Authored by Ron Paul via the Ron Paul Institute for Peace and Prosperity,

News this week that Elon Musk will soon be departing his “Department of Government Efficiency” (DOGE) is a grim reminder of what happens when you challenge big spending DC. Unfortunately, the lesson once again is that when you challenge the empire, the empire eventually strikes back.

President Trump rode into office with the help of Elon Musk’s ambitious plan to cut two trillion dollars in spending and slash useless and bloated government bureaucracies. 

Opinion polls demonstrated the huge popularity of the “Department.” 

Americans were excited when DOGE came to DC.

The exposure of the real harm being done to the country by agencies like USAID and others reinforced the idea that much of the “Federal bureaucracy” was simply not needed. Although Musk became a figure of hate for the entrenched special interests, to the large chunk of America forced to pay for Washington’s excesses he became a hero.

Many in Congress, seeing its popularity, actively embraced DOGE. Suddenly those who helped us rack up 37 trillion in debt were talking about making huge cuts and posing for photos with Musk.

Unfortunately, after the photos were taken and the hoopla had died down, Congress returned to doing what it usually does: nothing. There is no way for a DOGE to succeed without the Legislative Branch enshrining those cuts in legislation. But when the massive “Big Beautiful” spending bill was introduced, the spending cuts were nowhere to be found.

In the end it was the Beltway addiction to the global US military empire that may have hammered the final nail in DOGE’s coffin. The “Big Beautiful” spending bill actually increased military spending even after President Trump hinted that a 50 percent cut was possible.

Defense Secretary Pete Hegseth bragged about presiding over the “first” trillion-dollar defense budget. Starting a war on Yemen – at over a billion dollars a month – and saber rattling over Iran are the most obvious evidence that the empire has struck back. And of course the DC hawks want to “confront” China.

This isn’t the first time a populist, popular movement to tame the Beltway beast was embraced then defeated by that same beast. The “Tea Party” movement was launched in December, 2007, with volunteers supporting my 2008 Presidential campaign holding a record-breaking 24 hour “money bomb” on the anniversary of the 1773 Boston Tea Party.

Americans sick of deficit spending, over-reaching government, and the costly and counterproductive US military empire overseas, joined together to demand change. The “money bomb” success got Washington’s attention – money is the lifeblood of the political class – and before too long politicians of all stripes declared themselves to be part of the “Tea Party.”

They loved the popularity of associating themselves with the “Tea Party.” But actually cutting government? Not so much.

The first thing these newly-minted “Tea Party” members rejected was our demand for an end to the unsustainable, bloated military budget and our aggressive foreign policy. Eventually they backed away from other spending restrictions and within a few years the “brand” was diluted and tossed away.

What is the lesson here? Is it all futile? Hardly. The popularity of DOGE shows that Americans still want a much smaller government. That is great news, and the country owes a debt of gratitude to Elon for reminding us of this. But until Americans elect Representatives who have the courage to follow through beyond photo-ops, we will sadly continue down the path toward bankruptcy and collapse.

President Trump has responded to comments by Mexican President Claudia Sheinbaum, who said that she rejected an offer by President Trump to let the US Army hunt cartels on Mexican soil.

On Saturday, Sheinbaum told supporters in Eastern Mexico about Trump’s offer;

“In one of the calls, the U.S. President Donald Trump said it was important for the U.S. Army to enter Mexico to help us in the fight against drug trafficking. And I want to say that’s true. In some of the calls, he said, quote, ‘How can we help you fight drug trafficking? I propose that the U.S. Army come in to help you.’ And you know what I told him? ‘No, President Trump, the territory is sacrosanct. Sovereignty is sacrosanct. Sovereignty is not for sale. Sovereignty is loved and defended.'” she said, one day after Trump claimed “She is so afraid of the cartels she can’t even think straight.”

On Sunday, Trump told reporters aboard Air Force One that he made the offer because the drug cartels were “horrible people” who caused thousands of deaths.

“If Mexico wanted help with the cartels, I would be honored to go in and do it,” he said.

When asked if he was disappointed that Sheinbaum turned down his offer, Trump replied, “I think she’s a lovely woman. The president of Mexico is a lovely woman, but she is so afraid of the cartels that she can’t even think straight.“

“La presidenta de México es una mujer encantadora, pero tiene tanto miedo de los Cárteles de la Droga que no puede pensar bien”

Trump sobre Sheinbaum pic.twitter.com/VUnoUddvls

— GONZALO OLIVEROS (@goliveros) May 5, 2025

Trump’s proposal was first reported last week by the Wall Street Journal, which detailed tensions between Trump and Sheinbaum towards the end of a 45-minute  telephone conversation on April 16.

