Trump Targets the Fed, French Markets in Turmoil & UK Inflation Surges Again

Hello and welcome back to the Market Maker podcast. And yes, he's alive. Piers Curran is alive. I had to go through every continent on planet Earth to locate this man. There was lots of people messaging, what's going on? It's been several weeks. So, Takir Ahmed, your message was received. You don't need to go out and send a search party. That job has been done. I have located Piers Curran. And we are back to talk about all things markets. So before you give us a bit more colour on where you have been, Piers, we're going to talk about in this episode really 3 main market themes and try to break them down, make them a little bit more digestible to understand, particularly given the fact that we're going into application season, but also because markets as always are pretty volatile and it's good to know from an investing perspective. So we're going to talk about Trump versus the Fed. What is going on? And of course, Donald Trump is making moves once again. This time he has a name, Lisa Cook, in his crosshairs as to potential mortgage fraud. So what does this mean for her future, but more importantly that for the independence of the central bank and US monetary policy and how markets are perceiving that? So that's number one. Number two, France, politics meets markets. Yes, you are reading lots of headlines about French political chaos. Markets are really tanking. Breaking in France. Is that the case? How worried should we be? What's actually happening? What are the next things to look out for? And then closer to home here from where we are in the UK, we've had UK food prices climbing again, putting pressure on families, and they're going to get hit with another electricity price rise as well in the back end of this year. And so this all comes in the context of the Bank of England cutting rates. So are they able to cut when inflation in some of these measures is going the opposite direction? It's going up away from target. So Piers, how are you and where have you been?

Oh, well, I'm back. That's all that matters. I am back in the seat. Yeah. You know, taking some time out over the summer period, a bit of Greek islands and then England. Then Cornwall, actually, you know, staycation, keeping it, keeping it within the UK, but like, well, you know, JD Vance, if he can holiday in England, well then, you know, why can't I? Did you see that? JD Vance?

Yeah, but who's he being put up by?

It was George Osborne, George Osborne, wasn't it? But then they got done for fishing without a license. Isn't that right?

Does a billionaire require a license to fish? I'm not sure.

I mean, I don't know. I don't make the rules, but yeah, good to be back. August is always a bit of a, well, like as a trader, back in the day, August used to be a bit of a slog, like, because obviously a lot of huge amount of the industry take holiday in the Northern Hemisphere at least, right? Because the schools are out. And so, you know, if you've got families here, you're off on your family. Vacations. So it just means a lot of people are away from desks. Generally trade volumes, you know, drop right down. And so generally it can be pretty quiet and dull. It's just of course that not everything stops. Obviously big theme today is politics. So politics doesn't stop, and particularly when Trump's around, of course. So just because people are on holiday doesn't mean markets can't move. And actually, not that it's happened in this August, but you know, we, if something mega that does kick off in August and people are away from their desks, actually it can exacerbate the size of market reactions just because liquidity levels are lower. So maybe we saw a touch of that with some of the French market moves earlier this week, possibly. But yeah, we'll get into it. But yeah, good to be, good to be back and Looking forward to, yeah, getting stuck back in.

Well, look, anyone listening, if you haven't already done so, if you like and subscribe to this channel, and that will make it a stronger commitment then for us to never miss an episode because there'll be more of a business case to run the episode. So I'll leave it at that and let you take action on it. But let's start with the Fed then, because this is one of the big talking points. And You know, Trump is never far from the headlines and he's kind of pivoted here from targeting Powell to one of his deputies. So Fed Governor Lisa Cook. So what exactly has happened here?

