Wolfgang Münchau is a columnist for DL News. He is co-founder and director of Eurointelligence, and writes a column on European affairs for UnHerd. Opinions are his own. When the price of Bitcoin hit a low of $61,000 last week, the crypto-hating economists came out in force once again. Nouriel Roubini talked about “The Coming Crypto Apocalypse.” Olivier Blanchard ruminated that even a valueless asset like Bitcoin can have a strategic advantage if it constitutes a hedge against adverse shocks, but crypto i ...

Naomi, we're seeing a little bit of downside for the Japanese yen, but it doesn't seem to be at least catastrophic for now, when it comes to the pace of potential losses that we could have seen with the supposed Takaichi trade. What are your expectations now that you've seen the outcome of the elections. Well, what's interesting is that even though Takaichi won quite a lot of popular support, markets haven't voted yet.And so I think it's sensible to to give Takaichi the benefit of the doubt because after al ...

Core Viewpoint - Woodside Energy has secured a long-term liquefied natural gas (LNG) supply agreement with Turkey's BOTAS, marking a significant step in its strategy to expand its presence in key LNG markets [1][3]. Group 1: Agreement Details - The contract involves the supply of approximately 0.5 million tonnes per annum of LNG, equivalent to about 5.8 billion cubic meters of natural gas, over a period of up to nine years starting in 2030 [1][2]. - The LNG will primarily be sourced from Woodside's Louisiana LNG project in the United States, supplemented by its global portfolio [2]. Group 2: Strategic Implications - This agreement is a strategic milestone for Woodside, highlighting the flexibility of its LNG portfolio and its ambition to deepen its market presence [3]. - The deal supports Woodside's growth strategy in the US Gulf Coast, reinforcing the commercial case for the Louisiana LNG project [5]. Group 3: Market Context - The agreement aids Turkey in diversifying its gas supply sources amid global market volatility and aligns with Europe's efforts to secure long-term LNG contracts [4]. - As global LNG demand rises, particularly from Europe and emerging markets, long-term contracts are increasingly essential for energy security and investment certainty [7]. Group 4: Geopolitical Significance - The contract reflects closer energy cooperation between Turkey and the United States, with support from both governments indicating broader political backing for transatlantic LNG trade [6].

Economic Overview - Higher-income households are currently driving consumer spending, supported by home equity and stock market wealth, while lower-income consumers are struggling due to five years of rising prices, which are affecting their purchasing power more than the inflation rate itself [1][2] - The economy is exhibiting a K-shaped recovery, where higher-income individuals are benefiting more than lower-income groups, leading to concerns about sustainability [2][3] Consumer Behavior - Consumer-facing companies report that low and moderate-income consumers are tightening their spending, changing their purchasing habits, and buying less [2] - The top third of income earners account for a disproportionately high share of overall consumption, raising questions about the sustainability of this consumption pattern [3] Labor Market and Wage Gains - A strong labor market has been beneficial for lower-income individuals, with significant wage gains observed in the bottom quartile over the last two years [5] - Maintaining price stability and maximum employment is crucial for supporting lower-income households [6] Housing Market Challenges - The housing market is facing significant challenges, including low supply and high demand, which are exacerbated by the current economic conditions [7][8] - The average age of first-time home buyers has reached a record high of 40 years, indicating affordability issues in the housing market [7] - Structural housing shortages persist, and while interest rate adjustments can be made, they are insufficient to address the underlying issues in the housing market [9]

Core Insights - The proposed Constitution natural gas pipeline could generate up to $11.6 billion in energy savings for consumers and support nearly 2,000 jobs annually over a 15-year period [1][8] - The pipeline is expected to stimulate up to $4.4 billion in additional gross state product across Connecticut, Massachusetts, New York, and Rhode Island, along with generating $432 million in federal and state tax revenues [2][8] Economic Impact - The construction of the 135-mile pipeline could alleviate persistent pipeline constraints in the Northeast, where winter gas prices are nearly three times the national average [3] - The pipeline could reduce local gas prices by up to 6% during peak demand months, providing consistent savings throughout the project's lifespan [4][8] Market Dynamics - The region experiences extreme winter price spikes due to overwhelming demand and limited pipeline capacity, with prices soaring to as much as 36 times the annual average on peak days [5] - The analysis indicates that without additional pipeline capacity, severe market dislocations and seasonal price spikes will continue, even with increased renewable energy sources [5][6] Environmental Considerations - Improved gas supply and price stability from the pipeline could lower greenhouse gas emissions by facilitating a shift from heating oil to natural gas, which has a 28% lower emissions intensity [6] Summary of Key Findings - The Constitution Pipeline is projected to provide up to $11.6 billion in energy savings, with $8.5 billion net savings after service costs, and support nearly 2,000 jobs annually [8] - The total revenue for businesses across the four states could reach up to $8.5 billion [8]

