There’s a line that came to mind this week. Something a wise man once said: “Narratives, like currencies, only work if people believe in them.”
Well, belief is wobbling.
Let’s start with something rather curious. Most didn’t notice but a few days ago the cost of credit default swaps on U.S. government debt quietly rose to levels we haven’t seen since 2008. For the uninitiated, that’s how much it costs to insure against a U.S. default. Not Argentina. Not Sri Lanka. America.
And then yesterday came a sharp ruling from the U.S. Court of International Trade. It declared that Donald Trump’s use of emergency powers to impose sweeping tariffs was, in plain English, unlawful.
This ruling is a reminder that even empires can be told they’ve gone too far. Sometimes by judges. Sometimes by the bond market. And sometimes by both at once.
You’ll likely hear some noise in the coming days about Trump appealing the ruling and trying to revive his tariff powers with some dusty legislation from decades ago. And of course, the usual dance has resumed between Washington and Brussels. Trump is threatening a 50 percent tariff on European goods if he doesn’t get a deal by July.
But here’s the bit that really caught our attention.
All this market mayhem, rising default insurance costs, softening Treasuries, political brinkmanship, and legal slapdowns, is happening at the same time as U.S. interest payments exceed $1.1 trillion. That is more than America spends on defence.
And yet, the Federal Reserve keeps repeating the same tired refrain. “The economy is strong. The labour market is solid. No need to act.” Really?
This week’s GoldCoreTV takes a closer look at what happens when central bankers start believing their own fairytales. When the warning lights are flashing red, but no one inside the building is looking at the dashboard.
The question we ask is simple. What happens when the world’s most powerful central bank can’t tell the truth from the story it’s been telling itself?
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