Well, I mean, this specific story broke Monday night because Trump tweeted or on Truth Social or wherever it was that, right, Lisa Cook, you're fired effective Immediately was his kind of message. And look, this is just his latest little bite nibble. Is it more than a nibble? I don't really know, but it's latest to kind of general all-out assault on the Federal Reserve at large. And here he's claiming that she falsified some details on her, one of her mortgage applications, whatever. I don't even know the dates, a few years back, and that therefore she's fired. And that the issue Here is, right? And obviously Trump's been trying to get rid of Powell. There was a legal ruling to say that he had no legal grounds to fire Powell or anybody else on the, or any other Fed governor without due cause, right? So here's the thing. He can only legally, he can only fire someone with due cause. Due cause meaning they've done something specific that has violated the law in some way, hence why he's bringing forward this claim about the falsified documents as part of a mortgage application. I think it's something around Lisa Cook buying two houses in quite close succession and that she claimed that both were her primary residence. I think that was the deal.

Yeah. So the specifics of this was, because it's not an uncommon thing, Trump has actually used this as a tactical approach, specifically using mortgages as a centerpiece to some of these accusations he makes against opposition figures. So there were, there were two prior to Lisa Cook, the New York Attorney General, and Adam Schiff, who is the California Senator. So how it works is that the alleged, the alleged is, well, the alleged part of this with James and Schiff and Cook is committed what is known as owner occupancy fraud. So this is when a person claims a second home. I.e., Piers Corren might have Cornwall or the, an island in Cyprus. When a person claims a second home or investment property is actually a primary residence in order to get a better mortgage, i.e., lenders are more inclined to give borrowers a lower mortgage rate on a primary residence compared to a second home or investment. So that's where this comes in and it looks, he's accusing her of fudging that process. And she had two primary residences, I think.

Right. Look, I think, let's step back a sec. What's going on here when, you know, you see Trump heavily criticizing Powell, like pretty much on the daily. Now this Lisa Cook, the bigger issue is Trump wants interest rates down. Okay. He believes interest rates are too high. He wants them lower. He's talked about as much as 2% below where they are now. Look, his agenda is that he's got a lot of debt to refinance. He's got to roll over about a trillion dollars worth of debt and interest rates are high, so it's going to be expensive to roll and borrow another $1 trillion at a much higher interest rate than the government has been enjoying over the last sort of 15 years post-financial crisis where you've had that zero interest rate environment and borrowing's been, let's just say, relatively pretty free, right? So that's, Trump's top-level agenda. It's just that the Fed is independent of the White House and the government, right? So this is the whole thing that's in question here, the Fed's credibility. And look, this isn't, whilst it's not normal, Trump's not the first kind of president to be attacking the Fed and trying to get interest rates to kind of move lower. You've seen loads of them doing it over the years, including like, well, I had a list actually, I've lost it now, but yeah, like Johnson back in the 1960s basically invited the then Fed Chair Martin to his Texas ranch where he proceeded to kind of like lambast him about why he is not cutting interest rates. Nixon very famously was badgering Arthur Burns at the time and getting pretty fruity about the language. Actually, Nixon was quite kind of Trump-style, to be honest, in being pretty out front and not afraid to kind of throw abuse pretty much. But George Bush in the '90s was trying to get Greenspan to cut rates, right? So look, it's not unusual. It's just it hasn't happened since the '90s. So meaning most people around now in markets have never seen this before. It has happened though. And Trump in his first term, you know, that's when he actually got going in criticizing Powell back then. And you know, he's just amped it up big time. What is different and that's never happened before ever is the sitting president trying to fire a Fed governor. So this Lisa Cook thing is notable because it's like, It is unprecedented to try and go that far. Obviously the press are all over it. The press are kind of generally anti-Trump. And so of course, 99.9% of press coverage is about, oh my God, what the hell is Trump doing? Another threatening the sort of credibility of our institution and all the rest of it.

