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Trump Fires BLS Chief: The Argentinisation of American Data | The Market Monetarist
In my three decades as an economist—including 15 years as Chief Analyst for Emerging Markets at Danske Bank—I've seen some truly bizarre economic episodes. I've watched Argentina default on its debt. I've analysed Turkey's monetary policy madness under Erdoğan. I've observed Venezuela's descent into hyperinflation. But what happened today in the United States might top…
The EU-US Trade Deal: A European Victory Disguised as Defeat | The Market Monetarist
I must say that the commentary surrounding Sunday's so-called trade agreement between the US and EU has been almost universally "Trumpian" in its analysis. Nearly every commentator emphasises that Trump has "won" whilst the EU has capitulated. From Frankfurt to Paris, from Dublin to Copenhagen, the narrative is one of European defeat in the face…
The Forgotten Mandate: How “Moderate Long-term Interest Rates” Exposes the Fed’s Achilles Heel | The Market Monetarist
The Hidden Third Mandate The Federal Reserve Act may soon create serious problems for Jerome Powell - or perhaps I should say "Too Late" Jerome Powell, as President Trump has taken to calling him. Most economists discuss the Federal Reserve's "dual mandate"—to secure both "stable prices" and "maximum employment". The Fed has interpreted this more…
The Return of the Bond Vigilantes: Why 5% US Treasury Yields Signal Trouble Ahead | The Market Monetarist
After Trump announced "Liberation Day" on 2 April, US government bond yields began to rise – and even after the announcement on 9 April of a "pause" in the implementation of Trump's massive tariff increases, yields continued to climb. It was especially the 30-year Treasury yields that rose to alarmingly high levels, reaching just above…
Classical Liberals, Let’s Be Honest About Milei | The Market Monetarist
As a classical liberal economist, I ought to be thrilled about Javier Milei. A self-proclaimed libertarian winning the presidency of Argentina on a platform of radical economic liberalisation? It sounds like something straight out of a classical liberal dream. And to be fair, there’s plenty to like about Milei. He’s an economist — not just…
From the Extremist Centre Comes a Big Beautiful Delusion: Why the US Won’t Learn from Denmark’s Fiscal Success | The Market Monetarist
The sheer mathematical impossibility of American fiscal policy never ceases to amaze me. Here we have the world's largest economy, blessed with extraordinary dynamism and innovation, yet trapped in a consensus so delusional it would make a Danish politician from the 1970s blush. And I should know—I lived through Denmark's fiscal crisis as a child,…
Lies, Damned Lies, and… Actually Pretty Accurate Statistics: Neither Biden Nor Trump Are Fudging the Jobs Numbers | The Market Monetarist
The US economy added a stronger-than-expected 147,000 jobs in June, and the unemployment rate ticked down to 4.1%, according to this morning's Bureau of Labor Statistics report. As has become depressingly predictable, this release was immediately followed by political noise from both sides of the aisle. The Trump administration has been proposing rules that would…
From Leader to Follower: How the Federal Funds Rate Lost Its Causal Power | The Market Monetarist
For years, I've argued that central banks fundamentally misunderstand their own monetary policy transmission mechanism. They believe the federal funds rate drives nominal variables, when increasingly it's the other way around. In this blog post, I present strong empirical evidence through a structural VAR analysis spanning 1973 to 2025 that demonstrates this complete reversal of…
The Fiscal Dominance Trap: A Love Story Between Debt and Denial | The Market Monetarist
The calendar reads June 13, 2025, but I'm getting flashbacks to December 1977. As Israeli fighter jets strike Iranian nuclear facilities and President Trump calls Federal Reserve Chair Jerome Powell a "$600 billion numbskull," we're witnessing a dangerous historical parallel to the Carter-Burns-Miller transition that helped create the Great Inflation. Yet today's constraints—with federal debt…
The McCallum Rule and 25 Years of Euro-Area Monetary Policy | The Market Monetarist
Introduction: Why Monetary Policy Needs a Firm Theoretical Foundation Monetary policy is fundamentally about stabilising nominal spending — nominal GDP — to support economic growth and maintain price stability. For the euro area, this challenge is particularly complex given structural differences across member states, asymmetric shocks, and the unique institutional arrangement of monetary union without…
