Ker-Powell! To The Liberal World Order

Authored by Michael Every via Rabobank,

President Trump just landed another comic-book punch on Fed Chair Powell: 

“”Pre-emptive Cuts” in Interest Rates are being called for by many…. there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already “lowered” seven times. Powell has always been “Too late”, except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?”

To be honest, Trump is saying many of the same things that many of those covering the Fed in markets are too – just far less politely; and very inappropriately in the eyes of those same commentators… because they are allowed to criticize an independent central bank and take market positions to bend it to their will, but politicians are obviously not. 

That’s part of the Liberal World Order (LWO).

And how did that work out?

Pope Francis died on Easter Monday, his last speech after having met US Vice President Vance having stated: “How much contempt is stirred up at times towards the vulnerable, the marginalised, and migrants. I appeal to all those in positions of political responsibility in our world not to yield to the logic of fear which only leads to isolation from others, but rather to use the resources available to help the needy, to fight hunger and to encourage initiatives that promote development.” President Trump will attend the funeral in Rome, expected by April 27, then the world has another key election to focus on.

That’s as Canada’s and Australia’s white smoke looms as both sweat about the end of the LWO. In Oz, ridiculously, it’s still all about housing. Just as silly, Politico asks ‘Could Canada join the EU? Unlikely … but not impossible’ –as if ‘European’ in European Union doesn’t mean anything, and the US would just watch that happen without acting vs. it– and as Canadian PM Carney says he wants to increase federal spending by 1% of GDP for the next four years to ‘Trump-proof’ the economy if he wins. As if that is possible either.

The chief of the World Economic Forum also just stood down with immediate effect – but there won’t be any election for his successor, just a search committee. That’s orderly, and perhaps worldly, but doesn’t seem very liberal.

Trump has posted about the justice system again, claiming there wasn’t any court action to stop population flows in one direction, but there is lots to stop it going the other way. We wait to see what the Supreme Court has to say about the Alien Enemies Act of 1798, but informed speculation is a ruling may say the government can deport people if it gives seven days’ notice.

Last week, the US Trade Representative released his final port fees for Chinese-built ships journeying to the US. We will publish a report on that later today but suffice to say while many players can avoid the worst of its impact, China can’t. On US-China trade war, it’s full steam ahead.

China is openly threatening repercussions for any country that strikes a trade deal with the US with negative implications for it, which any trade deal the US signs now must logically have. In short, it’s choose or be chosen time, as I’ve warned. So, what are *you* going to do? “Rate cuts?”

Underlining the sense of desperation evident in some intellectual circles, The Atlantic claims Hitler’s Terrible Tariffs “by seeking to “liberate” Germans from a globalized world order,…sent the national economy careening backwards”. The messaging is clear.

Yet that claim has no basis in historical fact: Hitler used lots of economic statecraft tools pre-WW2, but tariffs were not his primary vector.

Foreign Affairs, however, argues ‘The Global Trading System Was Already Broken… But There’s a Better Way to Fix It Than a Reckless Tariff Regime.’ 

Its suggestion is the US finds large like-minded economies who agree to run balanced trade together and builds a new system from there, rather than everyone shouting, “Because markets!” while ignoring their own and others’ mercantilism in a system that IS broken. 

Which some think *is* the US plan if you join the dots.

On which note, US Vice-President Vance was just invited to Indian PM Modi’s home; India placed a 12% tariff on Chinese steel; and the talk is of a “roadmap” to elevate US-India relations, making a mockery of the BRICS as an anti-US wall, and perhaps moving us closer to the foundation stone of a new global architecture. Indeed, it seems a race between India, Japan, and possibly Vietnam to strike the first deal with the US… and then face the wrath of China.

Conversely, French President Macron reportedly claims Europe is ready for the burden of the global reserve currency…. which in the current broken system means a much higher euro, a much larger trade deficit, much less industry and rearmament, and much more inequality. Unless Europe thinks it can have a global reserve currency while running balanced trade or trade surpluses… which sounds like the US plan everyone is now decrying, “because markets!”

I continue to argue Europe is in NO way ready, or willing, to take on that burden, and any market ‘favouritism’ towards the Euro is a gift it won’t want to accept once it sees the euro pro quo. Meanwhile, if Europe is the global future, why is the ECB and EU Commission so worried about the issuance and use of US dollar-backed stablecoins there? Capital flight?

Gold just hit another record nominal high at $3,445 before dipping slightly. While most are getting an eerie feeling about that, and some note US Treasury yields are rising as the US dollar is falling, muttering about Trump and “the end of US exceptionalism”, very few truly grasp that the global system, not just global trade, is collapsing – or being collapsed. That extends way beyond what we are seeing so far: and how well do you think smaller economies and powers will fare as it does vs. the US? Badly. In short, shorting the dollar comes up short when one thinks about it that way.  

Will the Spring IMF, World Bank, and G20 finance ministers’ meetings this week see a Mar-a-Lago Accord or just plain discord as everyone –including central banks– realises they won’t be singing from the same hymn sheet, or with the same singers, much longer? Recall the collapse of central bank coordination, centred on gold, was a pivotal factor in the end of two previous Liberal World Orders in the early- then mid-20th century. As was geopolitics…

…as Russian President Putin signed a 20-year Strategic Partnership Agreement with Iran: after no Ukraine ceasefire or peace deal, that looks like no ‘Noxin’ (reverse Nixon) win for Trump on that front either.

Meanwhile, the Pentagon looks in chaos, with the White House saying it’s trying to reject Secretary of Defence Hegseth, who still has Trump’s backing. Don’t think this isn’t related to Iran, and who wants jaw-jaw vs war-war –and not necessarily the way you might think– as Israel rehearses for a strike on Iran and Hezbollah, the latter still refusing to disarm as Lebanon’s government and the UN wishes, and instead attempting to entrench itself deeper.

So, yes, a lot going on: even more than President Trump saying something rude about Powell. More like a US Ker-Powell! to the entire Liberal World Order.

Week ahead

Today has the ECB survey of professional forecasters, to delight… professional forecasters of the ECB, Eurozone consumer confidence, and the ECB’s Lagarde on CNBC. There is also the Philly and Richmond Fed services surveys and the Fed’s Jefferson and Harker speaking.

Wednesday: has global services and manufacturing PMIs, UK public sector borrowing, and the ECB’s wage tracker, then the Fed’s Beige Book and US new home sales and building permits.

Thursday: it’s the German IFO survey, US durable goods, initial claims, and existing home sales.

Friday: sees UK and Canadian retail sales, and US Michigan consumer confidence.