Yeah. And there's always method to Trump's apparent madness. And what I thought was quite interesting with this one, he's obviously fired a number of shots at Powell. And I think there's the law of kind of diminishing return when you are throwing pop shots at someone. It's pretty spicy first time, and it gets a bit boring after a while. Interesting this time, and perhaps again shows that there is a bit of tactics behind what he does, so, or a lot of thought, which was about the shape or the composition of the people that sit on the Federal Open Market Committee, which are the decision makers at the US Central Bank. Now in, in 2026, all 12 regional Fed bank presidents are up for a term recertification. And guess who decides who are the reserve district presidents? So reserve districts are basically, if you think of United States as a big geography in your mind's eye on a map. And because it's so big and diverse in its geography, so are its local economies. And so you have, say, the Dallas Fed, the Chicago Fed, the California San Fran Fed, and basically they're all coming up for renewal as they do on the calendar rotation. These are decided by the Fed's Board of Governors. She sits on the board of governors, Lisa Cook. So if she goes, if Cook is replaced by one of Trump's other picks, one of which I know you've got some color on, which is Steven Miran or Christopher Waller, who's talked about as a potential power replacement, or Michelle Bowman, if they were to vote together, i.e., block voting, they could theoretically remove and replace all 12 regional Fed presidents. Now, as much as I think that that's an absolute limited possibility of happening, just the timing and just the theoretical calculation of this being possible, I think has added an extra little dynamic to this Trump thing.

Yeah. Look, there's a theoretical pathway to Trump controlling the Fed from what you've just said. Right. And you know, obviously it's theoretically possible, like it's almost zero. I don't think that's Trump's agenda really. He's just kind of bashing the Fed to try and even if it's subconsciously influence their decision-making around the table come FOMC meeting day and just trying to encourage them to lean on the kind of rate-cutting direction. Right. I don't think Trump's agenda here is to basically do an Erdoğan in Turkey and take over the basically central bank and just control entirely interest rates. I don't think really that's his path. But look, it's theoretically possible and fine. Yes, it does. Look, I want to say two things. Firstly, let's see what happens. Most likely this is a, as you're saying, Trump playbook, just chipping away at somebody else on the Fed just to grab headlines and try and influence, right? Of course, there is the possibility that he's right and Lisa Cook did commit mortgage fraud and fine, the courts will decide and maybe she gets kicked out, right? What I was surprised when I was reading up on this was the term of these Fed governors They have a 14-year term. So she was, Lisa Cook was sworn in on in 2021. So, or is it 17 years? Yeah, it must be 17 years because she, her term ends in 2038, which I kind of shocked me a little bit because these are essentially unelected officials who have a huge job to do in terms of controlling interest rates, which obviously has a major, major influence on the US economy and indeed the economic kind of workings of the entire planet, let's be honest. So yeah, quite shocked me that their terms are so long. I get it that they're supposed to be longer than the 4 or even 8-year terms of the president. Fine. So to try and get it, try and make it as apolitical as possible. But look, that aside, look, is she going to get found guilty and kicked off? I don't know. Probably not. And in any case, it's going to take months. She's going to fight it, right? In fact, her quote was, we will be filing a lawsuit challenging this illegal action. So look, this is months in the making, And there's going to be plenty of headlines and noises. Is it going to change much? I don't know. The one thing to realize with the Fed governors is one of them stepped down, like forget Lisa Cook now, who may get fired and fine, Trump can replace. Forget that for a sec. Adriana Kugler, another of the 7 Fed governors, she quit at the start of August. Her term was coming to an end anyway in January '26, so near the end, but still she quit and that seat's currently open. Unavailable. Now, Trump has nominated Stephen Myron, who's his current White House's Council of Economic Advisers chief. He's been fully involved with creating the tariff policy. His opinion is there will be absolutely no inflationary impact to tariffs. He's obviously fully in Trump's pocket, very anti-Powell. Now, Trump can't just put him in that seat. The Senate has to, or Congress has to vote on that, right? But Republicans do have the majority, so who knows? But look, so he could get Mirren on there. I don't know if Cook got found guilty, then I think this could become more interesting because fine, that's another seat open and fine, we could go one more step down that path, theoretical pathway if you like. But look, we're not going to find that out for months and she may well not be guilty, so it could be a bit of a nothing. Burger, this story. So really it just kind of, I think you step back and it leaves you saying, well, we know Trump wants rates to go down. We know his attack on the Fed is aggressive and unconventional. We know that certain parts, and they're pretty isolated, I think, but there are certain parts of the market participants that are a bit concerned and nervous about this in terms of how it's undermining the Fed's credibility. I say certain parts because The S&P's at an all-time high. Stocks don't care, right? I know the media really wants stock markets to care about this. They just don't. So it leaves you with the bond markets and something they latched onto. I say they, the media is, you did see some very marginal moves in bond, US bond yields off the back of this story earlier this week. All that's happened is that the trends of the last couple of years are ongoing. So the 30-year bond yield ticked up and like the media were trying to make— the FT article I was reading was trying to make a big thing out of it, but it ticked up 0.06 basis points and then ended the day back to flat pretty much. But look, they were trying to make a thing out of it, but the trend is up, right? 30-year yields are rising and the 2-year yields are going down. That's because there's a— the markets are pricing in a higher likelihood of a cut. Right? So that means the lower end of the shorter end of the curve drops. One thing we look at a lot is the yield curve and really the difference, the shape of it, the difference between 2-year yields and 30-year yields, the difference between the short end and the long end. That difference ticked up to 1.25% off the back of this story. That trend, it's been on a rising trend all year, right? But it just ticks up another little new high, which If you are inclined to be critical of Trump here, the, the kind of reaction to that is, well, markets are pricing lower interest rates, but that's going to mean higher inflation in the future because inflationary pressures haven't gone away. And if the Fed does cut and if they cut too early, it's going to exacerbate the re-rise of inflation further down the line. So people are talking about those longer duration yields reflecting the fact that we're going to get another inflation problem down the track. So that's it really.