The Mechanics of US Debt: Modelling the Unpleasant Arithmetic | The Market Monetarist
Introduction: A Nation of Spend First, Ask Questions Later If there is any enduring law in fiscal economics, it is this: arithmetic always wins. Political rhetoric, on the other hand, is mercifully short-lived. In Washington, talk of “fiscal cliffs” and “grand bargains” has become background noise, but the numbers keep moving regardless. The US has…
Stanley Fischer – the Central Banker Who Understood Nominal Stability | The Market Monetarist
Stanley Fischer has passed away at the age of 81. For those of us who have followed monetary policy closely over the years, this is not merely the loss of a prominent economist. It marks the departure of one of the rare practitioners who truly understood what it means to safeguard nominal stability – and…
Court Strikes Down Trump’s “Liberation Day” Tariffs: A Victory for Constitutional Order and Economic Sanity | The Market Monetarist
While Europe slept last night, a legal bombshell exploded over Trump's trade policy. The U.S. Court of International Trade—America's specialist federal court with exclusive jurisdiction over trade disputes—delivered what can only be described as a devastating blow to presidential overreach. In simple terms, a three-judge panel told Trump: No, you cannot do this. This is…
The Bond Vigilantes Are Stirring: The U.S. is Nearing the Fiscal Inflection Point | The Market Monetarist
On Friday, Moody’s delivered a sharp warning to U.S. policymakers, downgrading the government’s credit rating from Aaa to Aa1. While this is not yet the beginning of a full-blown fiscal crisis, it may very well represent the first spark that sets one in motion. The bond market responded immediately. Today, the yield on 30-year U.S.…
“Eat the Tariffs” – Blaming Walmart Won’t Stop Inflation | The Market Monetarist
Today, 17 May 2025, US President Donald Trump took to Truth Social and delivered yet another economically illiterate proclamation. In a characteristically bombastic post, Trump lashed out at Walmart, the world’s largest retailer, for daring to suggest that his newly imposed tariffs would lead to higher consumer prices. Trump thundered that Walmart should simply “EAT…
The US Consumer Goes to Fiscal Reality Mart: Tariffs or VAT? | The Market Monetarist
Introduction (If you don't want to read the whole article - you can instead do your own simulations of how much revenue tariffs vs VAT can bring in here.) The United States is staring at a structural budget deficit of about 6.5% of GDP – roughly a $2 trillion annual gap. In plain terms, the…
Leavitt & Gono: When Amazon-Bashers Meet Zimbabwe’s Hyperinflation Houdini | The Market Monetarist
The American political circus continues. Today, President Trump's press secretary, Karoline Leavitt, lashed out at Amazon. The reason? Amazon was considering showing customers how much Trump's own tariffs have made goods more expensive. This prompted Leavitt to call the initiative a "hostile and political action," exclaiming: "Why didn't Amazon do this when the Biden administration…
Powell pardoned, China relieved: Bessent 1, Navarro 0, but has it changed the Mad Tariff King for real? | The Market Monetarist
In the past three months, I haven't written much positive about market developments - especially not regarding American stock and bond markets and the dollar. BUT the last 24 hours have brought positive news - and this brings some calm to the markets. I want to highlight two very important statements from Donald Trump himself:…
This Is How the US Lost Me — And Denmark | The Market Monetarist
I have always considered myself a non-American American patriot. I grew up with a deep admiration for the United States — for its ideals, its energy, and its global leadership. But after the events of the past few months, I find it increasingly difficult to view the US as a friend of Denmark. Jay Nordlinger’s…
Dollar Today, Lira Tomorrow? Trump’s Erdoğanomics Comes to the Fed | The Market Monetarist
There are certain moments in economic history where lessons from the past should not merely inform us – they should warn us. We are at such a juncture right now. Under normal circumstances, I would be reluctant to draw parallels between Turkey's monetary experiments and American monetary policy. However, in light of Trump's recent verbal…
