MAGA Jay And Silent Blob

By Benjamin Picton, senior market strategist at Rabobank

Jerome Powell used his set-piece speech at Jackson Hole on Friday to execute a dovish pivot. The S&P500 closed within 2pts of an all-time high and 10-year Treasury yields fell 7bps after the Fed Chair said that recent weakening in the labor market that was highlighted by sluggish employment growth in the most recent non-farm payrolls report – including big downward revisions to jobs growth in April and May – meant that the balance of risks had shifted and that some reduction in the restrictiveness of monetary policy may now be appropriate.

That admission must have stuck in the craw for a Fed Chairman who has pushed back against the White House’s at times puerile lobbying for cheaper money. The risk now is that ‘Too Slow’ Jerome Powell – as he has been dubbed by Trump – is suddenly transformed into ‘MAGA Jay’ in the eyes of the commentariat as he bows to pressure to cut rates and perhaps raises questions in some quarters over whether he might have one eye on safeguarding his own seat on the FOMC.

Tired: TACO
Wired: PACO

— zerohedge (@zerohedge) August 24, 2025

To add insult to injury, Powell also admitted that the risks to inflation are to the upside while the risks to employment are to the downside. To any economics-trained ear, that sounds like stagflation – a scenario that Powell expressly said he couldn’t envision last year.

The President has been busy subverting his Fed Chair by appointing loyalist and Mar-a-Lago Accord author Stephen Miran to fill Adriana Kugler’s (a Biden appointee) seat on the Board of Governors, and also by threatening to anoint a Fed Chair-in-waiting to second-guess Powell’s every utterance before his contract expires in May next year. Recent attacks on Biden-appointed Lisa Cook over allegations of shonky mortgage applications further highlights how the Fed is now treated similarly to the Supreme Court in terms of the administration seeking to stack it with ideological fellow travellers and dispensing with the fiction of central organs of government being political silent blobs. This trend will doubtless cut both ways as California Governor Newsom’s recent behavior regarding Congressional redistricting in Texas amply illustrates.

The unabashed politicization of the supposedly independent and technocratic process of setting the price of money once again confirms that it is no longer the 1990s and that old ideas about optimal policy transmission, central bank credibility and the need to insulate important decisions from the influence of the popular will offers little protection against the new paradigm of raw power politics. Just as the interpretation of law is inherently political, the price of money is inherently political, and all aspects of national policy are being co-opted to support the MAGA vision of the United States and its place in the world.

The political nature of the price of money is, of course, a feature of other economies, too. Down Under in Australia the RBA has recently cut rates for the third time – sparking another wave of FOMO buying in the country’s already poisonously expensive housing market. Tellingly, UBS’s latest Global Wealth Report places Australia second behind only tax haven microstate Luxembourg in terms of the median household wealth. By far the largest driver of Australia’s household wealth is real estate, accounting for 53% of the total compared to just 30% in the United States. The relative proportions of Australia’s wealth composition vs others certainly raises questions about how much of that household wealth is illusory and liable to disappear when the housing market eventually reverts to fair value (as it always does).

Seemingly content to sacrifice their young to the Moloch of housing market speculation, the Australian government is continuing to do its best to ensure that fair value is never achieved and has this morning announced that they are ‘helping’ by bringing forward a scheme for the government to credit wrap first homebuyers with deposits as small as 5%. To put that another way, the taxpayer will be providing credit guarantees for buyers who are just 5% away from negative equity in a generationally expensive market.

Concurrently, the ABC reports that thousands of houses purpose-built for the disabled on city fringes (where services for people with disabilities are thin on the ground) through the promise of turbocharged returns underwritten by a massive government honeypot for the investors who stumped up the capital are sitting empty – because not enough people with disabilities want to live there. Totally not 2008 vibes at all.

This sort of silliness is common in Australia where there is apparently no problem that a big dose of financialization can’t ‘fix’ by creating new and bigger problems (just look at Australia’s energy market – once a source of competitive advantage, but no longer). Such thinking was again on display through a three day productivity summit last week where the usual neoliberal tropes of “it’s a supply issue” and cutting red tape were again rolled out and there was further inching towards financial repression as all agreed that it should be easier for private pension savings to be redirected into government priority areas. Australia’s government also committed to another round of cuts to “nuisance” tariffs right at the time where the rest of the developed world is realising that – with the benefit of hindsight – such moves in the 1980s might have been a bad idea and the ability to make stuff in your own country is actually a very useful thing sometimes.

Contrast that thinking to what is happening in the USA, where Intel has apparently just agreed to allow the US government to take a 10% stake in the company to ensure that strategically important semiconductor manufacturing occurs inside the United States and is treated as a national security priority. Thinking from first principles, economics is the study of scarcity and it is the job of national governments to arrange the scarce factors of production (land, labor and capital) to best ensure the prosperity and security of their people.

Very clearly we are seeing two very different approaches to this problem of scarcity emerging. Is the wealth of nations best employed to bid up the housing stock, making do-nothing speculators and ticket-clipping middlemen (real estate agents, mortgage brokers, banks etc) in the rentier economy fat? Or is it better employed to ensure supremacy of real production and the dominance of strategic supply chains vis-à-vis potential adversaries?