While both countries have cooperated on certain security issues, including allowing U.S. drone flights to identify fentanyl labs, Sheinbaum has consistently rejected any form of military intervention from the United States in Mexican soil. “We don’t accept invasions or interference,” she said last month. “We are not a protectorate or colony of any foreign country.”

However, some in the Trump administration are reportedly considering launching drone strikes on drug cartels in Mexico anyway, the Crisis Group detailed last week. If the decision is ultimately carried out , it would be the first time since 1914 that the U.S. conducts unilateral military action in Mexico. “Some officials in Washington appear to be laying the groundwork for military action against drug trafficking organizations in Mexican territory, with – or without – Mexico’s consent,” the Crisis Group said in a passage of its analysis from last week. –Latin Times

“We can work together, but you in your territory and us in ours,” said Sheinbaum.

As the Epoch Times notes further, in a Jan. 31 interview with Fox News, U.S. Defense Secretary Pete Hegseth left open the possibility of U.S. military action in Mexico.

Responding to Hegseth’s comments just days later, Sheinbaum insisted that her country’s sovereignty be respected.

In early February, Sheinbaum agreed to mobilize 10,000 Mexican troops to assist in an expanded effort to counter cross-border trafficking. Trump agreed to delay a planned 25 percent tariff on Mexico as a show of goodwill following Sheinbaum’s troop deployment decision.

By mid-February, the U.S. State Department designated six Mexican cartels as foreign terrorist organizations, along with the El Salvador-based MS-13 and the Venezuela-based Tren de Aragua.

The terror designations provide more avenues for the U.S. government to target the finances of these transnational criminal organizations. They also raise the possibility of military action.

Following the terror designations, Sheinbaum reiterated her opposition to any U.S. intrusion into Mexico’s territory.

Mexican authorities arrested Humberto Rivera, a suspected top regional leader of the Sinaloa cartel, in February, in coordination with the United States.

The Mexican government also welcomed U.S. Army Green Berets to their country in February as part of a joint training exercise with the Mexican Marine Corps.

In the wake of the unprecedented Sunday direct hit on Israel’s Ben Gurion international airport by a ballistic missile launched by the Houthis of Yemen, Israeli leadership has vowed to hit back hard. “The attack on Ben Gurion Airport has removed all restrictions from our perspective,” Israeli Defense Minister Israel Katz has stated. He emphasized, “Whoever harms us will be harmed sevenfold” – amid an emergency meeting of Israel’s security cabinet. Al Jazeera and regional media say that response has come on Monday. There are reports that 30 Israeli jets are bombing Yemen’s main port, along with US military assistance:

Al Jazeera’s Ali Hashem has reported that Houthi-affiliated media has said a total of nine sites have been hit in Hodeidah.

Israeli media has reported both at least 30 Israeli fighter jets were involved in strikes on Yemen, which come a day after the Houthis attacked the Ben Gurion Airport in Tel Aviv, with a missile landing near the facility.

A senior US official has said the raids were being carried out in coordination with the US. Al Jazeera could not immediately confirm that information

⚡️Footage from the Israeli bombing of Hodeida port in Yemen pic.twitter.com/mVnILwuZS9

— Middle East Observer (@ME_Observer_) May 5, 2025

Israeli Broadcasting Corporation said late Sunday the Israeli army was preparing for a wide-scale military response, also as Prime Minister Benjamin Netanyahu has called out Iran for giving support to the Ansarallah movement (Houthis). 

“We, along with the entire world, are under threat from the Houthis. We will not tolerate it and will take very strong retaliatory action against them,” Netanyahu told Cypriot President Nikos Christodoulides, who is currently in Israel on an official visit.

A readout continued, “We will always remember that they acted under the orders and with the support of their patron — Iran.” The prime minister stated further, “We will do what needs to be done to deliver a proper warning to Iran that we cannot tolerate such acts.”

Over the weekend Netanyahu also posted to X a prior warning from President Trump which stated, “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN, and IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!”

