US Consumers Remain Resilient
Rebound in Durable Goods Lifts Consumer Spending
Real consumer spending rose 0.3% in July to notch its best month since the pre-tariff surge in March. The intervening months had been soft owing to an air pocket in spending on durable goods. Spending on these big-ticket items was flattish in April before posting back-to-back declines in May and June, raising concerns about the tariff impact on durable goods spending.
Those worries may fade a bit after today’s report showed durable goods spending rebounded in July rising 1.9% in the month. That’s the best monthly pick-up since the pre-tariff surge of 3.9% in March.
Most of the spending increase in July was attributable to spending on motor vehicles and parts where spending has been whipsawed amid tariff pricing concerns. Beyond autos, durable goods spending was more modest. Non-durable goods categories such as food, beverage and other non-durable goods generally outpaced durables categories.
We have argued that one largely unnoticed early manifestation of tariff impact on consumer spending is the trend decline in discretionary services categories. That remained intact here in July despite an otherwise solid report on consumer spending. Recreation services spending posted the smallest increase of any services category, and spending on food services and hotel accommodations were in decline in July.
One third of the $108.9B increase in spending was in “motor vehicles and parts”, a volatile category showing no real growth since 2015. Americans, faced with car prices 25% above pre-pandemic levels, are replacing their old cars only when offered attractive incentives and/or financing terms. Absent these, they manage their monthly payments by extending their liabilities.
Once rare, seven-year car loans are fast becoming the norm. They’re often the only way buyers can afford new rides, with average sale prices surging 28% in five years to approach $50,000. Compared to a five-year loan, they can make the difference between a $1,000 monthly payment and a $780 one. (Bloomberg)
More than half of new car loans are 6 or 7 years. A bet against rapid technology advancements.
The normally resilient services spending category has stalled since last December (+0.4% in 7 months) in spite of rising labor income (+1.2%). This is a picky consumer, a radical change from 2024.
The good news is that labor income keeps rising around 5.0% YoY while PCE inflation seems stuck at 2.6%. More importantly, there is no squeeze from essentials: PCE-Food is up 1.9% YoY and PCE-Energy is down 2.7%, more than offsetting rentflation of 3.5%.
Wages and salaries jumped 0.6% MoM in July. Last 3 and 6 months: +4.9% annualized.
The next employment report comes Friday. Jerome Powell said at Jackson Hole that, thanks to lower immigration, 100k job gains are the breakeven monthly pace needed to keep the unemployment rate steady. Last 3 months: +35k/m on average, down from 168k/m in 2024.
Powell, justifying his increased dovishness:
Labor supply has softened in line with demand, sharply lowering the breakeven rate of job creation needed to hold the unemployment rate constant. Indeed, labor force growth has slowed considerably this year with the sharp falloff in immigration, and the labor force participation rate has edged down in recent months.
Labor stats have been rather volatile this year, with meaningful revisions, making them less dependable for a data dependent Fed. Note the soft period in the summer of 2024, followed by strong employment growth in the following 4 months.
Interestingly, private employment has held up better in the most recent softening than in the summer of 2024.
Indeed Job Postings troughed in mid July and bounced 2.1% through August 22.
S&P Global’s flash August PMI surveys were broadly strong:
- Total output in the latest two months saw the strongest back-to-back expansions since the spring of 2022, in both manufacturing and services.
- New order inflows in the goods-producing sector also picked up in August, with growth hitting the highest since February 2024 principally on the back of rising domestic demand but also helped by the largest rise in goods exports for 15 months.
- The pace of job creation hit the highest since January (and one of the strongest rates seen for over three years). Service providers took on staff at the fastest pace for seven months while factory job gains reached the highest since March 2022.
- Uncompleted orders rose for a fifth consecutive month, rising in August at a pace unsurpassed since May 2022 reflecting stronger demand and near-term capacity constraints at some companies. Backlogs rose at an unchanged and therefore joint-steepest rate since May 2022 in the services economy, while manufacturing backlogs also rose to the greatest extent in over three years.
- Companies’ expectations about output in the year ahead rose to a two-month high in August.
We will find out this week if the more widely followed ISM surveys rebound from their weak July readings. My bet is they will. If so, the odds of a September 17 rate cut could drop and narratives change abruptly.
