The Federal Reserve’s preferred inflation gauge rose again in July, with the headline Personal Consumption Expenditures index increasing 0.2% for the month and 3.7% from a year earlier. Economists expected the annual rate to decline to 3.6%, yet it remained unchanged from June, while core PCE excluding food and energy increased 0.2% monthly and 3.3% annually. The political class has spent years promising that inflation was retreating, but prices are still rising at nearly twice the Federal Reserve’s official target after households already endured the largest cumulative increase in the cost of living in decades.
This is what they refuse to explain when they celebrate a lower inflation rate. A decline in the RATE of inflation does NOT mean prices declined, for it merely means the government believes they are increasing at a slower pace. The rent, insurance premium, electric bill, grocery receipt, property tax, and cost of borrowing do not return to where they stood before the inflationary wave began, and wages must rise faster than this accumulated increase simply to restore purchasing power that has already been destroyed.
The core figure is equally deceptive because removing food and energy excludes two of the expenses people cannot avoid. Economists defend this practice by claiming those categories are volatile, but that volatility does not make the expense imaginary. Energy flows into transportation, agriculture, manufacturing, utilities, packaging, and practically everything that must be produced or delivered, while food is not some discretionary luxury that families can postpone until the next Federal Reserve meeting.
The problem is now spreading well beyond one monthly inflation report. The economy expanded at an annualized rate of only 1.5% during the second quarter, employers eliminated 23,000 jobs in July, and May and June payrolls were revised downward by a combined 103,000. Inflation remains at 3.7% while employment has been stagnating for months, which is the precise environment the Keynesian playbook cannot resolve because raising rates attacks economic activity while doing nothing to repair the geopolitical, fiscal, regulatory, and supply-side pressures driving prices.
The Federal Reserve is now trapped by government. Washington continues to borrow and spend regardless of the business cycle, forcing the Treasury to compete for capital while interest payments consume an expanding share of federal revenue. The central bank can raise short-term rates, but it cannot produce oil, lower insurance costs, reverse taxation, rebuild supply chains, end wars, or restore confidence among businesses that no longer know what their expenses will be six months from now.
This is not a new inflation cycle appearing in July, just as the weak employment report did not suddenly mark the beginning of labor deterioration. Both figures confirm a trend that has been in motion beneath the government’s revised statistics for some time. The private economy is losing momentum while the cost of government, debt, energy, insurance, and basic necessities continues to rise, and calling this a “soft landing” will not change the fact that Americans are being forced to pay more merely to stand still.
Categories:Inflation
The European Central Bank is moving ahead with the digital euro and expects to begin a 12-month pilot during the second half of 2027. Thirty-six banks and payment providers have already been selected to participate, legislation is expected to be completed by the end of 2026, and the ECB intends to be ready for a potential first issuance during 2029. Brussels is spending approximately €1.3 billion to prepare the system, with projected operating costs of €320 million annually beginning in 2029, while pretending the final decision has not already been politically engineered.
The ECB insists the digital euro will never be “programmable money,” but in the same breath admits that it will facilitate “conditional payments.” This is the word game they always play. Programmable money is defined narrowly as currency restricted by where, when, or with whom it may be spent. Conditional payments, meanwhile, occur automatically only after predefined conditions have been satisfied. Brussels claims these are completely different concepts because the condition is attached to the payment service rather than the currency itself. To the person whose transaction is blocked until the system approves it, that distinction is meaningless.
The first examples sound harmless. A customer orders a product online, the money is reserved, and payment is released after delivery. Funds could be transferred according to milestones, pay-per-use arrangements, or other automated terms. That may offer convenience and reduce fraud, but the infrastructure does not possess morality. A system capable of withholding a payment until a commercial condition is satisfied can also withhold it until a regulatory, tax, identity, geographic, or political condition is satisfied. The technology only executes the rules written by those who control it.
The ECB also says the digital euro will complement rather than replace cash, just as every government program begins as voluntary before the alternatives are slowly made inconvenient, expensive, or unacceptable. Merchants that accept digital payments could be required to accept the digital euro, and banks could be required to distribute it to their customers. This is not a product attempting to win public support through competition. Brussels intends to manufacture adoption through regulation while calling it consumer choice.