I like your re-rise of inflation. I saw that sounded like a new Netflix kind of miniseries or something. The re-rise of inflation. Boom, boom, boom. Just a couple points there just before we move on, because I know there is a good segue between talking yields and talking US and France just before we do. I don't think you're giving some of the Fed governors enough credit here. You were saying they're going to be influenced when they have these meetings just to plant a little seed in their head, just to, you know, that he's there, he's looming literally outside the door or on the other side of a phone. So couple things. One, I don't think that's Trump's intention is to like, I don't think he's going to influence them. I think they're too long in the tooth. I think they probably intellectually think they're too superior. To want to come to his level. On that point though, I don't think that that reduces his impact that he can make, 'cause I don't think it's about him influencing the Fed. I think it's about him influencing public opinion. Right. And so this is a word that I wasn't familiar with, but you seemingly read much more than I do. But Trump tactics called lawfare, lawfare being the weaponization of the legal process, investigations or allegations for political gain. And so this very much, this would fit within this category, I guess, of what he's doing with Lisa Cook and kind of breaking that, those characteristics down, that selective prosecution, signaling out political opponents, claims of mortgage fraud, for example, whilst ignoring your allies who showing similar conduct. But probably the main one here, not just intimidation through legal pressures, but delegitimization strategy. I think that's core to everything he does. It's framing opponents as corrupt criminals to weaken their credibility, even if the allegation remains unproven. This can often happen when you see these, you know, kind of murder convictions. Oh, that guy next door looks really weird. It was definitely him. Like the Netflix always takes you on this journey, doesn't it? It goes, oh, these, these kids got kidnapped and it's like, well, it's definitely the guy who lives on his own at the end of the road who has the really ropey house. And you're like, that's the first 2 episodes.

Yeah.

And you go, just takes you through the whole cast list. Yeah.

One by one.

Well, no, he's just a weird guy. Like he's got nothing to do with it, but it's kind of a similar thing, but the damage is done. That guy is, you know, forever tainted by it. So I think, you know, I think his job is almost done here. Come what may out of the Lisa Cook scenario. I think it's just another chip at the armor of the Fed.