FYI:
- Friday’s Atlanta Fed’s GDPNow model tracked Q3’s real GDP growth rate at 3.5%, up from 2.2% and vs 3.3% during Q2.
- Ed Yardeni: “The CME FedWatch Tool indicated that the latest probability of a 25-basis-point Fed rate cut at the September 17 meeting of the FOMC is 86.4%. Our subjective odds are 40%. Friday’s data supported our none-and-done-in-2025 stance based on our view that the economy doesn’t need a rate cut, especially with inflation closer to 3.0% y/y than the Fed’s 2.0% target.”
- Goldman Sachs:
- “The equal-weighted S&P500 typically outperforms the cap-weighted when the Fed cuts rates… so further rate cuts would be supportive of the bullish broadening theme (catch-up, rotation, broadening out of the bull market).” (Callum Thomas)
Source: Daily Chartbook
- Powell: “Measures of longer-term inflation expectations, however, as reflected in market- and survey-based measures, appear to remain well anchored and consistent with our longer-run inflation objective of 2 percent”
Consumers inflation expectations seem indeed well anchored, but in the 3.5-4.0% range for the next 5 years (U. of Michigan). Markets are more hopeful at 2.4%, thanks largely to oil prices as Goldman Sachs illustrates:
Consumer one-year expectations are also largely influenced by gasoline prices but tariffs are currently scaring people. Investors expect tariffs to have but a temporary impact.
If gold is an inflation hedge, gold prices must reflect inflation expectations. There seems to be a lot more than inflation fears currently (geopolitics, USD, central banks buying, China …)
(MacroMicro)
Back to the oil price relationship, you can now buy 50 barrels of oil with one once of gold, well above the 30 barrels historical highs
Gold to Oil Ratio
(Macrotrends)
Low oil prices are thus keeping inflation expectations low per Goldman’s chart above. But gold investors now want a lot more oil than before per once of gold. Gold/oil broke 30 after Russia invaded Ukraine, which is also when gold reserves began to deviate from trends per Ed Yardeni’s charts. Spring 2024 is also when oil prices peaked before cratering 30%.
In this puzzle, the one piece that sticks out is gold-backed ETF demand, particularly from the US and China, which bounced back in H2’24 and sharply accelerated in 2025 in spite of rising gold prices.
This monthly chart shows the trend reversal in June 2024 and the sharp demand increase in January-April 2025, slowing somewhat since. Clear signs of speculation and momentum investing by price insensitive buyers.
The more price sensitive central banks reduced their purchases by 33% QoQ in Q2’25. Total H1 buying of 415t was 21% less than H1’24 (525t) and the lowest H1 total since 2022.
MANUFACTURING PMIs
Eurozone factory output growth at 41-month high in August
The HCOB Eurozone Manufacturing PMI® rose from 49.8 in July to 50.7 in August. This marked the first monthly improvement in operating conditions for goods producers in the single currency union since June 2022.
The main bulk of the euro area registered expansionary Manufacturing PMI readings midway through the third quarter. The exceptions were Austria and Germany, although the largest economy of the bloc posted a 38-month high and signalled broadly stable factory operating conditions. Austria’s manufacturing downturn also eased and was only marginal. Greece topped the growth rankings and was closely followed by Spain, with both nations registering strong upturns in August. Modest improvements were seen in the Netherlands and Ireland, while both France and Italy saw renewed (albeit only slight) expansions.
A sixth successive monthly increase in production was recorded in August. The rate of growth picked up markedly on the month to the quickest since March 2022. Spurring a faster rise in output was a renewed pick-up in demand conditions. Total new order volumes rose for the first time in close to three-and-a-half years, although this was reflective of a better domestic sales environment as the latest survey data signalled further (and faster) decline in exports.
Still, despite increased new order intakes, operating capacities were not placed under greater strain. This was evidenced by thirty-ninth successive monthly reduction in backlogs of work. Job cutting continued across the eurozone manufacturing sector, but the latest decrease in employment was only marginal overall and among the softest seen over the current 27-month sequence.
Eurozone manufacturers remained in stock-cutting mode during the latest survey period. Both pre- and post-production inventories were reduced, and in both cases to the quickest extents since March. Purchasing activity also fell more rapidly, although the rate of decrease was weak by comparison to the trend seen over the last three years. Pressures on supply chains nevertheless intensified as average input lead times lengthened to the most marked degree since November 2022.