Crucially, Israeli media reports citing military officials confirmed that the US-supplied THAAD missile as well as the Arrow defense system failed to intercept the inbound ballistic missile. Israel’s defenses tend to be most effective for the type of shorter-range missiles launched by Hamas and Hezbollah.

Social media images showed the missile impact on the airport grounds Sunday…

Direct impacts reported in the vicinity of Ben Gurion Airport following the missile launch from Yemen. pic.twitter.com/i87hjoWG6t

— The Cradle (@TheCradleMedia) May 4, 2025

At least six bystanders were injured – some hit be debris ejected from the site – but none of them seriously. The projectile hit beside a road near a Terminal 3 parking lot, and opened a diameter in the ground of tens of meters wide as well as tens of meters deep.

Authored by Helen Partz via CoinTelegraph.com,

OpenAI CEO Sam Altman’s digital identity project, World, formerly known as Worldcoin, faces challenges in Indonesia after local regulators temporarily suspended its registration certificates.

The Indonesian Ministry of Communications and Digital (Komdigi) has halted the Electronic System Operator Certificate Registration (TDPSE) for World and World ID over suspicious activity and alleged registration violations, the ministry announced on May 4.

After the suspension, Komdigi plans to summon World’s local subsidiaries, PT Terang Bulan Abadi and PT Sandina Abadi Nusantara, to provide clarification on the alleged violations, it stated.

According to a preliminary investigation, World’s PT Terang Bulan Abadi was allegedly operating without TDPSE, while PT Sandina Abadi Nusantara — the subsidiary World was using for providing its services — is allegedly involved in legal misrepresentation.

Indonesian law requires registration by all digital service providers

In the statement, Komdigi emphasized that all digital service providers in Indonesia must receive electronic registration in accordance with local laws.

Additionally, using another entity’s registration is considered a major breach of Indonesian digital operations law, the authority noted.

“Worldcoin services are recorded using TDPSE in the name of another legal entity, namely PT Sandina Abadi Nusantara,” Alexander Sabar, the Komdigi’s director general for digital supervision, said in the announcement, adding:

“Noncompliance with registration obligations and the use of the identity of another legal entity to carry out digital services is a serious violation.”

Community action required

According to Sabar, World’s temporary suspension in Indonesia is a measure taken to prevent potential risks to the community.

He mentioned that the digital ministry is committed to overseeing the digital ecosystem fairly and strictly to ensure the security of the national digital space.

Alexander Sabar is the head of Indonesia’s newly established Digital Space Monitoring Directorate General. Source: Komdigi

Sabar said proper supervision would require active participation from the community. “We invite the public to help maintain a safe and trusted digital space for all citizens,” he said. “Komdigi also appeals to the public to remain vigilant against unauthorized digital services, and to immediately report suspected violations through the official public complaint channel.”

The community response has been divided over the action by Komdigi.

“Good job Indonesia — at least somebody is standing up to that scam,” one Reddit user wrote.

Others fired back, hinting at potential benefits stemming from World’s offering in Indonesia for the general public.

“If giving up your iris biometrics means you can feed your loved ones for a few weeks, that might be a trade worth making. In the end, it all depends on what matters most to you,” another Redditor said.

World’s latest news from Indonesia follows World’s debut in the United States in May 2025, with the platform rolling out its digital identity tech in six cities initially.

A number of global regulators were pushing back on World’s operations since its launch in July 2023, with governments like Germany, Kenya and Brazil expressing concerns over potential risks to the security of biometric data passed by users.

By Charles Kennedy of OilPrice.com

U.S. crude oil supply will rise more slowly than expected for the rest of 2025 and in 2026 and peak as early as this year, as WTI benchmark prices below $60 per barrel are testing the breakeven point of shale production, energy flows intelligence firm Kpler said on Monday.

Kpler cuts 2025 crude forecast

Kpler has lowered its US crude supply forecast by 120,000 to 170,000 barrels a day for the rest of 2025 and into 2026, as weaker prices threaten to slow shale production. Brent is now expected to average $60 to $65 a barrel from the fourth quarter… pic.twitter.com/9OGwLd75Sj

— Kpler (@Kpler) May 5, 2025

Oil prices have slipped by more than 15% since the beginning of April as the market fears recessions from the U.S. tariffs and oversupply from the aggressive production hikes from OPEC+. Prices dipped early on Monday after the OPEC+ group decided on Saturday to raise collective output by 411,000 barrels per day (bpd), nearly triple the volume originally scheduled.

