Premeditated Chaos
August 20, 2026
The Trump administration is stirring the uncertainty pot in multiple ways, adding new dimensions of the phenomenon on a daily basis. To name just a few of the initiatives, there’s the shift from a half century-old alliance with South Korea to a blossoming friendship with North Korea; the constantly new accusations about U.S. election fraud even as that process posses the greatest threat to the country’s democracy; daily shifts in the claims and threats regarding the Strait of Hormuz and the Middle Eastern war; characterizations of”climate change” as a hoax in the face of daily weather disasters that suggest otherwise; turning Antifa into a dirty word even when the term simply means opposing fascism, which is simply the threat against which the second world war was fought; large and ongoing cuts in the federal employees juxtaposed against worrisome spreads of preventable infectious diseases and food-related illnesses; a transformed Justice Department and court system with a retooled allegiance to one person rather than the U.S. Constitution; the reversal of environmental protections; and a variety of gambits to corrupt the Federal Reserve’s ability to conduct an independent monetary policy in reality as well as perception. Today’s surprises of the day are 1) fresh support for legislation promoting crypto and 2) Treasury Secretary Bessent’s announced sharp increase in Treasury buyback operations of ten to thirty-year Treasury bonds intended to put downward pressure on longer-dated interest rates between during the brief time between now and the mid-term elections.
A big winner of the assault on social stability has been Bitcoin, whose price jumped 3.5% to an 11-week high. West Texas Intermediate crude oil climbed 3.3% to a 4-week high. The dollar has been mixed, rising 0.4% against the yen and 0.3% versus the Australian dollar but falling 0.3% relative to the Canadian dollar, 0.2% versus the kiwi and sterling and 0.1% vis-a-vis the euro. Yesterday’s drop in the 30-year Treasury yield right after Bessent’s comment has been reversed by increases today of five and six basis points on the 30- and 10-year U.S. Treasury bond yields. The ten-year German Bund yield hit a 15-year high, and comparable yields on French, Italian and Spanish sovereign debt yields are up today by 4, 3 and 4 basis points. Precious metal prices are somewhat lower. Equity markets in the Pacific Rim had closed up 5.9% in South Korea, 1.4% in Japan, 0.8% in Hong Kong and India but are lower in Europe and the United States.
The Executive Board of the Swedish Riksbank left its policy interest rate unchanged at 1.75% but noted that inflation and growth this quarter appears to evolved more strongly than assumed and retained the view that a rate hike may be needed soon.
If the unexpectedly high inflation during the summer were to be the start of a larger and more lasting upturn in inflation, the Riksbank would adjust its monetary policy in a tighter direction. As the war is still going on, the underlying cause of the supply disruptions remains, and there is still a risk of inflation becoming too high.
The decision by officials at the People’s Bank of China not to change the 3.0% one-year Loan Prime Rate and 3.5% five-year Loan Prime Rate met analyst expectations. The rates have been at those levels since cuts of ten basis points in May 2025, and the move before that was a 25-bp reduction in October of 2024. Officials have been pulled in opposite directions by geopolitical uncertainties on the one hand and slower-than-desired Chinese growth on the other.
Jamaica’s 5.5% central bank interest rate was also left unchanged. It’s been at that level since a cut in February, but inflation risks are deemed to be upwardly skewed.
Price data reported today include
- An acceleration of German producer price inflation to a 39-month high of 3.0% in July from 1.8% in June, led by energy costs.
- Consumer price inflation in Hong Kong receded to a 3-month low in July of 1.7%. Such bottomed last September at 1.0%.
- In Poland, producer price inflation jumped to a 38-month high of 2.8% last month from 1.9% in June.
- Georgian PPI inflation of 5.1% in July was down from a recent high of 7.1% in May and at a 10-month low.
- Canadian producer prices rose by a greater-than-forecast 0.6% between June and July and retained a 12.4% year-on-year increase. That was the fourth straight PPI reading above 10%.
- Moroccan CPI inflation of only 0.6% in July represented a 5-month low.
Switzerland experienced a record high monthly trade surplus of CHF 8.1 billion in July. Nevertheless, the CHF 31.5 billion year-to-date surplus was 21% narrower than a year earlier.
Japan’s trade deficit of JPY 635 billion last month was a lot smaller than expected but wider than the July 2025 gap of JPY 156 billion. The seasonally adjusted deficit of JPY 686 billion was 26% less than experienced in June.
Taiwan’s current account surplus of $121 billion was 83% greater than a year earlier. In another Asian economy, Malaysia accrued a MYR 170.5 billion trade surplus over the first seven months of this year, 2.4 times wider than a year earlier.
There’s been a 20-point rise in the orders component of the Confederation of British Industries’ August industrial trends survey to -25, a 21-month high.
Hourly year-on-year labor cost growth in the euro area slid to a 22-quarter low of 3.0% in the second quarter from 3.2% in the first quarter and 3.6% in the second quarter of 2025. Construction output in Euroland remains very depressed in June, dropping 1.3% from May and showing a 0.7% decrease compared to a year earlier.
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