Analysis of current economic conditions and policy
Private NFP from ADP
+44K vs. +68K per Bloomberg consensus.
Figure 1: Change since 2025M03 in private nonfarm payroll employment from BLS (blue), from ADP (red), 2023M04-2025M03 Stochastic trend (gray line), all in 000’s, s.a. Source: BLS, ADP via FRED.
About 1.9% of that is forecasted change in private inventories, which is way above average, and PCE is nowcasted at about 3.1%, as compared to somewhere in the 1.3% – 2.0% range it inhabited in Q2. Between those two, you’re seeing a boost of about 3 – 3.5% over what might be expected, leading to an “adjusted and meaningless number” of 2.4% – 2.9% without those two boosters.
Johnnydean
World cup driven irrelevancy. GDP now is so bad, abolishment should be considered.
pgl
There was a point here? Oh wait – your rants are always pointless.
Macroduck
GDPNow often begins its growth estimates for a given quarter far from where it ends up. GDPNow is entirely mechanical, no judgement allowed. That’s intentional, but can lead to some screwball estimates.
For now, personal consumption spending is assumed to add 2.85 ppts to Q3 growth mostly hecause PCE ended Q2 so strong. Here’s the picture, showing June vs Q2:
If, for instance, the World Cup pushed consumption unsustainably high in June, then PCE might fall short of what’s assumed in GDPNow.
Note also that, other than net exports, every component of GDP is assumed to add to growth. That might prove true, and it it does, Q3 growth will probably end up quite strong. Most quarters, some components impose a drag on growth. Professional forecasters, most of whom do exercise judgement in forecasting, mostly assume that GDPNow is exaggerating the pace of growth in Q3.
Treasury has lifted sanctions on an Iranian airline. But of course, the decision “was not indicative of any shift in U.S. policy towards Iran’s government, the Islamic Revolutionary Guards or any organization designated as terrorist and was unrelated to U.S. negotiations with Iran over a possible deal to end hostilities in the Gulf.”
It was an Iranian passanger flight into Yemen that sparked Saudi Arabia’s attack on the Sanaa airport, which in turn led the Houthis to ban Saudi shipping through Bab el-Mandeb. Thought I’d point that out.
Macroduck
“Treasury Secretary Scott Bessent said in an interview with CNBC on Tuesday that the U.S. and Iran could reach an agreement as early as Tuesday or Wednesday to reopen the Strait of Hormuz and restore freedom of navigation for commercial shipping.”
Today is Wednesday. No deal, and Iran insists that it is not talking with the U.S., only with Oman.
“A senior Gulf official familiar with the talks suggested there is about a 50:50 chance of a deal by Friday. One issue is that the Iranian delegation does not include the voice of the hardline Islamic Revolutionary Guard Corps (IRGC), which would have to sign off on the details, the source said.”
So, neither Tuesday nor Wednesday, but maybe Friday. The U.S. and Iran won’t reach agreement, but Iran and Oman might. Freedom of navigation? No, heavily supervised and restricted navigation.
Ivan
One of the main objectives of the IRGC is to remain at war with “the great satan” – so they can die and go straight to heaven. Peace is horrible for them because then they will not know where they end up after death – and they might even lose power here on earth before they die.
Macroduck
ADP reported a pick-up in wage gains for job switchers in July, to 7.0% y/y, the best in 11 months. Could be noise, but it fits with the recent increase in job openings.
Here’s the picture of openings and job-switcher wage gains, as reported by BLS:
Wages track openings, with a lag. BLS has not yet reported an acceleration in wage gains for switchers, but we don’t have July data yet. Anyhow, there are signs of modest improvement in the labor market. We’ll see if they last.
Johnnydean
War driven inflation pickup. My guess steady decline from here it is as long as inflation doesn’t rise, and the labor force isn’t gonna let it. World Cup caused a rise in job openings and explained the weird decline in in jobless claims earlier this year. Now claims are moving back at the pre world cup trend.
The World Cup is a big global economic mover, even more than the Olympics
joseph
Well, this should make Bessent some friends in Europe (sarcasm).