As for prices trends, eurozone manufacturers saw operating expenses increase for the first time in five months, although the uptick was only marginal. Prices charged were discounted fractionally.
Finally, eurozone goods producers looked to the next 12 months with optimism, but there was little change in sentiment when compared with July. Overall, growth expectations held just above their long-term average in August.
China: Manufacturing sector conditions improve at quickestpace in five months
The headline seasonally adjusted Purchasing Managers’ Index™ (PMI) posted 50.5 in August, up from 49.5 in July. Rising above the 50.0 no-change threshold in August, the latest figure signalled that manufacturing sector conditions improved midway through the third quarter of the year. Although marginal, the rate of improvement was the quickest in five months.
Rising new orders supported a renewed expansion of manufacturing output in August. This marked the second time in the past three months in which output has increased, though the upturn was only marginal. Better underlying demand conditions and successful promotional efforts underpinned the latest rise in new orders, according to panellists. Though modest, the rate of new order growth was the quickest seen since March. Companies signalled that the improvement in sales was largely driven by firmer domestic demand, as new export orders fell slightly.
Stronger inflows of new orders also led to a renewed accumulation of backlogged work in August. The rate at which unfinished business increased was the quickest in six months. Despite greater capacity pressures, manufacturers remained cautious with regards to their staffing levels, opting instead to shed staff for a fifth consecutive month.
Purchasing activity increased for a second consecutive month amid higher new orders and production. Anecdotal evidence suggested that some Chinese manufacturers were keen to stockpile in the latest survey period. Holdings of raw materials and semi-finished goods rose at the quickest pace since November 2020.
Stocks of finished goods also accumulated midway through the third quarter. This was attributed to both growth in production and delays in outbound shipments. At the same time, lead times for inputs continued to lengthen in August, albeit only fractionally, amid reports of shipping delays and logistics constraints.
Prices data showed that average input costs rose for a second successive month in August. The rate of inflation was the steepest since November 2024 but remained below the series average. Higher raw material costs were cited as a key reason for the latest increase in expenses.
To help cope with rising costs, some manufacturers raised their output charges while others were limited in their ability to pass on higher expenses due to intense competition. As a result, average selling prices were unchanged in August following an eight-month period of decline. On the other hand, export charges continued to increase on the back of rising transport costs.
Overall, sentiment regarding the one-year outlook for output in the Chinese manufacturing sector remained positive in August. Goods producers were the most upbeat since March amid hopes that economic conditions will improve, and that company expansion plans will help to drive new sales in the next 12 months.
- Both official manufacturing and non-manufacturing PMIs edged up in August
The NBS manufacturing PMI headline index edged up to 49.4 in August from 49.3 in July. Among major sub-indexes of NBS manufacturing PMI, the output sub-index increased to 50.8 from 50.5, the new orders sub-index edged up to 49.5 from 49.4, while the employment sub-index inched down to 47.9 from 48.0.
NBS commented that the output and new orders sub-indexes of pharmaceuticals and computer, communication, and other electronic equipment were notably higher than the overall manufacturing sector in August. However, the output and new orders sub-indexes of textiles, apparel and accessories, wood processing and furniture, and chemical raw materials and products sectors were below 50 in August.
On the trade-related sub-indexes, the manufacturing new export order sub-index edged up to 47.2 in August (vs. 47.1 in July). The import sub-index also inched up to 48.0 from 47.8.
Price sub-indexes suggested deflationary pressures continued to ease in August. The input cost sub-index increased to 53.3 (vs. 51.5 in July). The output prices sub-index also rose to 49.1 (vs. 48.3 in July). NBS commented that the input cost and output price indexes of ferrous metal smelting and rolling processing, and metal products sectors rose above 52 in August.
The official non-manufacturing PMI (comprised of the services and construction sectors) inched up to 50.3 in August (vs. 50.1 in July). The services PMI rose to 50.5 (vs. 50.0 in July). According to the survey, the PMIs of railway/water transportation, telecommunications, radio, television and satellite transmission, and capital market services sectors were above 60 while the PMIs of retail and real estate services sectors were below 50 in August.
The construction PMI fell notably in August to 49.1 (vs. 50.6 in July), which marked the lowest point since the initial outbreak of COVID in early 2020. NBS noted that construction activity slowed down in August due to recent adverse weather conditions such as persistent high temperatures and heavy rain in some regions.
