In 30 seconds: Multiple indicators — surging oil near $100/barrel, rising diesel prices, elevated Treasury yields, and sticky inflation expectations — point to persistent inflationary pressure even as some Fed officials see wage growth as consistent with a return to 2%. Commentators debate the unsustainability of US debt levels, the risk of a debt spiral, the erosion of dollar reserve status, and the political difficulty of fiscal adjustment. Brad Setser highlights how large US multinationals route profits through Ireland, resulting in some firms paying more corporate tax to Ireland than to the US, distorting eurozone GDP and balance-of-payments data. China's August trade surplus of $119 billion puts it on track for a new annual record exceeding $1.2 trillion, driven by sharp jumps in both exports and imports.
The nice story about disinflation has a fuel problem. Brent crude touched $100 a barrel, the 10-year US Treasury yield sat at 4.80% and the 30-year at 5.27%, and retail gasoline prices are rising during a period of the year they typically decline. Pump prices are already up 95 cents per gallon from a year ago, and whatever seasonal tailwind lower gasoline prices provided in June and July will be undone in the coming months. Average diesel prices hit an all-time high, up 60% since the start of the year. New York Fed median 1-year inflation expectations: 3.58%. The consumer survey's 3-year ahead inflation expectations edged down 0.1 point, which is the kind of improvement you describe as "rounding." Meanwhile, the perceived likelihood of higher unemployment in 1 year rose 1.6 points to 44.4%, the highest since Apr 2020. Consumers expect prices to stay elevated and jobs to get worse. 10-year US Treasury yield: 4.80%. NFIB Small Business Optimism Index (August actual) 98.7 vs NFIB Small Business Optimism Index (estimate) 99.3.
The arithmetic is not subtle. Last quarter, 105% of federal receipts went to entitlements, interest, and veterans' benefits — more than all the money coming in. Education spending, meanwhile, was cut 55%. The government is borrowing to pay the bills it already has, then cutting the bills that build future productivity. One prominent macro analyst argues that the conventional remedies are traps. Raising payroll taxes crushes consumer spending, which at these debt levels produces a larger deficit, not a smaller one. Cutting spending before devaluing the debt-to-GDP ratio is, in his view, guaranteed to trigger a debt spiral in the US and the West. China, he notes, has been positioning for this outcome since 2002 at least. Gold: $4,402.20. The infrastructure to bypass dollar reserve status is over 10 years old now. Addressing 40 years of front-running living standards requires everyone to absorb pain — a prescription that faces obvious political resistance. Raising payroll taxes will hurt consumer spending and growth, which with debt/GDP at 120% and deficit already at 7.4% will lead to a BIGGER fiscal deficit.
There is a country in Europe whose GDP figures are, to put it gently, not really about that country. About half of Ireland's reported GDP is from the shenanigans of a few large US companies that route a big share of their global profits through Ireland. The pattern has a clear genealogy. Apple led IP shoring in Ireland in 2014, and a number of prominent US companies followed suit in 2019-20. The distortion is not just a statistical curiosity. It has real fiscal consequences. A number of large US firms are now paying more in corporate income tax in Ireland than in DC. Eli Lilly paid more in tax to the Irish government in 2025 than it paid to the US government. The profits are real. The geography is not.
There is a certain kind of number that, once it gets large enough, stops feeling like economics and starts feeling like geology. China's $119 billion trade surplus in August is that kind of number. You look at it and think: okay, that is not a trade balance, that is a tectonic plate moving. The mechanics are straightforward enough. Exports jumped 25% year over year. Imports rose 28% year over year. The annual trajectory is what matters. China is on track to set a new annual record, eclipsing last year's eye-popping $1.2 trillion. China trade surplus: $119 billion. For now the surplus is a fact looking for a policy response. The fact is not going to get smaller on its own.
Here is where the labor market stands for your paycheck.
Initial jobless claims: 206,000, up 0.98% on the week
Continuing claims: 1,779,000, up 0.45% on the week
Job openings (JOLTS): 7,271.00, up 1.24% on the month
Quits rate: 1.90, down 5.00% on the month
Unemployment rate: 4.10, flat 0.00% on the month