You heard about Bessent’s instructions to the Federal Reserve to intervene to prop up the yen by buying $10 billion of yen with US dollars. It turns out that the Fed got the cash for the transaction by selling euros. Except the ECB was completely blindsided. Bessent never informed the ECB until after the transactions took place.
This is a major break in protocol that has never happened before. Since WWII there has been close coordination between western monetary authorities.
A senior Trump administration official noted that “we respect the confidentiality of private discussions with our international counterparts, unlike the ECB”, adding insult to injury. Bessent is just a pugnacious, ignorant sh*theel.
So once again we have the Trump administration deliberately sticking their thumb in the eye of our allies — followed at some later date by Trump whining about how our allies won’t stick up for him.
We no doubt will face some catastrophic monetary crisis in the future and we may not be able to count on any international assistance.
Ivan
There is absolutely no reason not to inform the ECB about something like this, and a lot of reasons you would give them a heads up.
The facts that we didn’t, is not just an indication of the cluelessness of Bessent; but also that no competent people are left below him who would make sure that things are done the right way. That lack of competence in itself is a bad sign for our ability to handle the upcoming crisis. Ignorant, incompetent nincompoops are not who you want steering the ship when you are heading into a storm.
pgl
I bet Bessett informed a bunch of friends of Trump who engage in insider trading. ECB? I guess Trump is destined to see a PRC-EU alliance after all.
Macroduck
Except, but, ’cause… EVERYBODY knew we had sold euros for yen! It was in all the press accounts. The Europeans didn’t say anything that wasn’t in the press.
We were arrogant. They weren’t. So we accuse them. ‘Cause we’re arrogant. And because, just possibly, nobody at Treasury these days knows enough about how things are done to realize WE DON’T SELL EUROS WITHOUT ASKING! At least, nobody with a voice knows this stuff.
pgl
‘Bessent is just a pugnacious, ignorant sh*theel’. True but his boyfriend likes his money!
joseph
And you gotta wonder if Jay Powell would have acquiesced to Bessent’s demands without giving a heads up to his counterpart, Christine Lagarde, at the ECB.
This debacle illustrates that Warsh is just a tool of the White House.
Ivan
It is just another demonstration of Warsh being new on the job and not qualified. That is probably the biggest damage from this whole episode. He demonstrated to the whole world that Mr. Clueless is in charge of the US central bank. We will not have the credibility we need when the big wave hits.
Macroduck
Odds are, as soon as the Fed got the order from Treasury, the desk had to start selling euros; no useful delay. The ECB would not have known any earlier, just more politely, if Powell were still Chair. ‘Cause Bessent is not just a jerk to his international colleagues, he’s a jerk to all of his colleagues.
joseph
No, it is absolutely false that the desk had to start selling euros instantly with no delay. Maybe they had to to buy yen quickly, but Bessent isn’t the boss of the Fed. And there was no rush to sell euros without a heads up to the ECB. The Fed has a balance sheet of over $6 trillion. They as no panic necessary to sell $10 billion of euros.
The sale of euros was in the press but only after the transactions had already occurred. That’s no way to run a central bank.
What is the matter with you? Defending Bessent and Warsh? Sometimes I wonder where your head is at.
Ivan
Agree, buying Yen doesn’t have to be linked to selling another currency. There probably was an exchange rate stability argument for selling some Euro’s, but no urgency (or connection to buying of Yen). Although its hard to imagine that level of idiocy in Bessent and Warsh; its almost as if they were saying “we like Japan better than EU; so we are buying Yen and selling Euro’s”. Maybe the Orange Idiot was involved in this?
Talking to the ECB before either of those transactions would be the competent way to handle it. The ECB might even have decided to take a few billion of the Yen buying off our shoulders, to get a little more weight behind the support for the Yen (making it less likely that anybody would dare to speculate against the Yen).
Making sure the ECB know about the sale of Euro’s before the market finds out is also in everybody’s interest. When the next crisis arrive it will be very important that everybody know, that they will know, what everybody else is doing. When shit hits the fan you don’t want everybody to act in a panic on what they think that everybody else probably maybe will be doing.
