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We Have The Tools/Tolls To Do It

Zero Rss
2 months 3 weeks ago
We Have The Tools/Tolls To Do It

By Michael Every of Rabobank

Markets were delighted by US CPI data. Against a backdrop of oil up nearly double digits they instead got a number closer to a future trimmed mean measure without that nasty volatility, even if it was a fall in gasoline prices that resulted in the -0.4% m-o-m headline and 0.0% core prints.

Warsh modelled the New Model Army he wants to see central bankers being: he refused to say ‘mission accomplished’ on inflation: “We have the tools to do it” is perhaps being the new “Whatever it takes.” However, he didn’t want to talk about what he thought on rates: markets had to do that themselves, and they took CPI to mean less Fed tightening.

The Middle East’s new models of arms will get a big say on that. In Hormuz, the US naval blockade of Iranian ports is now back in effect, with enforcement of sanctions, and the two sides are trading blows across the strait, if not the deadliest they are capable of. Yet President Trump is again threatening to hit Iranian power plants and bridges next week if no deal is reached; Axios reports that Trump just held a Situation Room meeting on massive new strikes that are wide enough in scope to force Tehran to back off in Hormuz; the Houthis might threaten the Red Sea after announcing Saudi airspace is not safe for overflight; and Israeli PM Netanyahu warned Iran if his country is attacked, the response will be a “decisive blow.”

There are more positive signs too. Israel-Lebanon talks continue in Rome, along with a surprise Trump press conference call for Israel to withdraw from Lebanon and Syria that is unlikely to mean much on the ground. Trump also just hosted Iraq’s PM for talks on a final US troop withdrawal set for end-September, Iran, and oil - where the US is supporting efforts to revive an Iraq-Syria crude oil pipeline as another Hormuz workaround.

Trump also dropped his 20% Hormuz toll in favor of GCC FDI pledges into the US. Take Trump seriously (the US is not going to fight for free) not literally (the toll was impractical short of a full state-press vs the private sector); and will those who fight alongside the US see their FDI contribution commensurately lower? A more obvious carrot and stick is the Wall Street Journal underlining the UAE was rewarded with coveted US AI chips for supporting the war.

At a more meta level than the Financial Times -- opining Trump has no clear path to victory vs. Iran -- sees, stop to Hor-muse over this idea for a moment too:

  1. The US national security strategy openly calls for control of maritime chokepoints.
  2. That must include Hormuz and its energy flows.
  3. That’s very expensive --and hard-- to achieve and maintain.
  4. Yet someone else controlling Hormuz is even more expensive, geostrategically.
  5. So, if the US starts a war to control Hormuz but can’t, even if it gains during fighting as an LNG and helium exporter, why not then ensure the strait is not a chokepoint?
  6. How better to achieve that than to ensure Hormuz remains in on-off chaos long enough that friends’ pipelines and new oil supply eventually reduce it to more of a sideshow?
  7. Seen that way, though the US went into this war wanting ‘Venezuela 2.0’, within limits, it has rolling optionality on other outcomes that suit its geostrategy - and it “has the tolls to do it.”

Brent is still stable at $85-86, in line with our energy analyst Joe Delaura’s expectations, following the aggressive short squeeze just seen. For more from him, and Florence Schmit on LNG, see here.

There is also more recognition of the incredible success of Ukrainian drone strikes on Russia’s Sea of Azov fleet, which Moscow is calling terrorism. Imagine that transplanted elsewhere…

Meanwhile, President Macron used Bastille Day to showcase Europe's defense ambitions and will allow Ukraine to build French defense systems there; but the head of Germany’s Luftwaffe warned Europe has “no time” to counter Putin without US weapons. Somebody who should know thinks that Europe doesn’t have the tools to do it.

US Under Secretary of War Colby had a blunt social media message in a related regard, not just for Europe, but for Australia and Canada, among others: “There is a great deal of hubbub about a collective “middle powers” strategy these days. At the Department of War, we are not concerned that this is a serious possibility. Rather, we are more concerned that a few allies and partners will *think it is* and waste valuable time, money, and political capital on a distraction.”

Just before that, UK Chancellor Reeves gave an annual Mansion House speech which sounded like an interview to keep her job under PM Burnham by focusing on devolution, postcodes, “economic security is national security,” “securonomics,” and “industrial strategy.” Yet she didn’t mention tariffs as the tools to do it when statecraft logic, which she implies is being embraced, says this cannot happen without them. Then again, Reeves also sounded like she would like to rejoin the EU if possible, so that tariff decision hypothetically wouldn’t be any UK government’s to make anyway.

For its part, Europe will look at yesterday’s China-EU trade data, with the Chinese surplus surging yet again, and the report that China is targeting strategic sectors in the Netherlands as Dutch technology and companies offer Beijing outsize influence over value chains, and thinking about what it needs to do re: trade come October.

Likewise, Chinese Q2 GDP today was 4.3% y-o-y, lower than the 4.5% consensus, but 0.9% q-o-q expectations, and the y-o-y year-to-date (YTD) figure was 4.7% vs. 4.8%. Within that, retail sales for June were 1.0% y-o-y and 1.3% y-o-y YTD, while industrial production was 5.3% y-o-y vs. 4.6% consensus and 5.4% y-o-y YTD. Fixed asset investment was -5.7% y-o-y YTD, worse than -5.0% expected. In short, consumers are spending little, investment is declining (with property investment -18% y-o-y YTD and new house prices -0.3% m-o-m), yet industry is booming: that either means stockpiles are building or exports are flooding the world.