Overall, several patterns shown in August official PMIs are similar to those in the July prints. For example, adverse weather conditions continued to negatively affect the August NBS PMIs (e.g., the construction PMI fell below 50). Additionally, increased government focus on overcapacity and excessive price competition helped to alleviate deflationary pressure, as reflected in the increased price sub-index within the official manufacturing PMI. (GS)
Japan: Operating conditions deteriorate slightly in August
The headline S&P Global Japan Manufacturing Purchasing Managers’ Index™ (PMI®) rose from 48.9 in July to 49.7 in August, to signal a slower and only marginal deterioration in business conditions. Nevertheless, the health of the sector has now weakened in 13 of the past 14 months.
Underlying data revealed that a deterioration in business conditions at intermediate goods makers offset improvements at producers of consumer and investment goods.
Latest survey data signalled a back-to-back monthly decline in manufacturing production across Japan. That said, the rate of contraction eased to a fractional pace that was slower than the average seen in 2025 to date. Where lower production was reported, this was generally attributed to lower amounts of new work.
Measured overall, new business fell at a modest pace that was unchanged from July. Companies often commented that subdued market conditions had weighed on customer demand. New business from overseas was an area of particular weakness, with new export sales declining at the sharpest pace since March 2024. Reduced orders from key markets such as Europe, China and the US were noted by panel members.
Manufacturers downwardly adjusted their purchasing activity again in August, with the rate of reduction solid overall. Companies also maintained a cautious approach to their inventory levels, with both stocks of purchases and finished goods also declining again in August.
Supply chain performance meanwhile deteriorated again midway through the third quarter. Though marginal, the rate at which delivery times increased was the most pronounced since last September.
Employment remained on an upward trend in August, with manufacturers in Japan adding to their payroll numbers for the ninth straight month. Though modest, the rate of job creation was above the series long-run trend. According to anecdotal evidence, companies added to their staffing levels to fill vacancies but also to prepare for future increases in customer demand.
Higher headcounts and lower amounts of incoming new work supported a further reduction in outstanding business in August. Furthermore, the rate of backlog depletion was the quickest seen since January and solid.
Average input prices continued to increase sharply in August. That said, the upturn was the second-slowest recorded in just over four-and-a-half years (after July 2024). A variety of factors had increased in cost, according to panellists, including raw materials, labour, utilities and transport.
Prices charged by Japanese manufacturers also rose in August. However, the rate of inflation was the weakest recorded since June 2021 and only modest. There were reports that intense market competition had restricted firms’ overall pricing power.
Although Japanese manufacturing firms remained confident that output will rise over the next year, the degree of sentiment slipped to a three-month low in August.
Canada: Second-quarter GDP hit hard by trade conflict
We now have the full picture for the first quarter in which U.S. tariffs were imposed, and it is far from reassuring. The Canadian economy posted its sharpest contraction since the pandemic, as the drop in exports far exceeded the decline in imports. As a result, trade made its largest negative contribution ever, with the exception of the temporary distortion caused by the pandemic.
Tariff uncertainty has also shaken business confidence, prompting firms to significantly reduce their investments. Non-residential investment fell by 10% on an annualized basis as investment in machinery and equipment plummeted by 33%, the fourth sharpest decline in history.
Despite this weakness in investment, domestic demand remained strong at 3.5% annualized. Per capita domestic demand grew at a comparable rate (3.3%) due to population stagnation, making this quarter the second strongest performance since 2022.
Households limited the damage during the quarter as residential construction picked up, but above all because consumption was solid (+4.5% ann.). There is reason to question the sustainability of this strength, given that it occurred despite sluggish growth in employee compensation, which led them to substantially reduce their savings rate for a third consecutive quarter.
(…) The downward revision of monthly GDP for June (preliminary was 0.1% and was revised to -0.1%) and the weak rebound in July lead us to believe that the economic weakness will continue into the third quarter. Moreover, yesterday’s labor market data points to a widespread deterioration in the labor market (link), which should limit consumption in Q3, especially as households grapple with an interest payment shock at current rate levels.
This economy seems in dire need of a trade agreement to give businesses greater visibility. In the meantime, the Bank of Canada can provide a little extra help while waiting for the federal government’s budget plans.