Macroduck
Agreed, the right thing to do is to ask the ECB, or get the ECB to intervene. They almost certainly would have; there is a long tradition of intervening in one’s own currency at the behest of another central bank. It is bizarre that Treasury did what it did.
josephs assertion that the Fed “absolutely” had the discretion to tell the ECB is, however, probably a figment of joseph’s ego. Most of the rules for interagency operation are laid out in persnickety detail, and given the billions involved in currency intervention, the risk associated with blabbing is enormous. The Fed either has discretion or it does not. joseph claims to know that they do. I strongly suspect the Fed does not.
joseph
Ivan: “Agree, buying Yen doesn’t have to be linked to selling another currency.”
Right. And the reason why is that normally this is not done through the Fed at all. This is a fiscal, political operation and the Fed shouldn’t be involved at all. The Treasury has its own $200 billion Exchange Stabilization Fund to handle these sorts of things. But Bessent didn’t like how that would make him look so he asked Warsh at the Fed to do it for him. Unlike the Treasury which can just spend the dollars from the Stabilization Fund, the Fed has to balance its asset sheet so if it buys yen it has to sell something else — euros in this case.
The Fed shouldn’t have been involved in this transaction at all. Bessent bullied Warsh into doing the dirty work for him and Warsh dutifully complied. So much for Fed independence. And the fact that Warsh failed to notify the ECB is just the icing on the nasty cake. This transaction never would have happened under Powell.
Macroduck is totally wrong about the press knowing about it. When it leaked that Bessent was going to buy yen, everyone assumed it would be the normal route of spending dollars from the Treasury’s Exchange Stabilization Fund. It came as a complete shock to everyone when it turned out the Fed was involved which required selling one asset to buy another asset on orders from the Treasury.
Macroduck
Absolutely false. Really? You know that for a fact? Tell me, where did you get that “fact”?
Here’s the thing…I’ve never worked at the Fed, but I was for many years in direct contact with Fed officials. I also worked on interagency operations with Treasury, the FBI, Customs and INS when I was at State. When engaged in interagency operations, I never had the discretion to inform anybody of anything that was not explicitly permitted by the other agency. So I’m curious, oh all-knowing joseph, where are you getting your “absolutely not” information? ‘Cause I think you’re just making stuff up.
So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.
joseph
Macroduck: “So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.”
Do you ever listen to yourself talk? The Fed must ask for Treasury’s permission in their own operations?
The Fed never should have been involved in these transactions to begin with. The Treasury has their own $200 billion fund dedicated to this purpose. It’s the same Exchange Stabilization Fund that Bessent used to buy $20 billion of Argentine pesos last year to bail out Trump’s MAGA buddy Javier Milei.
But Bessent didn’t want the visibility of selling US dollars so he bullied Warsh into doing his dirty work for him on the down low. And Warsh complied dutifully to his orders from Treasury. In the past the Fed has always operated openly and transparently, saying exactly what they are doing and why. Those days are over.
Once again — “”So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.
The Fed needing “Treasury’s permission” to explain what they are doing and to maintain good relations with their central bank allies? The Treasury issuing orders to the Fed on what it should sell and buy? And to keep it all a secret? Do you listen to yourself talk?
Optimistic but Sceptic
Job report from today is dismal, only 26k jobs per month since Feb 2025.
Either we found a way to grow GDP 2-3% without adding jobs (where will the added consumption come from?), or there’s a problem in our accounting.
Macroduck
Some jobs are more value-added creating than others. Data center construction is a big lift to GDP, and much of domestic value added is construction workers, electricians and plumbers, along with chip designers. Add in lawyers and financiers, who are also a big part of AI at this stage. Here are a couple of ways of looking at intellectual property, to give a flavor of what may be driving the accounting anomaly you have in mind:
That probably can’t continue, nor can the work for plumbers and electricians.
Macroduck
I write ” ‘Cause Bessent is not just a jerk to his international colleagues, he’s a jerk to all of his colleagues.”
You write “Defending Bessent and Warsh? Sometimes I wonder where your head is at.”
My head is at getting the facts right. I don’t see how the facts defend either Bessent, who messed up, or Warsh, who just allowed the Fed to do what it always does when Treasury asks for intervention. I do wonder, though, where your head is. You’re willing to pretend to know things you don’t know, simply to say mean things about Warsh and Bessent?