Here's a question for you. If this is entire BS, right? If Trump has just pulled this, it's completely made it up, right? There is no, absolutely no evidence for her fraudulent activity in the mortgage. Like if they, if it's a complete made up story, surely that'll come out and undermine Trump, won't it? If he's just kind of making up. Bullshit.

Doesn't matter. How many times have you heard Trump say incorrect things or Boris Johnson make inappropriate claims on statistics during COVID Like, that's not how this works. It's just about controlling the narrative and sometimes repetition, which is also core to his communication style. Human psychology dictates if you say something enough, it becomes believable irrespective of its truth or not. Now, I'm not here to say, are, you know, Trump is right or wrong or what is right or wrong overall. It's just a tactical approach. And I think he does this well in many senses. Yeah. But, and then the other part was, oh, sorry, go ahead.

No, no, go on.

The other part of this was about the length of term. So just, I'd had a quick look. I was like, ChatGPT, what do you think? And there's a couple of interesting points here. So basically all of the governors are on staggered terms. So they don't all roll off every 14 years.

Right.

So basically there is a, there's a one governor's term expires every 2 years.

I see.

Meaning no single president can immediately reshape the whole board.

Yeah.

Point number one. The other thing is about continuity because economic cycles generally take quite long and therefore they can see it through from a policy setting perspective. Insulation from politics. Obviously they outlast the White House officials in that respect. The one thing I would say is that aren't economic cycles getting shorter and isn't technology reshaping the way economies work? So by definition, whilst those things I noted remain true now and are appropriate, surely that system is doomed to fail because of technology's impact on the economic cycle itself.

Yeah, I mean, it's a very good point. I think you can argue that the speed at which these institutions evolve and modernize is like snail's pace, and certainly relative to what happens out there in the real world, right? And the problem is that AI, right, has just accelerated the evolution of the real world even faster, making that lag just all the more pronounced. But these are long-term issues that, yeah, I mean, how do you change it though? Because when you have an institution like the Fed, they will vote in a way that protects their institution and the way that they do things, right? And you can't change, they're in charge. So yeah, I think it probably is a model that's not fit for purpose and it's progressively getting even less fit for purpose as time goes on. But look, I want to maybe end on this whole Fed thing by just saying all this stuff this week, just forget about it. What's more important is what happened last week, which was Jackson Hole and was Powell who stepped up to make a speech and was surprisingly dovish and essentially paving the way for a rate cut in September. Now obviously this Trump and Cook story's just flashed up and taken over the whole narrative, right? But I think, park that, I think the Fed are going to now cut rates in September. You could argue Trump has badly timed this attack on Cook because if he just riles Powell and pisses off the Governing Council even more, they may, even if it's subconsciously, behave in a way that's against and opposite to what Trump wants. But obviously, I don't know. We'll see. Intellectually, I think they're above that. So I think you're going to get a cut next week, or next, not next week, sorry, at the next meeting in a few weeks' time. That's the most important thing from a market point of view. And that is why 2-year yields are dropping. That's why the stock market is on an all-time high. And this kind of storm in a teacup around Cook is just a bit of a temporary focal point.

Yeah. And the next Fed meeting's on the 17th. Of September, market pricing is currently at 90% implied probability of a 25 basis point cut. And also going out, so you've got the SEP meeting, October meeting, December meeting. In December, the market's tilted towards another cut. So it's a 3.75% to 4% federal funds range of around 50%.

Yep. And look, we've got another round of key economic data in the next couple of weeks. Another fresh look at the labor market, because you remember the nonfarm payroll payrolls report that we had last month was an absolute shocker, like really bad. The main reason why Powell has now pivoted a little bit more to the dovish side. So we're going to get another payrolls number at the end of next week. That's it. That is the number. That's everything. If that doesn't show a really strong rebound from the terrible numbers that we got at the start of August, then this rate cut's locked in. 100%. We do have another set of inflation figures before that Fed meeting as well, but I think given that shocker of a labor market report, that's become the number one data point between now and the next Fed meeting.

