Beige flags

Daily update

The Federal Reserve’s Beige Book of economic anecdotes was not affected by the absence of a functioning government. There was evidence of prices reacting to trade tariffs, and a sense of labor market fragility. However, it is possible that elements of political partisanship are being captured in some of the reported concerns.
There has been some back and forth over US trade with China. US Treasury Secretary Bessent does not sound happy with China’s mooted export controls, which have seemingly been modelled on actual US export controls. Markets appear largely unfazed, viewing the current trade rhetoric as a prelude ahead of further negotiations.
This week’s French prime minister faces no-confidence votes from both the far-left and the far-right. The price of survival is likely to be a degree of fiscal profligacy. The lesson from Japan or Italy in the 1990s is that unsustainable debt levels can be endured in a wealthy country for a very long time if that wealth is mobilized appropriately.
Having used USD 20bn of US taxpayers’ money to bail out Argentina, Bessent seems to be questioning whether this is enough by trying to get USD 20bn in additional support from the private sector.