The U.S. benchmark, WTI Crude, was trading at about $57 per barrel—a price point that is below the breakeven levels for many shale wells, especially those outside the prime acreage and hottest spots in the Permian.

With the low oil prices, Kpler has now cut its U.S. crude supply forecast by 120,000 barrels per day (bpd) to 170,000 bpd for the rest of 2025 and into 2026, “as weaker prices threaten to slow shale production.”

“With WTI, the main US benchmark crude, now near breakeven levels for new wells, producers are likely to cut back drilling,” said the analysts at Kpler.

U.S. shale producers are the most reactive to oil price changes and they are typically quick to follow the price trends. Lower margins are prompting caution among the American oil industry, Kpler noted.

The latest OPEC+ move to fight for market share and discipline U.S. shale is putting pressure on U.S. crude output, said Kpler, which now expects America’s crude production to peak in 2025 and gradually decline after that.

Despite steady near-term activity, growth is slowing in the U.S. shale patch, and U.S. crude output is set to peak this year, Kpler noted.

On Sunday night Israeli Prime Minister Benjamin Netanyahu convened his security cabinet, after which officials told local media that the cabinet approved expanding anti-Hamas operations to “conquering Gaza, holding the territories.“

The plan, as cited in The Times of Israel, specifically calls for “conquering of Gaza” and retaining the captured territory, and follows on the heels of weekend reports that tens of thousands of extra reservists have been called up.

IDF Chief of Staff Lt. Gen. Eyal Zamir said of the plan it will see the IDF “take control of territory in Gaza, move the civilian population toward the south, attack Hamas, and prevent the terror group from taking control of humanitarian aid.”

It apparently has received some pushback from IDF commanders. Gen. Zamir himself has warned government ministers that this escalation plan could endanger the remaining hostages held in the Palestinian enclave.

“In a plan for a full-scale maneuver, we won’t necessarily reach the hostages,” Zamir was quoted as saying in a meeting with top officials. “Keep in mind that we could lose them.” Concerning the twin aims of reaching the hostages while defeating Hamas, the IDF chief called them “problematic in relation to each other.”

“This week, we are sending tens of thousands of draft orders to our reserve personnel to intensify and expand our action in Gaza. We are increasing the pressure to return our people [held hostage] and defeat Hamas,” he said.

But the plan is not expected to be enacted until after President Trump’s expected visit to the Middle East next week:

A senior Israeli defence official said on Monday there was a “window of opportunity” for a hostage deal in Gaza during US President Donald Trump’s visit to the region next week.

However, Reuters reports, if no deal is agreed Israel would begin its new operation in the enclave.

“If there is no hostage deal, Operation ‘Gideon Chariots’ will begin with great intensity and will not stop until all its goals are achieved,” he said, following a decision by the security cabinet to approve an expanded operation.

Defense Secretary Pete Hegseth will be in Israel May 12, while Trump will be in the Gulf. Along with visiting Saudi Arabia, “Trump will also visit Qatar and the UAE but is not currently expected to visit Israel,” writes Axios.

Among the total 251 Israeli and foreign hostages abducted on October 7, 2023 – there are 59 still remaining, and of these at least 35 have been confirmed dead. Netanyahu recently admitted that only up to 24 hostages are believed alive.

Outrage and controversy has been raging inside Israel, especially among hostage victims’ families, following remarks of Netanyahu wherein he strongly suggested that victory over Hamas is the top priority – and not the rescue of the captives. 

“We have many objectives, many goals in this war. We want to bring back all of our hostages,” Netanyahu had said at an even. “That is a very important goal. In war, there is a supreme objective. And that supreme objective is victory over our enemies. And that is what we will achieve,” he added. 

But just prior to Sunday’s cabinet meeting, he tried to soften the words, describing both the defeat of Hamas and rescue of the hostages as paramount.

59 hostages remain, and the IDF chief has warned those still alive will be at risk amid an expanded operation…

He posted to X that his administration is focused on two missions: “One, to bring our hostages back. Two, to defeat Hamas. Hamas will not be there, you have to understand this.” He emphasized, “In wars, you reach a decision — victory.”

