Rearranging The Chairs

By Michael Every of Rabobank

Rearranging the Chairs

Tuesday was another down day for most markets as the US weekly ADP jobs report suggested the labor backdrop is weakening and housing starts sagged. As the FT puts it, ‘Oracle’s astonishing $300bn OpenAI deal is now valued at minus $60bn.’

Here Is The Batshit Insane Chart That Sent Oracle Stock Soaring 25% After Hours https://t.co/Haus5Ueybg

— zerohedge (@zerohedge) September 9, 2025

Wednesday is mixed so far in Asia for bonds: Australia is seeing its 10-year yield down around 2bps and Japan’s equivalent is up 3bp – and neither is what their economies need right now; but there as elsewhere, with K-shapes all over, nasty politics, and worrying geopolitics, what is? That question it tied up with ‘who is?’

Treasury Secretary Bessent just said he doesn’t want to be Fed Chair but that person will hopefully be named by Xmas – Trump thinks he already knows who he wants . Does anybody think it’s going to be a strong, independent, gnostic, hawk deliberately ignorant of geopolitics, who will focus on 2% CPI and clash with the White House and Treasury? I thought not.

Politico reports Spain and Germany are gunning to head the ECB in 2027, with former Bank of Spain governor de Cos, now running the BIS, in a strong position – though moving him could cost Europe its BIS leadership if Trump wants an American to run the central bankers’ central bank. Bundesbank president Nagel is mentioned, as is him recently annoying Chancellor Merz in expressing support for Eurobonds for defence purposes. Germany has more hawkish candidates – or it could support one from elsewhere, such as former president of the Dutch central bank Knot.

Markets will soon focus on this rearranging of Chairs… and that it’s on the Titanic(?) As noted yesterday, the White House sees the neoliberal, central-bank centric, inflation-targeting world no longer exists: so, logically, it won’t exist under the next Fed Chair. Monetary policy and fiscal policy will (further) conjoin, as will FX, trade, defence, industrial, and energy policy – and others to boot. Covering any of those areas will require a real understanding of that connection and the nested hierarchy of national (or bloc) Grand Macro Strategy driving them.  

Is that just a US issue? No. The PBOC operates in a similar fashion, so the world’s two largest economies would be outside the neoliberal norm. The Bank of England could follow under Reform. Even Europe will be forced to grapple with serious structural issues, which the Draghi Report argue require bold, original, joined-up thinking – and it’s not as if the ECB hasn’t changed hugely since its inception.

The real issue will be finding someone who can Chair a central bank as it will need to be run when existing candidates have, by default, been trained on how it used to need to be run. That’s not going to be easy. A related issue will be finding financial media and analysts willing to keep up with this dizzying set of conflating changes: that’s also going to be a hard sell when most of the specialised and siloed industry is built around CPI or payrolls higher/lower games.

Meanwhile, in geopolitics and related geoeconomics what the BOJ, Fed, ECB, financial media, and markets are all going to have to grapple is long and growing:

Japan issued a safety alert for its citizens in China as that diplomatic row escalates, with neither side seen willing to back down. Japanese businesses are bunkering down for the expected fallout. That’s as the US Ambassador to Japan publicly reiterated that the US will defend it if needed, in regards to the disputed Senkaku islands, which the Chinese coastguard just sailed past, as the PLA-N’s Fujian aircraft carrier completes its first training exercise after entering service.

Politico argues trench warfare in Ukraine is now far worse as drones create a “hellscape”. The FT underlines it takes 45 days(!) to move a tank from Rotterdam to the EU-Ukraine border due to infrastructure issues: a “military Schengen” is seen needed, alongside vast budgets – as a UK review has found Britain is “not ready to defend itself.”

The structure of the €140bn EU loan to Ukraine secured by Russian assets is seen by critics as deliberately designed to seize the underlying collateral as Ukraine will never be able to repay: how does that help the ‘liberal world order’ or hopes to extend the global reach of the Euro? That’s as President Zelenskyy will today visit Turkey to try to “reinvigorate” US peace talks which are likely to leave the EU holding the can even if they succeed.

In terms of EU ‘strategic autonomy’, Rio Tinto has placed its €3bn lithium project in Serbia on indefinite “care and maintenance”; Norway is furious with after being rejected for an EU metals-trade tariff exemption; and Macron stated the EU refuses to be either a US or China “vassal” in AI. S’il vous plait, use “Europe preference” to build your own system, alienating the US, at a cost of trillions of Euros, while pushing electricity prices even higher, as generals make clear AI is essential for the military, and only one standard can be used, so if the US stays in NATO, it’s from the US.

China’s PLA media accused the US of “gunboat diplomacy” vs Venezuela, as Maduro says he’s “ready to talk” to the White House. That ‘s as the Wall Street Journal notes ‘The ‘JPMorgan Boys’ Behind the U.S. Bailout for Argentina’, where “President Javier Milei’s administration is packed with former Wall Street traders trying to steer market forces.” Forces, certainly: then markets.

Trump designated Saudi Arabia as the latest US major non-NATO ally, saying MBS “knew nothing” about Khashoggi’s murder, and “things happen.” That’s as the Crown Prince pledged to invest $1 trillion in the US, reportedly pressed it to intervene to end the Sudan war and said he wants to join the Abraham Accords, which still requires a path to a Palestinian state. He now gets F-35s (years from now, and over Israeli objections) and US AI chips.

A US report argued the government needs an overhaul to compete with China: logically, yes, as it’s revealed Wright USA, an insurance company that insured FBI and CIA agents, was acquired by China’s Fosun Group, giving it access to the personal data of US secret service employees. Yet a new US body would also be a single-point of failure – and now do everyone else.

In the economy, the FT notes ‘the growing problem with China’s unreliable numbers’ – yes, and now do everywhere else, recalling these are what central-bank technocrats and market analysts are supposed to work with. The Wall Street Journal adds that this is ‘The Most Joyless Tech Revolution Ever: AI Is Making Us Rich and Unhappy.’

In European politics, Germany’s Merz is facing a conservative rebellion over pension reforms, France still doesn’t have a budget, France and Germany are clashing over a controversial EU budget structure, Danish voters are turning on PM Frederiksen over housing costs (says Politico), and Ireland’s Donohoe has resigned as the Eurogroup president to run the World Bank.

In US politics, Congress approved the release of the Epstein files. Once Trump signs, expect a flood of headline-grabbing info, or at least that which is not redacted for legal or national security reasons, which the legislation grants AG Bondi the power to do.  

One might think this has nothing to do with markets or Fed Chairs or geopolitics and geoeconomics. Until one sees an already-released Epstein email forced former Treasury Secretary and nearly-Fed Chair and former Harvard President Larry Summers to step away from public life because it revealed he asked Epstein for advice on how to seduce a Chinese economist mentee – who was the daughter of a senior CCP official, a former Vice Minister of Finance, and at that time chairing the World Bank-rival Asian Infrastructure Investment Bank HQ-ed in Beijing.

But let’s all talk about 2% CPI – clearly that’s where all the real action is.