Digital euro holdings will not pay interest and will be subjected to limits designed to prevent people from withdrawing too much money from commercial banks. The system will include a “waterfall” mechanism that automatically moves excess digital euros into a linked bank account when the holding ceiling is reached. Therefore, this supposed digital equivalent of cash will already contain restrictions that physical euros do not possess. Nobody programs a €50 note to return automatically to a bank because the owner accumulated too many banknotes.
The ECB claims that it will not be able to identify users from payment data and that offline transactions will provide cash-like privacy between the payer and recipient. Yet online transactions will still move through payment providers that can identify users for anti-money-laundering compliance. The central bank may construct a technical wall between itself and personal identities today, but laws can be rewritten, emergency powers can be expanded, and intermediaries can be ordered to disclose information. Privacy that exists only through legislation is not privacy. It is temporary permission from government.
Europe claims it needs a digital euro to reduce its dependence on American payment companies and defend its “monetary sovereignty.” That argument has become more powerful as the United States has weaponized the dollar, sanctions, and financial networks against political opponents. Nevertheless, Brussels is using the external threat to construct a domestic instrument of financial control. It is not restoring monetary sovereignty to European citizens. It is concentrating monetary power in an unelected institution that cannot be removed by voters.
The 2029 timetable is particularly disturbing because it coincides with the rising geopolitical and monetary pressure approaching the 2030 Economic Confidence Model turning point. The War Cycle is accelerating, Europe is taking on enormous debt to rearm, and the European economy is being destroyed by high energy costs, taxation, regulation, and collapsing competitiveness. When the Sovereign Debt Crisis intensifies, governments will need to ensure that capital remains inside their financial system and continues financing public debt.
A digital euro provides exactly that infrastructure. Holding limits, linked accounts, identified intermediaries, mandatory distribution, mandatory acceptance, automated transfers, and conditional payments are being assembled inside one system. Brussels will market each feature separately as a technical safeguard or consumer benefit, but together they create the framework through which government could eventually monitor, restrict, and direct the movement of money across the eurozone.
They will never announce that the objective is capital control. They will speak of resilience, inclusion, innovation, security, sovereignty, and convenience. When war or debt produces the next emergency, additional restrictions will be presented as temporary measures required to protect financial stability. Europe has already demonstrated how quickly temporary emergency powers become permanent bureaucratic institutions.
The ECB says the digital euro will not be programmable, yet it is creating a currency system capable of supporting payments that execute only when predetermined conditions are met. Brussels can manipulate the terminology, but it cannot alter the function. By 2029, Europe may possess the technical foundation for a monetary system in which money no longer represents unconditional purchasing power. It will represent permission to transact under rules established by government.
Categories:
War and sovereign debt are merging into a vicious spiral that will determine which nations survive the coming monetary crisis. Governments entered the conflicts in Ukraine and Iran, along with the escalating confrontation between the United States and China, already buried beneath debt accumulated through decades of fiscal incompetence. Now they are increasing military spending, subsidizing domestic industries, restructuring supply chains, and borrowing even more money to prepare for conflicts their own foreign policies helped create.
The United States, China, France, the United Kingdom, and Japan already carry gross government debt exceeding an entire year of economic output. Russia has drained much of its National Wealth Fund to finance the war in Ukraine while Western governments froze approximately $300 billion in Russian sovereign assets. Gulf states are being forced to expand defense spending amid the conflict with Iran, and Europe has committed itself to raising NATO-related expenditures toward 5% of GDP by 2035. Trump wants to increase annual US defense spending by $500 billion to reach $1.5 trillion, but Washington is already borrowing simply to pay interest on the debt it accumulated before this latest round of wars began.
These people speak about military spending as if the money materializes from thin air without consequences. Government does not possess wealth of its own. Every missile, drone, weapons package, foreign aid program, and military deployment must be financed through taxation, borrowing, or inflation. Taxation drains the productive economy, borrowing competes for private capital, and inflation silently confiscates purchasing power from everyone. Politicians choose debt because it conceals the cost until after the election, allowing them to play emperor today while leaving future generations with the bill.