It’s the latter, clearly, as China’s economic statecraft has the tools to do it: for example, it now not only makes the tools Germany used to, but the tool-making machines it used to. Now let’s all say “securonomics” or “strategic autonomy” again and see what happens next.

Aside from tools and tolls, markets can also note that China just increased its holdings of US Treasuries, as Japan’s Finance Ministry is floating JGBs in tax-free accounts amid a GPIF portfolio review to incentivise its vast funds to keep more cash at home not abroad. What if (or when) other major economies follow suit to try to deal with the vast bills looming for a true “securonomics”?

In the meantime, enjoy headlines such as ‘Wall Street Traders Seize on Fervour and Fear to Set Records’ and ‘IBM Acting Like a Penny Stock Is a Sign of Times’ on your Bloomberg screen.

Tyler Durden Wed, 07/15/2026 - 10:00
Tyler Durden

Contractor goes to war with LAX over mega-project fiasco, accuses airport of cover up

NY Post
2 months 3 weeks ago
The legal gloves are off over LAX’s never-ending people mover fiasco. The company behind LAX’s long-delayed $3.3 billion SkyLink train is suing the City of Los Angeles and accusing airport officials of covering up the real reasons the mega-project keeps going off the rails. The lawsuit is the latest black eye for the troubled transit...
Daniel Farr

Why Central Banks Love A Gold Sell-Off

Zero Rss
2 months 3 weeks ago
Why Central Banks Love A Gold Sell-Off

Via SchiffSovereign.com,

On July 7, Bloomberg published an article with the headline: “Gold’s Bull Market Has Ended and Now All Eyes Are on Bears,” explaining how many retail investors have headed for the exits.

That same day, the People’s Bank of China, the country’s central bank, reported its largest monthly gold purchase since 2023.

Of course, June marked its twentieth consecutive month of adding gold to its reserves. Central banks are relatively price insensitive. They buy gold as a long term hedge to preserve value, not to trade back for more paper.

But they aren’t stupid either, and this shows they are buying the dip.

Gold peaked at $5,589 per ounce on January 28 and trades around $4,000 today, roughly 28% below the high. The second quarter was gold’s worst since 2013. Investors have pulled about $18 billion out of gold ETFs since the peak, much of it late money that piled in during last year’s frenzy and bolted the moment momentum broke.

But the price is not the story. The story is what central banks are doing.

Central banks have been the dominant force in gold since 2022, when Russia invaded Ukraine, the US froze $300 billion of Russia’s central bank reserves, and every finance ministry on earth learned that dollar assets were not the safe havens they’d believed.

In 2024, central banks bought 1,090 tons of gold, close to an all-time record.

That massive demand made gold expensive. The price nearly doubled from its 2025 low, and central bank buying slowed to 863 tons. That was still higher than historical averages, but down 21% from the year before.

The slowdown was not fading interest; it was price discipline. Central banks are not traders chasing momentum. They are savers accumulating a reserve asset, and like any sensible saver, they buy less when the thing they are saving in gets expensive.

And they speed back up when it goes on sale. In the first quarter of this year central banks bought 244 tons, more than the previous quarter and above the five-year average. China alone has added about 40 tons in the first six months of 2026, compared to just 27 tons in all of 2025. The People’s Bank of China bought more gold last month, with the price down nearly 30% from its high, than in any single month of the entire run-up.

The reason is simple: nothing has changed about why they buy.

The World Gold Council, the industry group that tracks official gold demand, surveyed 76 central banks this year. Seventy-four percent said they expect the dollar’s share of global reserves to be lower five years from now.

These are the institutions that actually hold the world’s reserves, and they are telling you, on the record, that they plan to keep moving away from the dollar.

None of their reasons went away when the price fell. The US national debt keeps growing by trillions, Congress has no plan beyond borrowing more, and Washington keeps proving it will continue to weaponize the dollar.

A central bank holding dollars is holding the liability of a government that is both overextended and unpredictable. Gold sitting in its own vault carries neither risk.

That calculus was true at $5,589, and it is just as true at $4,000.

A trader who is down 28% has a problem if they are trying to quickly turn a profit, and accumulate more paper dollars.

But a saver who plans to accumulate gold for the next decade just got a better price. That is why the sell-off did not scare away the biggest buyers in the market.

It may be exactly what they were waiting for.

We made this argument to our subscribers of our investment research newsletter, Strategic Assets, in January.

With gold near its all-time high, we said that this was no longer the early stage of a bull market, that a major drawdown was a real possibility, and that it was time to take some profits.

In fact, subscribers who took action on our research locked in gains of more than 950% on a small silver producer and 540% on a gold and silver producer, both in under a year.

Now the sell-off has come for the miners too. Even solid, debt-free producers are trading as much as 50% below their highs from earlier this year.

But again, as nothing had changed about the long term gold thesis, little has changed about the profitability of these companies. They are still wildly profitable at $4,000 gold, which is far above projections they had planned for.

Some of these companies are still pulling gold out of the ground at a cost of just $1,000 an ounce, which is an amazing margin.

So we are starting to buy again.

It is the same discipline the central banks just demonstrated: slow down when the asset is expensive, step up when it gets cheap, and never confuse a price correction with a change in the story.

Nobody knows where gold trades next month. But the biggest buyers on earth just showed you what they do when gold gets cheaper. They buy more.

Tyler Durden Wed, 07/15/2026 - 09:20
Tyler Durden

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