The surge in calling up reservists continues, meanwhile, as they are increasingly needed as Israel’s military once again becomes more engaged in places like Syria, Lebanon, the Golan Heights, and security crackdowns in the West Bank. There’s also the increasing prospect of direct military action against the Houthis of Yemen, after the Sunday ballistic missile attack on Ben Gurion international airport.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Interest rates are linked to inflation, but they’re also linked to risk.

As a result of recency bias, where we assume the recent past is a permanent state of affairs, many believe near-zero interest rates are “normal.” They aren’t. As the chart of 10-year US Treasury yields–a proxy for interest rates throughout the economy–illustrates, rates in the 3% or lower were an anomaly that only occurred in the relatively brief period of 2011-2022.

For the five decades between 1960 and 2007, interest rates of 4% and higher were the norm. These included the glorious decades of stable growth and rising stocks / housing valuations–the 1960s, 1980s, 1990s and up to 2007, just before the financial crisis of 2008-09.

For 33 of those years, interest rates of 5.75% or higher were the norm, from 1967 to 2000. No one said that the economy would collapse if interest rates didn’t drop to 3%, for it was understood that super-low interest rates would ignite inflation and incentivize destructive speculative excesses.

For the 25 years between 1970 and 1994, rates between 5.75% and 8% were normal. The 10-year Treasury yield is now around 4% to 4.2%–far lower than what was considered normal for 25 years.

It’s long been noted that interest rate cycles tend to run for decades, not years. Interest rates rose for around 25 years, and then declined for 40 years from 1981 to 2020–a period that was longer than average, thanks to the dominance of central bank monetary policies, or perhaps more accurately, the growing dependence of economies on extraordinarily low interest rates for their “growth.”

If history is any guide, interest rates will rise back to the historic range between 5.75% and 8% and linger there for the better part of two decades. Alternatively, rates break above that range and skyrocket into the realm of debt / inflationary crises.

The return of Treasury yields to the historically “normal” range of 4% and higher has doubled the Federal interest payments on Federal debt. It was easily predictable that super-low interest rates would encourage an orgy of borrowing and spending of all that “nearly free money,” which is precisely what happened.

The interest paid by households has also soared for the same reason: not just because interest rates rose, but because the borrowed money (debt) being serviced exploded higher due to low interest rates.

Higher debt / interest payments squeeze out other spending. Debt payments come first, or the entity defaults on its debts and enters bankruptcy–a bankruptcy that tends to bankrupt the lenders who will be lucky to collect pennies on every dollar they lent out.

Households are going to have a hard time servicing debt and spending more as rates rise, for wage earners’ share of the economy has been in a freefall for 50 years. Less income + higher debt service payments = lower discretionary income to spend + inability to borrow more money to spend = recession.

Interest rates are linked to inflation, but they’re also linked to risk. The cost of money isn’t simply tied to inflation expectations–it’s also tied to speculative excesses blowing credit-asset bubbles which implode, destroying the phantom wealth generated by the bubble.

The lenders that survive the implosion are wary of lending money to all but the most conservative, risk-averse, creditworthy borrowers backed by ample collateral. That excludes the majority of households and enterprises.

*  *  *

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Authored by Matt Margolis via PJMedia.com,

When President Trump returned to the White House, he didn’t just get to work cleaning up Joe Biden’s mess—he set his sights on dismantling decades of entrenched bureaucratic bloat, waste, and corruption. With a relentless series of executive orders and policy directives, Trump reignited his mission to drain the swamp—this time with laser precision and zero patience for the status quo.

Predictably, the left went into full-blown panic mode. Liberal legal groups immediately launched a barrage of lawsuits, cherry-picking friendly courts in a shameless attempt to stall Trump’s agenda. They’re terrified of losing control over the bloated regulatory state they’ve used for years to push policies they could never pass through Congress.

But that strategy just hit a major roadblock. In a landmark ruling on Saturday, the D.C. Circuit Court of Appeals handed the Trump administration a decisive legal victory—one that could fundamentally change how activist judges and forum-shopped cases interfere with executive authority. 

“This is a huge victory for President Trump and his Article II powers granted in the United States Constitution. It’s also a victory for US Agency for Global Media (USAGM) and VOA,” Kari Lake told Fox News Digital. Lake now serves as a USAGM senior advisor to the Trump administration. “We are eager to accomplish President Trump’s America First agenda which has always been to modernize and make our government efficient while cutting waste, fraud, and abuse.”