The yield on the 10-year US Treasury has nearly tripled over five years to 4.3%, which means Washington is financing a vastly larger debt at far higher interest rates. This is elementary mathematics that the political class refuses to confront. A government may survive $10 trillion in debt when rates are near zero, but the same fiscal structure becomes impossible when the debt multiplies and borrowing costs normalize. Every additional dollar devoted to interest is a dollar that cannot maintain infrastructure, reduce taxes, or support genuine economic development. Government then borrows more to cover the interest, increasing the debt that created the problem in the first place.
The attempt to separate national economies from geopolitical rivals will impose another enormous cost. Europe abandoned cheap Russian energy and then wondered why its industries became uncompetitive. The West wants to reduce dependence on Chinese manufacturing and rare earths, but rebuilding those supply chains will require subsidies, tariffs, controls, and years of expensive investment. Iran’s position around the Strait of Hormuz demonstrates how quickly a regional conflict can threaten a route that previously carried roughly one-fifth of the world’s daily oil supply. Every attempt to create economic security through political coercion raises prices, reduces efficiency, and demands still more government borrowing.
The United States depends on foreign capital after decades of deficits. The value of foreign investments in America exceeds American investments abroad by roughly $27 trillion. Washington’s reserve currency privilege has allowed it to finance military operations, trade deficits, and domestic spending on a scale no other country could sustain. Yet sanctions, the weaponization of payment systems, and the seizure of sovereign assets have encouraged foreign governments to reduce their dependence on the dollar. The United States cannot use the dollar as a political weapon indefinitely while assuming the rest of the world will continue financing its debt without question.
Europe is in an even more desperate position because it has chosen rearmament while its economy stagnates, its population ages, and its welfare state consumes the productive capacity of the private sector. France cannot reform its pension system without civil unrest. Germany destroyed its energy advantage to satisfy Brussels and the climate zealots. Britain is drowning in debt while pretending it remains an imperial military power. These governments cannot finance the promises already made to their citizens, yet they are volunteering hundreds of billions more for a geopolitical confrontation that has no clear objective or exit.
The War Cycle will now intensify the Sovereign Debt Crisis because these are not independent trends. War increases spending and inflation, inflation pushes borrowing costs higher, higher rates worsen the deficit, and deteriorating finances weaken the nation’s ability to sustain the war. Politicians respond by raising taxes, imposing controls, and demanding further sacrifice from the public while refusing to reconsider their own policies. Government becomes more authoritarian as its financial position deteriorates because coercion replaces the confidence it has lost.
The nations that emerge strongest will not necessarily be those possessing the largest armies today. Power will migrate toward the governments capable of financing themselves without destroying their currencies or crushing their domestic economies. The West is entering this struggle with record debt, aging populations, collapsing political trust, and leaders who believe every crisis can be solved with another bond auction. They are preparing for endless war with money they do not have, and the debt required to preserve their power will ultimately become the force that destroys it.
Categories:War
QUESTION: Mr. Armstrong, You previously predicted that gold would decline due to forced selling to raise cash, partly triggered by the energy crisis involving Iran, and I believe that assessment was correct. Turkey, for instance, has reportedly sold 60 tons of gold while also dumping U.S. Treasuries. Now, with tensions escalating between Turkey and Israel—and given Netanyahu’s recent rejection of negotiated peace with Iran, stating that “savages cannot be trusted”—I am concerned about the broader implications. Given that U.S. Treasury yields are rising as you anticipated due to geopolitical conflict, do you foresee this escalating into a major Middle Eastern war?
HL
ANSWER: In the case of Turkey, it is a significant net importer of oil. The country relies heavily on foreign sources to meet its energy needs, with domestic production covering only a small fraction of its consumption. To meet that cost in the face of their perpetual currency decline, they dumped US treasuries and sold 60 tons of gold to buy energy. The currency is in a virtual religious bear market.
Consequently, I have said many times, when domestic tension rises, government look for an external enemy. This is what you are witnessing. There is significant tension between Turkey and Israel right now. Relations have severely deteriorated, reaching one of their most strained points in years, driven by the faltering economics using a combination of the ongoing war in Gaza and a new, direct rivalry in Syria to justify the tension.