You’ve taken a fair number of shots at me, and you’ve always been wrong. Once in a while, you’ve made the attack personal, and you’re coming pretty close again. What’s up with you? I’m pretty sure I’ve never peed in your cornflakes.
joseph
Macroduck: “Warsh, who just allowed the Fed to do what it always does when Treasury asks for intervention.”
Sorry, but you have no idea what you are talking about. It is rare for the Fed to directly intervene in currency exchanges except in some sort of extreme international crisis. Normally, that’s the job of the Treasury’s Exchange Stabilization Fund. The Fed maintains the Treasury’s bank account. Yes, the Treasury directs the Fed how to distribute the money in its bank account, the same way the Treasury directs the Fed to pay all of the other bills of the US government. The Fed is just the banker the same way you use your bank to pay your bills by writing checks on your account. That’s the normal method method of exchange stabilization. The Treasury tells the Fed to spend money from the Treasury’s Stabilization Fund account to buy a currency. It’s not the Fed’s intervention, they are just the agent. It’s supposed to be the Treasury’s intervention.
But that isn’t what Bessent did in this case. He directed the Fed to use the Fed’s own assets to buy yen, not the Treasury’s assets. That’s simply not the way it is normally done. And of course, if the Fed is using its assets to buy yen, it has to balance its account by selling some other asset, in this case euros. The Treasury giving orders to the Fed as to what to do with its balance sheet would have never happened under Powell.
The policy of a strong or weak dollar vs the yen is an executive branch policy decision, not the bailiwick of the Fed. Bessent was just worried that US Treasury rates would go up if the Japanese starting selling off dollars. This was not an international crisis. It was an embarrassment for Trump. And in the case of an international crisis, the Fed closely coordinates with allied central banks, not through the back door on the sly.
No this isn’t what the “Fed always does when the Treasury asks for intervention.”
GDP nowcasting for Q3 2026 is at 5.9% today, seems high, someone can comment on the forecast?
https://www.atlantafed.org/research-and-data/data/gdpnow
About 1.9% of that is forecasted change in private inventories, which is way above average, and PCE is nowcasted at about 3.1%, as compared to somewhere in the 1.3% – 2.0% range it inhabited in Q2. Between those two, you’re seeing a boost of about 3 – 3.5% over what might be expected, leading to an “adjusted and meaningless number” of 2.4% – 2.9% without those two boosters.
World cup driven irrelevancy. GDP now is so bad, abolishment should be considered.
There was a point here? Oh wait – your rants are always pointless.
GDPNow often begins its growth estimates for a given quarter far from where it ends up. GDPNow is entirely mechanical, no judgement allowed. That’s intentional, but can lead to some screwball estimates.
For now, personal consumption spending is assumed to add 2.85 ppts to Q3 growth mostly hecause PCE ended Q2 so strong. Here’s the picture, showing June vs Q2:
https://fred.stlouisfed.org/graph/?g=1XOfO
If, for instance, the World Cup pushed consumption unsustainably high in June, then PCE might fall short of what’s assumed in GDPNow.
Note also that, other than net exports, every component of GDP is assumed to add to growth. That might prove true, and it it does, Q3 growth will probably end up quite strong. Most quarters, some components impose a drag on growth. Professional forecasters, most of whom do exercise judgement in forecasting, mostly assume that GDPNow is exaggerating the pace of growth in Q3.
Signs of progress?:
https://www.reuters.com/world/middle-east/us-removes-sanctions-three-irgc-linked-entities-treasury-website-shows-2026-08-05/
Treasury has lifted sanctions on an Iranian airline. But of course, the decision “was not indicative of any shift in U.S. policy towards Iran’s government, the Islamic Revolutionary Guards or any organization designated as terrorist and was unrelated to U.S. negotiations with Iran over a possible deal to end hostilities in the Gulf.”
It was an Iranian passanger flight into Yemen that sparked Saudi Arabia’s attack on the Sanaa airport, which in turn led the Houthis to ban Saudi shipping through Bab el-Mandeb. Thought I’d point that out.