Eurozone Inflation Accelerates, Priming Continued Rate Pause by ECB Annual inflation inched up to 2.1%, but core prices rose at an unchanged pace
Consumer prices rose by 2.1% on year in August across the 20 nations that use the euro, European Union figures showed Tuesday. That marks an increase from the 2.0% rate of annual inflation booked in July. Core inflation, which strips out the more volatile shifts in the prices of energy and food, was unchanged at 2.3% on year last month. (…)
With inflation rising slightly above the ECB’s target, and the eurozone’s labor market holding up well despite global economic turmoil, the central bank looks very likely to keep its key interest rate in place at 2.0% when its rate setters meet in Frankfurt next week. Investors overwhelmingly expect the bank to stand pat on rates, according to data provided by LSEG Refinitiv. (…)
In Germany, Europe’s largest economy, annual inflation rose in August. But the rate eased in France and was stable in the eurozone’s other two largest economies, Italy and Spain, data last week showed. (…)
Eurozone inflation has remained close to the ECB’s target since early this year. Bank staff project the rate will dip to 1.6% on average in 2026 before returning to target the following year. (…)
- ECB Should Keep Rates Steady, Schnabel Tells Reuters
- ECB’s Simkus Hints at December Rate Cut, Econostream Says
- ECB’s Kocher Advocates Caution Ahead of Next Decision
South Korea’s Inflation Hits Nine-Month Low The benchmark consumer-price index rose 1.7% from a year earlier, softer than July’s 2.1% increase
EARNINGS WATCH
Simply remarkable in the current environment and inflation below 3%.
489 companies in the S&P 500 Index have reported earnings for Q2 2025. Of these companies, 79.6% reported earnings above analyst expectations and 15.7% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 76% of companies beat the estimates and 18% missed estimates.
In aggregate, companies are reporting earnings that are 7.8% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.3% and the average surprise factor over the prior four quarters of 6.3%.
Of these companies, 79.2% reported revenue above analyst expectations and 20.8% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.
In aggregate, companies are reporting revenues that are 2.5% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.
The estimated earnings growth rate for the S&P 500 for 25Q2 is 13.2%. If the energy sector is excluded, the growth rate improves to 15.2%.
The estimated revenue growth rate for the S&P 500 for 25Q2 is 6.3%. If the energy sector is excluded, the growth rate improves to 7.5%.
The estimated earnings growth rate for the S&P 500 for 25Q3 is 8.4%. If the energy sector is excluded, the growth rate improves to 9.2%.
Trailing EPS are now $258.25. Full year 2025e: $267.58. Forward EPS: $283.34e. Full year 2026: $303.35e.
Factset
Xi outlines China’s ambition to reshape world order in showpiece summit
Xi Jinping has called on Russia, India and other countries in the region to join China in leveraging their economic influence to challenge the west at a time of rising geopolitical and trade tensions. (…)
“We should expand the scope of co-operation, make the most of each country’s unique strengths, and shoulder together the shared responsibility of promoting regional peace, stability and prosperity,” Xi told world leaders including Russian President Vladimir Putin and Indian Prime Minister Narendra Modi. (…)
In a veiled response to Trump’s trade war, the Chinese leader announced what he called a “global governance initiative” founded on principles including “sovereign equality”, “international rule of law” and “multilateralism”. (…)
Xi also said the meeting had agreed on Chinese proposals for the creation of a Shanghai Cooperation Organization development bank and outlined plans for Beijing to make loans and grants to countries in the grouping. (…)
Presumably not in USD…
Developing countries swap out of dollar debt to cut borrowing costs Sovereign borrowers are turning to lower interest rates in currencies such as the Chinese renminbi and Swiss franc
(…) A switch to renminbi borrowing — which comes as the Chinese currency hits its highest level against the dollar this year — is also a consequence of Beijing’s $1.3tn belt-and-road development programme, which has lent hundreds of billions of dollars for infrastructure projects to governments across the globe. (…)
Many “Belt and Road” loans of the 2010s were in dollars, at a time when US interest rates were far lower. (…)
Since governments rarely have export earnings in currencies such as the renminbi and Swiss franc, they also may have to hedge their exposure to exchange rates through derivatives. (…)
Companies in emerging markets are also selling more bonds in euros this year, with the amount of this debt in issue rising to a record $239bn as of July, according to JPMorgan. The overall stock of emerging market corporate bonds in dollars totals about $2.5tn. “This year’s euro issuance is growing more than we see in dollar issuance,” said Toke Hjortshøj, senior portfolio manager at Impax Asset Management. Asian issuers account for a third of the outstanding euro stock, up from 10 to 15 per cent 15 years ago, he added.