Cool. Well, look, just for the sake of time, let's try and connect the dots then to France and then cover off the UK inflation situation.

Yes. So France, look, are having a bit of a shocker. From a political point of view. And there's been another call for a vote of no confidence in Bayrou. That's the current prime minister in his administration. And if the vote fails, then he must resign. Déjà vu, because this happened literally 8 months ago. The last time that there was a vote of no confidence in the government and the prime minister had to resign, a guy called Michel Éric-Albanier, that you'll, I'm sure, recognize the name from the Brexit negotiations. But look, this is yet another episode in the French political circus. Macron, who's the president, of course, if the vote of no confidence goes through, which is looking likely, then Macron will have a decision to make. Either he has to try and appoint a new prime minister like he did last time when Barnier he got chopped. So, but then that would mean trying to cobble together a new coalition. And obviously that didn't work last time because here we are 8 months on, we've got the same problem. I imagine he'll try and do that though and try and kick this down the road because the other option is dissolving Parliament and having a general election. And the way the polls are going at the moment, you're definitely getting kind of Not extreme, but very, very left and very right political parties are on the rise, of course. And look, markets sold off quite sharply off the back of this development earlier this week. And underlying all of this is just the situation that the French economy is not in a good place and their debt and their deficit levels are not in a good place. Okay? And this is why markets are getting a little not panicked, but their concern has ratcheted up another notch. And so we saw French stocks. I was actually looking at the CAC 40, that's the French stock market. I mean, so it's down 3% this week, right? But if you look at, this isn't new, right? The French have been underperforming all year, the year to date for the French market. I mean, it's up, but it's up 5%. Compare that to Germany. Germany's up 21%. Italy's up 24%. Spain's up 30%. Right? So out of the big four economies, France is having a shocker from a stock market point of view, which is just a reflection of this whole story that's not suddenly happened this week, has been ongoing for months and months and months. Right? So we'll see. But, and you've gotta keep an eye on things like the French 10-year bond yield, for example, and also obviously the French stock market. But when you're looking at their debt situation. I've got some stats here. So the French debt-to-GDP ratio is 113%, which is high, but the problem is the direction of travel as well. So it's high, but it's rising. Okay, so it's getting worse. To compare that, Germany, who are always the most fiscally prudent out of the European countries. Their debt to GDP is 63%. Oh, and by the way, as an aside, back in the '90s when these lot were trying to figure out this new kind of Eurozone thing and let's have a single currency, they came up with this Stability and Growth Pact and it was basically to appease Germany who were the strong economy at the time and saying, Germany basically said, look, if I'm going to join a club with you lot, then I want assurances that you are going to be fiscally more disciplined. So look, here are a set of rules. And the rules were, you are not allowed, your debt-to-GDP ratio cannot rise above 60%. France is at 113. Your deficit, right? So debt-to-GDP is just, right, your total debt right now, this moment divided by the size of your economy, right? Gives you that ratio. So the amount of debt they have is, larger in monetary terms than in an entire 12 months' worth of economic output. The deficit is then looking on an annual basis, what's the government's budget spend versus the revenues they've got coming in, revenues from taxes and whatever. And there, their deficit is at -6%. Okay. But the Stability and Growth Pact back in the '90s said you're not allowed to have a deficit above -3%. So their deficits double, give or take their debt-to-GDP ratios double, all right, than what it's supposed to be. However, there isn't one country in the entire bloc pretty much that stuck to these rules. I mean, all right, we've had COVID and major crises, so fair enough, maybe in the short term, right? But look, France is in a bad place and it's getting worse. That's the problem. And they've The credit rating agencies are kind of, they're on negative watch across all three of the main ratings agencies. They're currently rated at AA-. They're probably going to get chopped down to single A. All right. And so yeah, I guess this story needs to be monitored. It's not really moving at a breakneck speed at this point. But if I would say if Macron has, if he's forced into calling a general election rather than trying to cobble together a new coalition, then I markets will really start to go again and you'll see the concern levels start ratcheting. And the last point, if the big worry is the vicious sort of cycle that if you get into the negative feedback loop, then you're kind of dead. That meaning if people are worried that France are going to default on their debt and their fiscal trajectory's unsustainable, they're going to start selling. That debt, which means yields rise, which means it's then even more expensive for France to roll over and reborrow some of this money, meaning their fiscal situation gets even worse. And so, right, yields rise and people sell debt and you, you get into this negative spiral, right? And we're, we're not there, but it's not a million miles away. But yeah, something, it's definitely one of the key risks in Europe for sure over the second half of this year that you've gotta be be looking out for.