“Treasury Secretary Scott Bessent said in an interview with CNBC on Tuesday that the U.S. and Iran could reach an agreement as early as Tuesday or Wednesday to reopen the Strait of Hormuz and restore freedom of navigation for commercial shipping.”
https://www.msn.com/en-us/money/general/us-iran-may-strike-hormuz-reopening-deal-as-soon-as-tuesday-or-wednesday-bes
Today is Wednesday. No deal, and Iran insists that it is not talking with the U.S., only with Oman.
“A senior Gulf official familiar with the talks suggested there is about a 50:50 chance of a deal by Friday. One issue is that the Iranian delegation does not include the voice of the hardline Islamic Revolutionary Guard Corps (IRGC), which would have to sign off on the details, the source said.”
https://www.cnn.com/2026/08/05/middleeast/hormuz-iran-oman-agreement-analysis-intl
So, neither Tuesday nor Wednesday, but maybe Friday. The U.S. and Iran won’t reach agreement, but Iran and Oman might. Freedom of navigation? No, heavily supervised and restricted navigation.
One of the main objectives of the IRGC is to remain at war with “the great satan” – so they can die and go straight to heaven. Peace is horrible for them because then they will not know where they end up after death – and they might even lose power here on earth before they die.
ADP reported a pick-up in wage gains for job switchers in July, to 7.0% y/y, the best in 11 months. Could be noise, but it fits with the recent increase in job openings.
Here’s the picture of openings and job-switcher wage gains, as reported by BLS:
https://fred.stlouisfed.org/graph/?g=1XPC7
Wages track openings, with a lag. BLS has not yet reported an acceleration in wage gains for switchers, but we don’t have July data yet. Anyhow, there are signs of modest improvement in the labor market. We’ll see if they last.
War driven inflation pickup. My guess steady decline from here it is as long as inflation doesn’t rise, and the labor force isn’t gonna let it. World Cup caused a rise in job openings and explained the weird decline in in jobless claims earlier this year. Now claims are moving back at the pre world cup trend.
The World Cup is a big global economic mover, even more than the Olympics
Well, this should make Bessent some friends in Europe (sarcasm).
You heard about Bessent’s instructions to the Federal Reserve to intervene to prop up the yen by buying $10 billion of yen with US dollars. It turns out that the Fed got the cash for the transaction by selling euros. Except the ECB was completely blindsided. Bessent never informed the ECB until after the transactions took place.
This is a major break in protocol that has never happened before. Since WWII there has been close coordination between western monetary authorities.
A senior Trump administration official noted that “we respect the confidentiality of private discussions with our international counterparts, unlike the ECB”, adding insult to injury. Bessent is just a pugnacious, ignorant sh*theel.
So once again we have the Trump administration deliberately sticking their thumb in the eye of our allies — followed at some later date by Trump whining about how our allies won’t stick up for him.
We no doubt will face some catastrophic monetary crisis in the future and we may not be able to count on any international assistance.
There is absolutely no reason not to inform the ECB about something like this, and a lot of reasons you would give them a heads up.
The facts that we didn’t, is not just an indication of the cluelessness of Bessent; but also that no competent people are left below him who would make sure that things are done the right way. That lack of competence in itself is a bad sign for our ability to handle the upcoming crisis. Ignorant, incompetent nincompoops are not who you want steering the ship when you are heading into a storm.
I bet Bessett informed a bunch of friends of Trump who engage in insider trading. ECB? I guess Trump is destined to see a PRC-EU alliance after all.
Except, but, ’cause… EVERYBODY knew we had sold euros for yen! It was in all the press accounts. The Europeans didn’t say anything that wasn’t in the press.
We were arrogant. They weren’t. So we accuse them. ‘Cause we’re arrogant. And because, just possibly, nobody at Treasury these days knows enough about how things are done to realize WE DON’T SELL EUROS WITHOUT ASKING! At least, nobody with a voice knows this stuff.
‘Bessent is just a pugnacious, ignorant sh*theel’. True but his boyfriend likes his money!
And you gotta wonder if Jay Powell would have acquiesced to Bessent’s demands without giving a heads up to his counterpart, Christine Lagarde, at the ECB.