The Main Sources of Conflict used to Divert Domestic Tension
Turkey has been one of the most vocal critics of Israel’s military actions in Gaza, accusing it of committing “genocide.” Turkey has suspended all trade with Israel, closed its airspace to Israeli aircraft, and joined a genocide case against Israel at the International Court of Justice . In a striking escalation, a Turkish court has even issued an arrest warrant for Israeli Prime Minister Benjamin Netanyahu on these charges, and Turkey has requested Interpol to issue a “red notice” for his arrest. None of this alters the domestic economic deuteriation. Yet, it makes a great diversion tactic.
The most immediate flashpoint is Syria. Following the fall of the Assad regime, Turkey has deepened its ties with Syria’s new government and is seen as trying to expand its military influence there. This is a major concern for Israel. On August 18, 2026, Israel launched an airstrike on the Abu al-Duhur airbase in Syria, claiming it was a preemptive strike to prevent Turkey from deploying air defense systems that could threaten Israeli aircraft. This event brought the two countries dangerously close to a direct military confrontation.
Historical Disputes:
Mutual accusations have also spiked around historical issues as they always do. In July 2026, Israel officially recognized the Armenian Genocide, a move that deeply angered Turkey. The accusation is that the Ottoman Empire systematically killed 1.5 million Armenians during World War I, and it is recognized as genocide by over 30 countries and numerous international organizations. In response, Turkish officials made strong statements against Israel, which Israel’s Foreign Minister called “textbook incitement to genocide.” Turkey accuses Israel of Genocide in Gaza.
Could This Lead to a Direct War?
Despite the intense hostility, most analysts do not believe a direct war likely. Both sides have stated they do not seek a direct conflict. They are continuing to use back channels that I know of off the headlines. This is standard in an effort to prevent any miscalculation.
I can confirm that the US is acting as a mediator right now since it is a key ally to both countries. It is trying to de-escalate tensions in Syria, to prevent an accidental clash.
There is no question that this is a Middle East “cold war.” The conflict is playing out in the political, diplomatic, and legal arenas, as well as through competition for influence in places like Syria and the Eastern Mediterranean, rather than on a direct military battlefield. The red flag is the triumvirate of Turkey, Saudi Arabia, and Pakistan.
In short, while the relationship has hit a new low and the risk of a direct incident is rather high. There are efforts underway behind the curtain trying to manage the tensions to keep them from escalating into a full-blown war.
We have an important Directional Change in Israel in 2027 and the critical turning point aligns with the ECM in 2028.Our models have shown rising volatility was to begin here in August and escalate into November.
Secretary of State Marco Rubio has suspended all international visa reviews and interviews with applicants until all of the consulate staff undergo training on the appropriate review process. The intent is to proactively identify visa applicants who are seeking temporary visas with the intent of claiming asylum status or similar permanent migration.
Each consular staff agent and officer is being tasked with scrutinizing applications to ensure the applicant does not become a “public charge” after entry.
WASHINGTON – The Trump administration has directed U.S. embassies and consulates around the world to postpone immigrant visa interviews while consular officers complete training on new public-charge guidance, temporarily stalling applications that have reached the interview stage.
The State Department told diplomatic posts to reschedule immigrant visa interviews until consular officers complete the training on how to evaluate whether an applicant is likely to become a public charge.
A public-charge determination can make an immigrant visa applicant inadmissible under federal immigration law if officials determine the person is likely to become dependent on certain forms of public assistance after arriving in the U.S.
“In early August, we launched a global training initiative at all of our embassies and consulates worldwide. To accommodate this in-depth training, appointments for visa services will be adjusted,” a State Department official said in a statement.
[…] The administration said Monday that it was preparing to revoke the business and tourism visas of up to 200,000 foreigners who have applied for or are seeking asylum in the U.S., a move that would represent the largest mass visa revocation in U.S. history. (read more)
The move comes on the heels of U.S. District Judge Jeannette Vargas, a Biden appointee in Manhattan, striking down a prior State Dept ban on visas from 75 countries. However, the judge’s decision does not invalidate visa denials overall, based on independent grounds of ineligibility. As a consequence, Secretary Rubio is ordering worldwide embassy and consulate retraining to enhance scrutiny of all visa applications carefully.
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