And just for context, looking at that French yield in comparison to the German benchmark yield, so the French-German 10-year yield spread, that's coming up to around those late March, early April highs, which is around 80 basis points. We were around 70 before this latest debacle, but in that previous one you mentioned 8 months ago at the end of last year, it got up to near 90. So there's a bit of room to run here. But my question is, isn't France, two things, isn't France too big to fail? And isn't secondly, famous last words, but isn't the second one here that like any political incumbent, your power and popularity decline over time. It's Macron's time to go. He's outstaying his welcome here. So he's on, he's a dead man walking as far as his political situation is right now. It's how long, when is it going to happen? So that change is coming. So is the trade, the trade is not now shorting French stocks or going long, you know, the spread or whatever it is. Is the trade not fading all of this, right? In the end, waiting for the freakout, right? At the end of any political term, it normally requires an economic episode to just be the final dagger. And then sensibility prevails and France is France, and then this thing fades like it has done on prior occasions.

Yes, I think you are right. I mean, the risk is who wins if Macron falls on his sword. And the big concern from a market's point of view, not, I mean, your political persuasions are what they are, right? But from a market's point of view, if we suddenly get a more, if we kind of get a knee-jerk to the left, then the left will be more policies such as lowering the retirement age or let's increase welfare spending. And so that just means the government spending more money, which means the debt levels and the deficits aren't going to get any better. They're going to get worse, right? And so then that kind of default risk rises. But to your point, France is too big to fail. Let's not get confused here. 100% too big to fail. Greece and Portugal, And Ireland, if you're old enough, you'll remember they got bailed out back in 2010 and 2011. They're tiny minnows compared to the French economy. And so should the absolute worst case scenario happens, and I don't think it will, but if you do get a slide to default, then of course the Eurozone will come in and backstop France and there will be a bailout. And so you are right, that Armageddon scenario isn't going to happen. So you wait till the freakout about it peaks and then you're kind of fading that move as it kind of reverses off those sort of exaggerated behavioral extremes.

Alright, well look, to wrap up maybe in the next few minutes, just a final word on the UK, because I know we've had some headlines, certainly if you are based here, that would've been on your radar. One being, damn, my food shop's gone up again. UK food inflation has gone up to 4.2% in August. That's now the highest since basically the beginning of 2024. So Feb '24, they were attributing this to poor harvests, higher labor costs, and supply strains driving that rise. But what was interesting is I saw in the news this morning that in addition, gas and electricity prices will rise by 2% for millions of households under the latest cap announced by the energy regulator Ofgem. Now, I thought this was what we were expecting anyway, which is a bit of an uptick in toward year end, but you've got energy prices going up. As a systematic kind of jump with the cap. Then you got food prices more aggressively going up, the fastest rate in fact in 18 months. So what does this mean for the Bank of England? Because they've just cut interest rates hoping that inflation's under control. So what would they be thinking in this scenario, do you think?