The appeals court’s 2-1 ruling Saturday emphasized the judiciary’s deference to executive authority in matters concerning federal employment and contractual decisions.

The court noted that the district court likely lacked jurisdiction to interfere with the administration’s personnel actions and funding decisions, particularly regarding grant agreements with non-federal entities like Radio Free Asia and the Middle East Broadcasting Networks.

This ruling  Trump’s March 14 executive order (EO), which aimed to dismantle USAGM operations.

This ruling effectively reins in district courts that have been sidestepping proper jurisdictional channels in cases challenging Trump administration actions. The decision serves as a clear reminder that courts themselves must operate within their prescribed legal boundaries.

According to Margot Cleveland, senior legal correspondent for The Federalist, the D.C. Circuit’s ruling hinges on a critical point: jurisdiction, which has sweeping implications. As Cleveland explains, many of the legal challenges being hurled at the Trump administration involve employment decisions—precisely the kind of disputes Congress has explicitly said federal district courts have no authority to adjudicate.

*  *  *

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The court’s decision also strikes at the heart of a broader legal strategy being used by leftist groups to stymie Trump’s reforms—namely, the claim that the administration is engaging in “wholesale dismantling” of agencies. But as the ruling makes clear, the Administrative Procedure Act was never designed to handle such broad-based political grievances, and Congress never waived sovereign immunity to allow them.

In another key point, the court found that the lower court also overstepped its bounds by trying to restore federal grants—something Congress assigned to the Court of Federal Claims, not the district courts. All told, the decision is a sharp rebuke to the legal overreach being used to obstruct the Trump administration’s agenda.

13/ c) you can’t get around Congress limiting district court jurisdiction by creative pleading of claims under other theories; d) with no bond harm to government will outweigh other harm; e) public has interest in Article III obey Article I.

— Margot Cleveland (@ProfMJCleveland) May 3, 2025

14/14 Final thought: It is next to impossible to reconcile opinion here with same panels refusal to clarify stay in other case involving USAID and grants from legal perspective. Practically: Judge Katas in other case figured decision on merits would be soon enough so no harm.

— Margot Cleveland (@ProfMJCleveland) May 3, 2025

The significance of this decision extends far beyond these specific cases—it establishes clear jurisdictional parameters that could affect dozens of pending lawsuits against Trump administration policies. While the administration won’t prevail in every case, this ruling suggests courts may need to more carefully consider their jurisdictional authority before issuing sweeping injunctions against executive actions.

The D.C. Circuit Court just handed Trump a game-changing victory that will help him clean house in 2025.

‘Soft’ survey data continues to slump into this morning’s Services PMIs as Manufacturing PMIs were weak and Regional Red surveys were a disaster (despite still solid labor market ‘hard’ data)

The S&P Global Services PMI fell from 54.4 to 50.8 (below the 51.4 flash print) in final April data – the lowest since Oct 2023.

The ISM Services PMI rose from 50.8 to 51.6 (well above the decline to 50.2 expected).

So baffle ’em with bullshit is back:

The ISM print was better than all but one expectations…

Under the hood, the picture is not so pretty with Prices Paid at the highest since Jan 2023 (even though New Orders and Employment picked up modestly)…

 “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (51.6 percent) corresponds to a 1-percentage point increase in real gross domestic product (GDP) on an annualized basis,” according to PMI.

The S&P Global US Composite PMI® fell to 50.6 in April, down from March’s 53.5 and its lowest level since September 2023.

“While tariff announcements mean manufacturing dominates the news, a worrying backstory is developing in the vastly larger services economy, where business activity and hiring have come closer to stalling in April amid plunging business confidence,”  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence warns that:

“Business and consumer facing service providers alike, and especially financial services firms, are reporting markedly weaker growth prospects, citing intensifying uncertainty over the economic outlook amid recent tariff announcements and ongoing federal spending cuts.”

“A key area of weakness is slumping exports of services, which is now falling at rate not seen since 2022, but domestic demand is also reportedly waning as confidence slides lower.

But the stagflationary aspects seen in the Manufacturing survey are also showing up in Services…

“Higher prices paid for imports due to tariffs are also driving up service sector firms’ costs, feeding though to higher prices, notably in consumer-facing industries such as restaurants and hotels.

“The resulting bottom line from the services sector is a heightened risk of stalling growth and rising inflation, or stagflation.“

Bad enough news for Fed cuts? Or hot enough stagflation to leave Powell on pause for longer?