- Asian and Middle Eastern investors avoiding US, says private markets giant Partners Group’s Roberto Cagnati says some investors ‘more wary about what they’re exposed to’ following Trump shocks
Several top Asian and Middle Eastern investors including sovereign funds are asking to steer clear of US assets, spooked by policy shocks under Donald Trump, according to one of Europe’s largest private markets investors.
Executives at Partners Group told the Financial Times that some funds are asking to avoid US exposure entirely, citing uncertainty around tariffs or other potential trade or investment restrictions.
“There’s more people who look from Asia into non-US exposure,” said Roberto Cagnati, head of portfolio solutions at the Swiss firm, which manages assets worth more than $170bn, almost half of which are in the US. (…)
“The world becomes a bit more segregated and less integrated also, with regards to the financial system, as a result,” Cagnati added. “Economically, there will be a price for this.” (…)
The Cracks in America’s Rule of Law Are Getting Deeper Court battles over the administration’s sweeping use of executive power are exposing limits on how much judges can constrain the presidency.
(…) It’s a recurring pattern in Trump’s second term: On more than a dozen occasions, the Supreme Court has lifted an injunction issued by a trial judge who said the administration was at least probably acting illegally. The court has sometimes offered a few sentences on what the lower court got wrong — but not always. The decisions are part of the litigation blizzard spawned by Trump’s unprecedented use of executive actions to try to unilaterally reshape the law. (…) “The rule of law in America is facing grave threats, the likes of which it hasn’t seen in a generation,” said Gregg Nunziata, executive director of the Society for the Rule of Law, an advocacy and educational group of conservative lawyers, including former judges.
The courtroom has been a major flashpoint, underscoring the strains within the judiciary. Judges who conclude the administration is violating the law are finding themselves undercut by the Supreme Court, often without the kind of explanation that has been the hallmark of the US legal system. And in the name of keeping judges in their constitutional lane, the Supreme Court has stripped them of a key tool for keeping the executive branch from overstepping its authority: the universal injunction. (…)
“The failsafe for that kind of president is a Congress that pushes back and a public citizenry that is outraged by such behavior, but neither is happening right now. Too much is resting on the court. Or we maybe are expecting too much from it.”
The Supreme Court has sided with the administration, at least in part, in all but three of 21 emergency cases decided since January — a record of success the White House says amounts to vindication. (…)
The idea of the rule of law dates back as far as Aristotle, who in the 4th century B.C. wrote that “it is more proper that the law should govern than any of the citizens.” But it remains a bit of a slippery concept. It is “often invoked yet seldom defined,” now-retired Justice Anthony Kennedy said in a 2006 speech.
Kennedy went on to offer a semblance of a definition, laying out three key principles. The first, he said, is the understanding that the law binds everyone, including public officials. “Government is the servant of the law and the people,” he said. “It is not the other way around.” Second, the law must preserve the “dignity, equality and human rights” of everyone. And finally, the law has to be enforceable, telling people what their rights are and giving them a fair chance at getting redress if they are wronged.
Kennedy’s first and third principles — the law’s applicability to the government and its enforceability — are particularly relevant in the Trump era. Most glaringly, the administration has been accused, at times by judges themselves, of repeatedly flouting the law and disobeying court orders.
So far the administration hasn’t faced any real consequences for the findings of defiance, in large part because the Supreme Court hasn’t seemed overly bothered by them. (…)
Critics say the rulings collectively have created a law-free zone for the administration, giving Trump a window to implement sweeping policies even after a judge says he’s exceeding his authority.
“It is destroying the trust of the lower courts in the Supreme Court,” said Aziz Huq, a professor at the University of Chicago Law School and the author of a book on the rule of law. “And it’s destroying the judiciary’s own capacity to enforce constitutional rules or statutory rules.”
