“Oh!…K”

By Michael Every of Rabobank

As Bloomberg puts it, the latest Fed Beige Book underlined a ‘deepening K-shaped split’. The very wealthy are still spending; everyone else is struggling. That split is now evident all over. AI firms are booming; most aren’t. Moreover, a day after the Financial Times spoke of people looking for “crumbs” in parts of the US, it happily reports ‘Megadeals hit new record as Wall Street’s animal spirits roar back.’ That will please the crumb-seekers.

It’s there in budgets too. Brussels just rebuked Finland for breaching EU budget rules: if even the Scandies are naughty, as they rearm aggressively, then who isn’t? The UK saw what the Telegraph calls ‘A Budget of chaos, contradiction and falsehoods’, as the Guardian noted “Rachel Reeves targets UK’s wealthiest in £26bn tax-raising budget”, and the FT said it ”raises the UK tax take to an all-time high.” Our China seeks an “alternative world order.” Yet ‘because markets’ types were all ‘O’-shaped: mouths agape, intellectually in a closed loop. So, here we are.

The FT op-ed concludes the EU must embrace protectionism if it wants to retain any industry as, “Europe has nothing to offer and difficult decisions to make”. It’s already heading in that direction slowly, grudgingly, blaming Trump, and still thinking it will be able to remain a net exporter as it happens, which it likely won’t. It goes without saying that Europe is K-shaped on that key front, within lobby groups in each member state, and between them – and Brussels.

In other geoeconomics, Nikkei Asia reports ‘Japan Inc.’ is trying to reduce reliance on China; the US is negotiating a trade deal with Taiwan that could help train US workers; pro-‘free-trade’ Canada announced further limits on steel imports and promised more money for its lumber mills; the Israeli army is moving away from Chinese cars to avoid tech spying; and Trump won’t invite South Africa to the Miami G-20 – maybe that global institution is at a fork in the road too.

The ECB also has a plan ‘to boost Europe’s global influence’ – making the Euro available for those worried about access to dollars. Yet the Euro’s global role is small, commodities are priced in dollars, Russia’s pushing for barter, China for CNY-invoicing, and US stablecoins about to be unleashed: so, some worry about the ECB’s access to dollars more than others’ access to Euros.

In the political realm things are always K-shaped – but now it’s a huge capital letter. The Georgia election interference case against Trump was just dropped, as was the court case against its instigator, Letitia James, on a legal technicality; but Axios notes, ‘Supreme Court poised to reshape next 3 election cycles.’ That may matter more than what it says on tariffs ahead.

It’s not just courts: every US institution is K-shaped, even the army. The White House is floating sedition charges against six Democratic politicians, including Senator Kelly, for calling for the armed forces not to obey illegal orders –without stating which ones are– as social media shows billboards encouraging troops to do so. It’s also floated on MSNBC that anyone helping that legal process would face Nuremberg-style charges if Republicans lose the 2028 election. That’s the backdrop to two US national guard soldiers being shot near the White House, following two assassination attempts against President Trump and the murder of Charlie Kirk.

Naturally, international relations are not OK, just ‘K’. China is demanding clarity from Japan on its one-China principle as the Wall Street Journal’s Ling Ling Wei reports following the Trump-Xi call, the White House told Japan to “lower the volume” on Taiwan, which Tokyo “found worrying.” Yet media are always K-shaped, so in no (Ling Ling) way does that mean this is gospel, just a view. Meanwhile, Taiwan pledged to boost defence spending by $40bn to “defend democracy” – and whom will it buying those arms from?

Regarding Russia-Ukraine, on one hand Moscow is pursuing a deal on its terms and called the leak of a Witkoff call with its team “hybrid warfare”: true, but it takes one to know one. Moreover, the US is reportedly demanding Kyiv signs a peace deal before it underlines the details of its security guarantees for it – talk about caveat emptor! On the other hand, Europe is trying to find a plan B for Kyiv if they can’t agree on using Moscow’s frozen state assets – which could blow up any peace deal; France and the UK are LARPing the 1950s, forgetting in 1956 the US was already showing them who did and didn’t have ‘strategic autonomy’ in the Suez Crisis; and the EU’s top diplomat, Kallas, is saying a peace deal should insist