By Benjamin Picton, Senior strategist at Rabobank

Australia’s ruling Labor Party was returned to government in emphatic fashion over the weekend, becoming the only first-term government in Australian history to actually increase its numbers in the House of Representatives at its first bid for re-election. The Australian result echoes what we saw a week earlier in Canada, where a centre-left party that had been chronically trailing in the polls just a few months ago suddenly surged to victory. In Australia, as in Canada, the leader of the main centre-right opposition party not only lost the election, he lost his own seat in the parliament.

The return of Donald Trump to the White House looms large in both results and seems to have flipped last year’s dynamic of incumbency being a curse to a new environment where stability is favored and any hints of Trumpian instincts are punished by electors. Nevertheless, while it might be tempting to read this as a uniform embrace of bigger government and globalized trade across the Anglosphere (ex-USA), that might be over-interpreting the signal as there are confounding signs elsewhere.

In England, for instance, things look quite different. Council elections held late last week saw both the ruling Labour Party and the main opposition Conservatives decimated by the right-wing populist Reform party. Reform won 677 out of around 1,600 seats, cementing the party’s position as a genuine third-force in British politics and an existential threat to the Conservative Party in particular. Labour lost control of Doncaster council and was displaced as the largest party bloc in Durham, while areas that have reliably voted Conservative for aeons flipped to Reform.

What to make of these results? Perhaps the most we can say is that a volatile external environment is upending established political norms and, in some cases, established political parties as frustration with politics-as-usual vies against popular revulsion of the leader of the Free World. Local voter profiles will also be a factor here as England particularly tends to lean further to the right than much of the rest of the UK while in Canada the emphatic result papers over rumbling discontent in resource-rich Western Provinces.

Nevertheless, markets are back into risk-on mode with the S&P500 and the NASDAQ closing up ~1.5% on Friday and US 10-year yields poking higher to 4.31%. The Dollar spot index closed above 100 on Friday, but has edged back below that key level this morning following a better than expected US payrolls report on Friday, comments by Trump that tariffs on China would be lowered “at some point” and assurances that he wouldn’t be firing “too slow” Jerome Powell (probably because he can’t).

Crude oil prices have fallen by more than 3% in early trade this morning to see benchmark Brent prices back below $60/bbl. The falls were precipitated by reports that Saudi Arabia could look to increase output even further in response to other OPEC+ producers (particularly Iraq and Kazakhstan) exceeding agreed production levels.

The falls in oil prices are interesting given that tensions in the Middle East have only increased over the last few days. A Houthi missile managed to elude Israel’s Iron Dome to strike just outside the Ben Gurion Airport in Jerusalem, injuring a number of bystanders. Prime Minister Netanyahu said that Israel will respond to the Houthi attack and, critically, to the Houthis’ “Iranian terror masters” at a time and place of Israel’s choosing. Netanyahu’s threat against Iran follows rumours that US National Security Advisor Mike Waltz was fired (at least in part) for coordinating with Israel on plans to attack Iran’s nuclear program even while Trump’s Middle East Envoy, Steve Witkoff, was trying to reach a deal with Iran over the same. 

Will Israel unilaterally attack Iranian nuclear assets? Might they attack the oil facilities on Kharg Island that ultimately bankrolls the Iranian nuclear program? These are non-zero probabilities, but any risk premium for crude is MIA while the market continues to stare down the barrel of substantial oversupply.

Still, Treasury Secretary Scott Bessent will be pleased to see lower energy prices coinciding with the recent strengthening of the DXY and bond yields that show no real signs of threatening the 2023 highs. This happy combination might take the edge off of the price impacts of tariffs, which is timely given an announcement by Donald Trump this morning that foreign films will be subject to a 100% tariff rate. 

Considerable uncertainty over price pass-through from tariffs still exists. Bessent and Trump tell us that exporters will “eat” the cost, but Amazon has conspicuously passed costs through to consumers and there are plenty of anecdotes to be found about purchasing managers halting new orders. In reality the burden will be shared between exporters (via lower prices), importers (via lower margins) and consumers (via higher prices) with a little bit of deadweight loss tacked on just to upset economists. The price elasticity of demand for each product is going to be the critical factor, which makes the foreign film tariff read like an indirect tax on wealthy Democrats. 

How price sensitive are US consumers of French arthouse cinema likely to be?