Week's Important Economic Indicators [London time]