This debacle illustrates that Warsh is just a tool of the White House.
It is just another demonstration of Warsh being new on the job and not qualified. That is probably the biggest damage from this whole episode. He demonstrated to the whole world that Mr. Clueless is in charge of the US central bank. We will not have the credibility we need when the big wave hits.
Odds are, as soon as the Fed got the order from Treasury, the desk had to start selling euros; no useful delay. The ECB would not have known any earlier, just more politely, if Powell were still Chair. ‘Cause Bessent is not just a jerk to his international colleagues, he’s a jerk to all of his colleagues.
No, it is absolutely false that the desk had to start selling euros instantly with no delay. Maybe they had to to buy yen quickly, but Bessent isn’t the boss of the Fed. And there was no rush to sell euros without a heads up to the ECB. The Fed has a balance sheet of over $6 trillion. They as no panic necessary to sell $10 billion of euros.
The sale of euros was in the press but only after the transactions had already occurred. That’s no way to run a central bank.
What is the matter with you? Defending Bessent and Warsh? Sometimes I wonder where your head is at.
Agree, buying Yen doesn’t have to be linked to selling another currency. There probably was an exchange rate stability argument for selling some Euro’s, but no urgency (or connection to buying of Yen). Although its hard to imagine that level of idiocy in Bessent and Warsh; its almost as if they were saying “we like Japan better than EU; so we are buying Yen and selling Euro’s”. Maybe the Orange Idiot was involved in this?
Talking to the ECB before either of those transactions would be the competent way to handle it. The ECB might even have decided to take a few billion of the Yen buying off our shoulders, to get a little more weight behind the support for the Yen (making it less likely that anybody would dare to speculate against the Yen).
Making sure the ECB know about the sale of Euro’s before the market finds out is also in everybody’s interest. When the next crisis arrive it will be very important that everybody know, that they will know, what everybody else is doing. When shit hits the fan you don’t want everybody to act in a panic on what they think that everybody else probably maybe will be doing.
Agreed, the right thing to do is to ask the ECB, or get the ECB to intervene. They almost certainly would have; there is a long tradition of intervening in one’s own currency at the behest of another central bank. It is bizarre that Treasury did what it did.
josephs assertion that the Fed “absolutely” had the discretion to tell the ECB is, however, probably a figment of joseph’s ego. Most of the rules for interagency operation are laid out in persnickety detail, and given the billions involved in currency intervention, the risk associated with blabbing is enormous. The Fed either has discretion or it does not. joseph claims to know that they do. I strongly suspect the Fed does not.
Ivan: “Agree, buying Yen doesn’t have to be linked to selling another currency.”
Right. And the reason why is that normally this is not done through the Fed at all. This is a fiscal, political operation and the Fed shouldn’t be involved at all. The Treasury has its own $200 billion Exchange Stabilization Fund to handle these sorts of things. But Bessent didn’t like how that would make him look so he asked Warsh at the Fed to do it for him. Unlike the Treasury which can just spend the dollars from the Stabilization Fund, the Fed has to balance its asset sheet so if it buys yen it has to sell something else — euros in this case.
The Fed shouldn’t have been involved in this transaction at all. Bessent bullied Warsh into doing the dirty work for him and Warsh dutifully complied. So much for Fed independence. And the fact that Warsh failed to notify the ECB is just the icing on the nasty cake. This transaction never would have happened under Powell.
Macroduck is totally wrong about the press knowing about it. When it leaked that Bessent was going to buy yen, everyone assumed it would be the normal route of spending dollars from the Treasury’s Exchange Stabilization Fund. It came as a complete shock to everyone when it turned out the Fed was involved which required selling one asset to buy another asset on orders from the Treasury.
Absolutely false. Really? You know that for a fact? Tell me, where did you get that “fact”?
Here’s the thing…I’ve never worked at the Fed, but I was for many years in direct contact with Fed officials. I also worked on interagency operations with Treasury, the FBI, Customs and INS when I was at State. When engaged in interagency operations, I never had the discretion to inform anybody of anything that was not explicitly permitted by the other agency. So I’m curious, oh all-knowing joseph, where are you getting your “absolutely not” information? ‘Cause I think you’re just making stuff up.