Vance’s Death Spiral: How Trump’s Liberation Day Turned the Bond Market Into a Burning Fuse | The Market Monetarist
You really couldn’t make it up. Just months ago, Vice President J.D. Vance – then a senatorial Cassandra – sat down with Tucker Carlson to warn the world of a looming “bond-market death spiral.” “I really worry about the bond markets. Do the international investors, the people who are getting rich off globalization, the people…
This is Donald Trump’s “Liz Truss Moment” | The Market Monetarist
In 2022, then-British Prime Minister Liz Truss announced an unfunded plan for tax cuts, convinced that the markets would welcome her “pro-growth” policies. Instead, the markets panicked. The pound plummeted, UK government bond yields surged, and the Bank of England was forced to intervene to prevent a complete financial meltdown. Truss remained in office for…
Collective American Madness: Trump’s Trade War Sparks a Global Financial Firestorm | The Market Monetarist
As of 04:00 European time, in the early hours of Monday, we are witnessing the very real and devastating financial consequences of what can only be described as an American collective brain haemorrhage. Let’s be clear: this is not a crisis caused by macroeconomic fundamentals or an external shock. This is man-made. And the man…
The Fiscal Reckoning: Trump’s Inconvenient Legacy | The Market Monetarist
The graph below shows the relationship between the federal budget situation (% of GDP) in the USA and American unemployment. Blue dots represent years with Democratic presidents, red dots show years with Republican presidents, and green dots indicate years when Trump was president. Until around 2008, we observe a clear inverse relationship between unemployment and…
Hidden in Plain Sight: How the Fed Has Quietly Followed Friedman’s K-Rule for a Quarter Century | The Market Monetarist
Milton Friedman famously argued that central banks should follow a rule ensuring a constant growth rate of the money supply - also known as the k-rule. The Federal Reserve attempted to implement a version of this rule in the late 1970s and 1980s, but with limited success. Since then, Fed officials have consistently maintained that…
Trump’s Pump and Dump: Politicising and Destabilising Crypto Markets | The Market Monetarist
The term "pump and dump" refers to a scheme where certain investors acquire a financial asset at a low price and then actively attempt to inflate its market value by spreading positive narratives—often through social media or various online forums—causing the price to rise. This is a well-known phenomenon, particularly in the world of small-cap…
‘Globale Tanker’ (Global Thoughts) – A New Platform for Economic Insights and Engaging Talks | The Market Monetarist
In an era of rapid economic shifts, geopolitical tensions, and technological transformation, understanding the forces shaping our world has never been more crucial. That is precisely why Paice, a company I co-founded and am a co-owner of, has launched Globale Tanker—a new platform dedicated to sharing economic insights through lectures, blog posts, and podcasts. A…
Trump-Trade Unwinding: Bitcoin, (Micro)Strategy and Tesla in the Silver Trap | The Market Monetarist
When Donald Trump was re-elected in November, tech stocks and cryptocurrencies received a massive boost. Bitcoin, Tesla, and MicroStrategy (now Strategy) were among the biggest winners. But now the party seems to be ending. Bitcoin has lost momentum, and the downturn could soon accelerate. Tesla has already fallen over 30% from its peak in January,…
Creating an Interactive Monetary Policy Simulator with AI | The Market Monetarist
How we transformed Market Monetarist theory into an interactive tool with Claude AI Recently, I discussed the risks of political interference in monetary policy and the potential for a 1970s-style inflation scenario in my Market Monetarist articles. Today, I want to share how these theoretical concepts have been turned into an interactive simulation that allows…
Make Inflation Great Again? Trump’s Trade War Sparks Price Surge Fears | The Market Monetarist
Recent developments in US financial markets are painting an increasingly clear picture of rising inflation expectations, a phenomenon we might call 'Trumpflation'. T he evidence is mounting across various market indicators, suggesting we may be transitioning from a 'goldilocks' economy towards a more stagflationary scenario. American consumers' inflation expectations have risen sharply in January and…