Yeah, well look, the Bank of England, don't forget they've been cutting rates. That's, that was their 5th rate cut. Okay. Since the peak. So they started cutting in August last year and they basically cut every quarter, right? Which is kind of their usual playbook. Every other meeting they cut rates by 25 basis points. So the peak back last year was up at 5.25%. And as of the meeting back on 7th of August, they cut and it's now at 4%. Right now during that time, yes, food inflation has grabbed the headlines here. Food inflation is on the up, but actually inflation broadly has been rising in the UK all year. So really, if you think about that post-COVID spike in inflation where inflation peaked around the start of 2023 or mid-2022, let's call it, then really we had a big drop, but that drop troughed sort of a year ago, right? September, October, we kind of troughed and inflation's just trending back up at a quite a slow, steady rate, but trending back up anyway. But the Bank of England have cut rates 5 times in that period of 12 months where inflation's been creeping back up. So I guess the timing of this is good in that they've just cut rates, right? And on the current schedule, they're going to cut rates again, but not until November. So we've still got, it's August still, right? So we've got the whole of September, the whole of October and a bit of November, and we're going to get more inflation data and we'll get more knowledge about how the economy's doing before that kind of cutting meeting comes round. Right. But look, mainly the reason for food prices going up is not something that the central bank can control because it's supply side. It's the weather. Our harvests have been really bad again. And so it just means supply's short. Now the central bank, I mean, you can cut rates or hike rates all you want, but that's not going to control the weather. So really, if I was thinking about this, it would be, well, this is going to cause an economic drag if food prices particularly are back on the up. Well then surely this is a negative factor for economic growth. Therefore, we should get a dampening in demand as a result of that, which should take care of this bump higher in inflation on its own. And really, let's look beyond that and think about the economic trajectory, which, let's be honest, is probably down. And if I was the Bank of England, I'd still be thinking, yep, we're going to cut in November. That's my— Yeah.

One of the, one of the stats there, I was just kind of fact-checking. I was watching the news last night and they were talking, 'cause me and my wife were saying, well, you know, it's been such an amazing summer. Like from a personal point of view, you're like, oh, sunshine's great. And you watch the news and you're like, damn, this global warming. Like you look at what's happening in Bangladesh, you look at what's happening to the farmers in the UK. And as you said, you know, some of these shortages, butter, eggs, chocolate. Oof. That's a tough one. I know for you to swallow. But chocolate is going up because of the ingredient shortages. But the UK is almost certain, and we're already obviously coming to September, to have had its hottest summer on record. And looking over the course of like the whole year, mean temperatures across the country, which includes overnight lows as well as daytime highs for the UK, stands at 16.13 Celsius, 61 Fahrenheit. That is well above the previous warmest summer. It's crazy. It's like that the previous one was 15.7. It's gone up to 16.1. Temperatures during the rest of August would need to be 4 degrees below normal to prevent the record being broken. So, and what was interesting was there has been, I think, previous periods when this has happened, but what's happening is the data's showing that all of these are happening I think it was 2020, 2022, 2025. It used to be, you know, a decade episode.

More stretched out.

If you like.

Yeah. The frequency's increased.

Right. So temperature's going up, frequency is going up. But look, I'm not here to complain about climate change and I'm sure people will have their views on that, especially Trump, who I know is listening. So drop a comment, Donald, let us know what you think. But yeah, just some stats on that. All right, well look, we've gone on for 45, so we'll end it there. Good to be back. Thank you, Piers, for joining me.

You're very welcome. That's it. I'm back now. No more missing of any episodes. Honest.

Yeah. So drop us a comment. Let us know. I've also been recording some really great guest episodes that are coming up across everything from banking to quant trading. And also I've got a really cool series that I'm doing with the LSE, the London School of Economics students. And so keep your eyes and ears peeled and tuned for that because it's going to be super helpful for application season, which I know is fully underway at the moment. So see you next week. Thanks very much, everyone. Cool. See ya.