So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.
Macroduck: “So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.”
Do you ever listen to yourself talk? The Fed must ask for Treasury’s permission in their own operations?
The Fed never should have been involved in these transactions to begin with. The Treasury has their own $200 billion fund dedicated to this purpose. It’s the same Exchange Stabilization Fund that Bessent used to buy $20 billion of Argentine pesos last year to bail out Trump’s MAGA buddy Javier Milei.
But Bessent didn’t want the visibility of selling US dollars so he bullied Warsh into doing his dirty work for him on the down low. And Warsh complied dutifully to his orders from Treasury. In the past the Fed has always operated openly and transparently, saying exactly what they are doing and why. Those days are over.
Once again — “”So tell me how you know that the Fed, which operates entirely as Treasuries agent in currency intervention, had either the discretion, or Treasury’s permission, to spill the beans.
The Fed needing “Treasury’s permission” to explain what they are doing and to maintain good relations with their central bank allies? The Treasury issuing orders to the Fed on what it should sell and buy? And to keep it all a secret? Do you listen to yourself talk?
Job report from today is dismal, only 26k jobs per month since Feb 2025.
Either we found a way to grow GDP 2-3% without adding jobs (where will the added consumption come from?), or there’s a problem in our accounting.
Some jobs are more value-added creating than others. Data center construction is a big lift to GDP, and much of domestic value added is construction workers, electricians and plumbers, along with chip designers. Add in lawyers and financiers, who are also a big part of AI at this stage. Here are a couple of ways of looking at intellectual property, to give a flavor of what may be driving the accounting anomaly you have in mind:
https://fred.stlouisfed.org/graph/?g=1XQSx
That probably can’t continue, nor can the work for plumbers and electricians.
I write ” ‘Cause Bessent is not just a jerk to his international colleagues, he’s a jerk to all of his colleagues.”
You write “Defending Bessent and Warsh? Sometimes I wonder where your head is at.”
My head is at getting the facts right. I don’t see how the facts defend either Bessent, who messed up, or Warsh, who just allowed the Fed to do what it always does when Treasury asks for intervention. I do wonder, though, where your head is. You’re willing to pretend to know things you don’t know, simply to say mean things about Warsh and Bessent?
You’ve taken a fair number of shots at me, and you’ve always been wrong. Once in a while, you’ve made the attack personal, and you’re coming pretty close again. What’s up with you? I’m pretty sure I’ve never peed in your cornflakes.
Macroduck: “Warsh, who just allowed the Fed to do what it always does when Treasury asks for intervention.”
Sorry, but you have no idea what you are talking about. It is rare for the Fed to directly intervene in currency exchanges except in some sort of extreme international crisis. Normally, that’s the job of the Treasury’s Exchange Stabilization Fund. The Fed maintains the Treasury’s bank account. Yes, the Treasury directs the Fed how to distribute the money in its bank account, the same way the Treasury directs the Fed to pay all of the other bills of the US government. The Fed is just the banker the same way you use your bank to pay your bills by writing checks on your account. That’s the normal method method of exchange stabilization. The Treasury tells the Fed to spend money from the Treasury’s Stabilization Fund account to buy a currency. It’s not the Fed’s intervention, they are just the agent. It’s supposed to be the Treasury’s intervention.
But that isn’t what Bessent did in this case. He directed the Fed to use the Fed’s own assets to buy yen, not the Treasury’s assets. That’s simply not the way it is normally done. And of course, if the Fed is using its assets to buy yen, it has to balance its account by selling some other asset, in this case euros. The Treasury giving orders to the Fed as to what to do with its balance sheet would have never happened under Powell.
The policy of a strong or weak dollar vs the yen is an executive branch policy decision, not the bailiwick of the Fed. Bessent was just worried that US Treasury rates would go up if the Japanese starting selling off dollars. This was not an international crisis. It was an embarrassment for Trump. And in the case of an international crisis, the Fed closely coordinates with allied central banks, not through the back door on the sly.
No this isn’t what the “Fed always does when the Treasury asks for intervention.”