Part of the problem is the way many cases are landing at the high court these days — as stay applications on its emergency or “shadow” docket. These are generally requests to either pause or allow some action, like the firing of agency employees, until the courts have ruled on its legality. The court’s longstanding approach with stay applications is to assess which side will probably win in the end, but not to rule definitively. (…)
But the upshot of those sparing decisions at times has been to let Trump ignore legal constraints that bound previous presidents. In May, the court let Trump fire top officials at the National Labor Relations Board and the Merit Systems Protection Board — despite a decades-long consensus that presidents had to respect the job protections Congress created for those positions. The Supreme Court blessed restrictions on those types of firings in 1935, when it said Congress could legitimately protect leaders of the Federal Trade Commission from being fired in order to insulate them from political pressures. That ruling, known as Humphrey’s Executor, paved the way for the independent expert agencies that came to proliferate across the federal government.
The Supreme Court, which is stacked with supporters of a powerful presidency, has chipped away at Humphrey’s Executor in recent years. In 2020, a majority struck down job protections Congress gave the director of the Consumer Financial Protection Bureau, ruling that a person with so much executive power needed to be accountable to the president under the Constitution. But the court stopped short of overturning Humphrey’s Executor, saying the ruling remained in force at least for “multimember expert agencies that do not wield substantial executive power.”
That’s where things stood when Trump separately moved to fire NLRB member Gwynne Wilcox and MSPB member Cathy Harris. District judges rejected the ousters as illegal, saying Humphrey’s Executor remained binding law, and a federal appeals court agreed.
The Supreme Court then stayed the lower court rulings so Trump could oust Wilcox and Harris while the litigation went forward. In a delphic four-paragraph opinion that didn’t mention Humphrey’s Executor by name, the court said it wasn’t deciding whether the firings were constitutional. But it said it would err on the side of presidential power in the interim — effectively letting Trump circumvent Humphrey’s Executor without directly ruling on the issue. “The government,” the court said in its unsigned opinion, “faces greater risk of harm from an order allowing a removed officer to continue exercising the executive power than a wrongfully removed officer faces from being unable to perform her statutory duty.”
Left undiscussed was the potential harm to the agencies themselves or to the lawmakers who voted for the system. (For his part, Kavanaugh said in July in a separate case raising the same issue that the court should have immediately taken up the Humphrey’s Executor issue, rather than leaving the law in a state of “extended uncertainty and confusion.”)
The rule-of-law debate came to a head rather pointedly in the showdown over Trump’s effort to allow automatic birthright citizenship only for the children of citizens and permanent residents, a move that conflicts with more than a century of practice and legal consensus. After three district judges halted the policy as probably illegal, the Supreme Court ruled that judges could no longer issue universal injunctions that go beyond the parties in a case and apply nationwide. Though the decision so far hasn’t allowed Trump’s citizenship restrictions to take effect, it stripped district judges of a powerful device they have used repeatedly in recent years to broadly stop policies from Republican and Democratic administrations.
The ruling prompted a blistering dissent from Justice Ketanji Brown Jackson, who called the decision “an existential threat to the rule of law.” She continued: “Stated simply, what it means to have a system of government that is bounded by law is that everyone is constrained by the law, no exceptions. And for that to actually happen, courts must have the power to order everyone (including the executive) to follow the law — full stop.”
Writing for the majority, Justice Amy Coney Barrett offered a starkly different vision, arguing that the Constitution limits what judges can do. “No one disputes that the executive has a duty to follow the law,” Barrett wrote. “But the judiciary does not have unbridled authority to enforce this obligation — in fact, sometimes the law prohibits the judiciary from doing so.” Jackson was “embracing an imperial judiciary,” Barrett said.
If correct, Barrett’s view means Kennedy’s principles have their limits. Yes, the law applies to the president, but the president has significant latitude to decide what the law is, at least in the short term. And yes, the law must be enforceable, but judges have only so much authority to do the enforcing. In short, the rule of law depends heavily on having a president willing to accept it. (…)
How the Rule of Law Hits Wall Street:
- They [business people] want to know what the rules are. They need predictability. They need a sense of fairness that the rules are going to be applied in a predictable way to everybody.
- You have a rule of law or the absence of the rule of law. There is only one alternative to the rule of law and that’s “might makes right” because either you have rules that constrain the exercise of power by the powerful or the powerful are gonna make the rules and they’re gonna run society.
- Predictable, so that entities can know what they need to do to comply with the law, knowable for reasons of transparency and trust in the legal process.