Monetary Policy Stance - The Fed acknowledges a challenging situation with upside risks to inflation and downside risks to employment, requiring a balanced approach [1][2] - The Fed took a step toward a more neutral policy stance, considering increased downside risks to employment [2] - Future policy decisions will be based on incoming data, the evolving outlook, and the balance of risks, with no pre-set course [3][4] Balance Sheet Normalization - The Fed decided to conclude the reduction of aggregate securities holdings as of December 1 [4] - Over three and a half years, the Fed's securities holdings have declined by $22 trillion [6] - As a share of nominal GDP, the Fed's balance sheet has fallen from 35% to about 21% [6] - In December, the Fed will hold the size of its balance sheet steady while reserve balances continue to move gradually lower [7] - The Fed will continue to allow agency securities to run off and reinvest the proceeds in Treasury bills [7] Dual Mandate - The Fed is committed to supporting maximum employment, bringing inflation sustainably to the 2% goal, and keeping longer-term inflation expectations well anchored [8] - The Fed understands its actions affect communities, families, and businesses across the country and is dedicated to achieving its maximum employment and price stability goals [9]

Core Insights - The article discusses the expertise of Ernest Hoffman, a Crypto and Market Reporter for Kitco News, highlighting his extensive background in market news and journalism [3]. Group 1 - Ernest Hoffman has over 15 years of experience in writing, editing, broadcasting, and producing for various media and cultural organizations [3]. - He began his career in market news in 2007, establishing a broadcast division that created a fast web-based audio news service [3]. - Hoffman has a Bachelor's degree in Journalism from Concordia University [3].

Fed Independence & Political Influence - The removal of a Fed governor based on accusations poses a significant threat to the Fed's independence [1][3] - Such a removal could set a precedent, allowing political influence to sway interest rate decisions away from the Fed's dual mandate [3][6] - Administrations typically favor lower interest rates, potentially leading to policies misaligned with maximum employment and price stability [6] Market Reaction & Economic Implications - Markets may not immediately react to the issue but could respond negatively if a governor is removed from the FOMC [4][6] - Political influence on interest rates could introduce inflation and risk premiums in the long-term bond market [7] - A Fed perceived as politically influenced could lead to higher premiums on long bond yields, counteracting the goal of lower long-term interest rates [7]

Core Points - The Federal Reserve has implemented a quarter percentage point interest rate cut, lowering the benchmark to a target range of 4%-4.25%, the lowest in nearly three years [1] - The Federal Open Market Committee has indicated future directions for monetary policy [1] Group 1 - There was only one dissenting vote during the Federal Reserve's decision, contrary to expectations of multiple "no" votes, suggesting a unified front among committee members [2] - The primary challenge for the Federal Reserve in the coming years will be maintaining full employment, as the hiring environment is becoming less healthy despite a well-operating economy [2] - Analysts suggest that the Federal Reserve may tolerate inflation above its target due to upcoming personnel changes, indicating a potential shift in monetary policy approach [2]

Monetary Policy & Interest Rates - The Federal Reserve is widely expected to hold rates steady at the current FOMC meeting [1] - Some governors may dissent, arguing for lower rates [2] - The Fed is likely to keep options open, including a potential action in September [3][4][10] - The market believes that the Fed cutting rates is not a certainty, as evidenced by long rates increasing the last time rates were cut [11] - The Fed's control over the long end of the curve is limited, influenced more by future growth prospects and treasury supply/demand [12][14] Inflation & Economic Factors - There are disinflationary forces at play, including sluggish growth, regulatory review, and the AI boom [3] - Tariffs will increase costs, but the impact on persistent price pressures in a disinflationary environment is uncertain [4][5] - The Fed is trying to determine if cost increases are one-time events [6] - The unemployment rate is low due to decelerating workforce growth, not aggressive hiring [9] Labor Market - Hiring levels are sluggish and may continue to be so [10] Fed's Mandate - Price stability is considered a primary job for the Federal Reserve by many [8] - The Fed has been overbalanced towards inflation concerns recently due to the tariff situation [10] - The Fed is expected to try to get more balanced between inflation and full employment, which may lead to action [10] Fed's Decision-Making - The decision to cut rates requires a consensus among the 12 voting members, not solely the Fed chair's decision [14]