The Trump Superspike: If Trust in U.S. Governance Breaks, Interest Rates Will Explode | The Market Monetarist
In risk departments across Europe’s banks and pension funds, intense discussions are unfolding. The topic? Trump’s increasingly erratic behavior and what it means for financial stability. At first glance, the immediate concerns seem obvious—tariffs, trade wars, and economic uncertainty. But that’s not where the real danger lies. European credit departments will, of course, start by…
Credibility problems: The Fed isn’t convincing and Truflation isn’t true | The Market Monetarist
Today we got the US inflation (CPI) data for January. Both headline inflation and core inflation (excluding food and energy prices) came in higher than expected. Headline inflation was 3.0% year-over-year, while core inflation rose to 3.3% year-over-year.This is hardly good news. However, we should be very careful about drawing too many conclusions from month-to-month…
Trump’s Tariffs and the Fed: A 1970s Velocity Nightmare in the Making | The Market Monetarist
The latest University of Michigan Consumer Sentiment Survey delivers a stark warning about U.S. monetary stability. Following Trump's return to the presidency in the November 2024 election, inflation expectations have surged dramatically. The short-term (one-year) inflation expectations have jumped to 4.3% - a level that should set alarm bells ringing. Even more concerning is the…
The Erosion of Institutional Democracy: America’s Shift Toward a Latin-Style Executive Rule | The Market Monetarist
I should start by noting that cultural analysis is not my area of expertise—I typically focus on economic policy and market-driven explanations. However, recent developments in American political culture have been striking enough that I feel compelled to address them, even if they fall outside my usual analytical framework. As someone who has long felt…
When Democracy Fails: US Budget Deficit Accelerating Towards 10% of GDP | The Market Monetarist
A Fiscal Crisis in the Making The United States' public finances are approaching a historic turning point. With Donald Trump's re-election to the presidency in November 2024, it is clear that American fiscal policy is moving towards a critical point. In this article, I present an econometric analysis of the US budget deficit, which shows…
How Biden and Powell Mismanaged the 2021 Recovery – A Mistake Trump Seems Determined to Repeat | The Market Monetarist
The Golden Opportunity—Squandered Four years ago today, just as Biden had become president, I wrote the following on Facebook (in Danish): "No more grumbling from here. How is the US economy doing? Today we got retail sales figures for January. They look extremely good—retail sales are now 10% higher than a year ago. That there…
Trump’s Trade War Could Kill America’s ‘Exorbitant Privilege’ | The Market Monetarist
Yesterday, the Trump administration announced new tariffs of 25% on all imports from Mexico and Canada and 10% on all imports from China. In response to this announcement - which wasn't entirely unexpected - US stocks fell and interest rates rose. The simple interpretation is that higher import prices drive up US inflation, causing the…
Erdogan Redux: Trump’s Self-Defeating Mix of Tariffs and Demands for Lower Interest Rates | The Market Monetarist
In the realm of economic policy, there are times when ambition and political rhetoric can overshadow basic numerical coherence. President Donald Trump’s recent declaration at the World Economic Forum in Davos that he will “demand that interest rates drop immediately” while simultaneously championing protectionist tariffs is a glaring example of this kind of inconsistency (see…
Trump Optimism or Tariff Fears? The Curious Case of the January Philly Fed Surge | The Market Monetarist
A Record-Breaking January Jump Last Friday, we got the January Manufacturing Business Outlook Survey from the Philadelphia Fed, and to say the numbers were eye-popping would be an understatement. The data, collected from January 6 to January 13, showed such a remarkable turnaround in manufacturing activity that it demands closer scrutiny - particularly given the…
Fed gets it right: Central banks should do monetary policy, not climate policy | The Market Monetarist
The idea that central banks should conduct "climate policy" is fortunately dying out. I say fortunately because central banks essentially have only one instrument - how much money they create - and that instrument can only be used for one thing. So if one invents all sorts of tasks, one sets aside the main task…