- The rule of law is not just a guardian against corruption and personal misdeeds. It is also a guardian of an environment of robust business and economic sector.
US sliding towards 1930s-style autocracy, warns Ray Dalio Billionaire hedge fund boss says other investors are too scared of Trump to speak out
The Bridgewater Associates founder told the Financial Times that “gaps in wealth”, “gaps in values” and a collapse in trust were driving “more extreme” policies in the US.
“I think that what is happening now politically and socially is analogous to what happened around the world in the 1930-40 period,” Dalio said. (…)
“I am just describing the cause and effect relationships that are driving what is happening,” he said. “And by the way, during such times most people are silent because they are afraid of retaliation if they criticise.” (…)
Dalio said a politically weakened central bank, pressed to keep rates low, “would undermine the confidence in the Fed defending the value of money and make holding dollar-denominated debt assets less attractive which would weaken the monetary order as we know it”.
International investors had started shifting out of Treasuries into gold, he added. (…)
“The great excesses that are now projected as a result of the new budget will likely cause a debt-induced heart attack in the relatively near future,” he said. “I’d say three years, give or take a year or two.” (…)
The Fed would face a stark choice as the market began doubting the US’s fiscal credibility, Dalio added. “Allow interest rates to go up and have a debt default crisis, or print money and buy the debt that others won’t buy.” Both paths would hurt the dollar, he said. (…)
“Classically, increased wealth and value gaps lead to increased populism of the right and populism of the left and irreconcilable differences between them that can’t be resolved through the democratic process. So democracies weaken and more autocratic leadership increases as a large percentage of the population wants government leaders to get control of the system to make things work well for them.”
Hello darkness, my old friend
I’ve come to talk with you again
Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains
Within the sound of silence
In restless dreams I walked alone
Narrow streets of cobblestone
‘Neath the halo of a streetlamp
I turned my collar to the cold and damp
When my eyes were stabbed by the flash of a neon light
That split the night
And touched the sound of silence
And in the naked light I saw
Ten thousand people, maybe more
People talking without speaking
People hearing without listening
People writing songs that voices never share
No one dare
Disturb the sound of silence
“Fools” said I, “You do not know
Silence like a cancer grow
Hear my words that I might teach you
Take my arms that I might reach you”
But my words like silent raindrops fell
And echoed in the wells of silence
And the people bowed and prayed
To the neon god they made
And the sign flashed out its warning
In the words that it was forming
And the sign said “The words of the prophets
Are written on subway walls
And tenement halls
And whispered in the sounds of silence”
Paul Simon
For Some Patients, the ‘Inner Voice’ May Soon Be Audible In a recent study, scientists successfully decoded not only the words people tried to say but the words they merely imagined saying.
For decades, neuroengineers have dreamed of helping people who have been cut off from the world of language.
A disease like amyotrophic lateral sclerosis, or A.L.S., weakens the muscles in the airway. A stroke can kill neurons that normally relay commands for speaking. Perhaps, by implanting electrodes, scientists could instead record the brain’s electric activity and translate that into spoken words.
Now a team of researchers has made an important advance toward that goal. Previously they succeeded in decoding the signals produced when people tried to speak. In the new study, published on Thursday in the journal Cell, their computer often made correct guesses when the subjects simply imagined saying words.
Christian Herff, a neuroscientist at Maastricht University in the Netherlands who was not involved in the research, said the result went beyond the merely technological and shed light on the mystery of language. “It’s a fantastic advance,” Dr. Herff said. (…)
One participant, Casey Harrell, now uses his brain-machine interface to hold conversations with his family and friends.
In 2023, after A.L.S. had made his voice unintelligible, Mr. Harrell agreed to have electrodes implanted in his brain. Surgeons placed four arrays of tiny needles on the left side, in a patch of tissue called the motor cortex. The region becomes active when the brain creates commands for muscles to produce speech.
A computer recorded the electrical activity from the implants as Mr. Harrell attempted to say different words. Over time, with the help of artificial intelligence, the computer accurately predicted almost 6,000 words, with an accuracy of 97.5 percent. It could then synthesize those words using Mr. Harrell’s voice, based on recordings made before he developed A.L.S. (…)
Yes, if you wonder, this last piece is related to the one above… new ways to let inner thoughts out.