Bessent Touts Drop In Deficit-to-GDP Ratio, Sees Tax-Refund Wave

Economic

Summary:

Treasury Secretary Scott Bessent touted a drop in a key US fiscal ratio as evidence that President Donald Trump’s economic policies are working without causing a recession.

“The deficit-to-GDP now has a five in front of it,” Bessent said at a community bank conference hosted by the Federal Reserve Thursday. That’s down from a 2024 ratio “which was the highest when we weren’t at war or weren’t in a recession in US history.”

He spoke a day after the nonpartisan Congressional Budget Office published its estimate for September federal government spending and revenue figures, along with the full 2025 fiscal year numbers. Bessent noted the official Treasury data are delayed due to the current government shutdown, pending congressional passage of appropriations bills for the new 2026 fiscal year now underway.

The CBO estimated the budget gap for fiscal year 2025 was little changed from 2024, at $1.8 trillion. But using its estimate for gross domestic product, that helped shrink the deficit ratio to 5.9%. Treasury figures for 2024 show that measure was 6.4%.

Bessent has often said he decided to enter the public policy debate out of concern about an unsustainable trajectory for government debt. On Thursday he related an exchange he had with Trump about two years ago: “He looked at me, first thing, he said, ‘Scott, how are we going to get the debt and deficits down and not cause a recession?’”

Trump’s tariff hikes have spurred record customs duties, helping hold down the deficit. But the CBO figures showed spending continues to climb, while the administration’s corporate-tax cuts are eroding revenue. The agency also said interest on the public debt surpassed $1 trillion a year for the first time in 2025.

Bessent has said he wants to see the deficit ratio come down to “something with a three in front of it” by the end of Trump’s second term in office.

“We’re on our way,” Bessent said. “I think we saw that today.”

US Budget Deficit Seen at $1.8 Trillion by CBO, Despite Tariffs

Bessent also said he expects the Treasury to issue more tax refunds next year as a consequence of changes made to the tax code under Trump’s One Big Beautiful Bill. Those include no taxes on tipped wages for certain workers, lower taxes on Social Security disbursements and the ability to deduct interest payments on purchases of American automobiles.

“We expect to see substantial tax refunds beginning of next year, which I think will be accrued to lower-end consumers — for the bottom 50% who need the relief,” he said. “And concurrently, they will change their withholding schedule so their real take-home pay will be higher next year.”

Source: Bloomberg

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Adam

Economic

The country’s largest banks are navigating a delicate balancing act in President Trump's Washington.

CEOs for some of the biggest US lenders, including JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Citigroup (C), Morgan Stanley (MS), and Wells Fargo (WFC), are all competing to win a leading role in a lucrative public offering for mortgage giants Fannie Mae and Freddie Mac, a competition that has involved Oval Office appearances with the president.

At the same time, Trump has called out some of these same Wall Street bosses over "debanking." Some are now facing increasing scrutiny from their regulators over whether they denied or refused services to conservative customers. Their legal and regulatory affairs teams are currently combing through old records for any account closures.

"There are a lot of areas where we're playing offense," said Greg Baer, CEO of the Bank Policy Institute, an industry trade group. "There's some areas where we're playing defense. It makes for a very complicated battlefield, that's for sure."

Banks began the Trump administration with high hopes for broad, sweeping reforms that would work to their advantage.

And that does appear to be happening. Bank regulators are proposing the biggest walk-back in rules since Congress tightened the reins on the industry following the 2008 financial crisis with a piece of legislation known as Dodd-Frank.

The Fed, for example, has unveiled proposals to relax key bank capital components based on leverage and its annual stress-test exercise specific to large banks. It will host a conference on Thursday designed to air concerns about the regulation of smaller community banks.

"It's 15 years later, right, since Dodd-Frank was originally envisioned," Michelle Bowman, the Federal Reserve's top banking supervisor, said during a Georgetown University event in late September.

"I think we have a good perspective on what's been working, what could be improved," Bowman added.

But the Trump administration has also made things more complicated for banks at the same time.

For one, it has provided regulatory relief to the crypto industry, which is emerging as an upstart competitor to banks within the financial world. Some crypto companies are now seeking banking licenses — a sign they intend to push deeper onto banks' turf.

Bank lobbyists are pushing back. They're seeking language to bar non-bank crypto platforms from offering interest payments on customer stablecoin balances in a forthcoming crypto market structure bill, arguing that doling out interest on stablecoins creates less-regulated "pseudo-banks."

"Everybody would want to be in the business of issuing money and offering something that's a money-like instrument without being subject to the same level of oversight," BPI's Baer said on the subject.

"That would be an incredibly profitable business," Baer added.

Major crypto platform Coinbase (COIN), which offers financial "rewards" on stablecoin holdings, has already urged customers to oppose big banks on the issue.

Another challenge for banks trying to navigate the new administration is the focus on debanking, which Trump highlighted in January when he confronted Bank of America CEO Brian Moynihan at the World Economic Forum in Davos, Switzerland. In August, he signed an executive order on the issue.

Last month, the Office of the Comptroller of the Currency said it had requested information about debanking activities from nine of the largest institutions it regulates. The review is scheduled to be completed early next year.

Some of those same institutions that received letters anticipate negotiations with the administration and potentially lawsuits to follow, according to one source familiar with the matter.

Smaller banks also received debanking letters in September, according to the Wall Street Journal.

The Small Business Administration wrote to 5,000 banks and other lenders directing them to make reasonable efforts by Dec. 5 to find customers they previously cut off for political or debanking reasons, according to the Wall Street Journal.

Banks have denied discriminating against Trump and other customers based on their political or religious affiliations. However, they have also said their decision to shut down accounts or turn away potential customers is based on financial and legal risks, which banks are held accountable for by regulators.

The president has said that both JPMorgan Chase and Capital One (COF) closed family and business accounts after he left the White House in 2021, while Bank of America refused to offer him services.

"The banks discriminated against me very badly, and I was very good to the banks," Trump said on CNBC's "Squawk Box" in August.

Source: finance.yahoo

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Michelle

Economic

Forex

The dollar was mixed on Thursday as a selloff in the Japanese yen appeared exhausted for now, while the euro was dented by political uncertainty.

The yen reached its weakest level since mid-February against the greenback on concerns that Sanae Takaichi, the newly elected head of Japan's ruling party, will introduce more fiscally expansive policies.

But the yen got a modest bid on Thursday as traders evaluated how much room she will have to stimulate the economy.

“Traders are turning a little bit more sceptical on the Takaichi administration's capacity for passing fiscal stimulus and pushing back against the Bank of Japan's tightening plans,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“That's a reflection of underlying inflation dynamics in Japan. The reality is that Japanese households are agitating for change because inflation is running at elevated levels,” Schamotta said.

Takaichi said on Thursday she will immediately issue an order to compile a package of steps to cushion the economic impact of rising living costs once chosen by parliament to become next prime minister.

The dollar was last flat on the day at 152.67 yenafter earlier reaching 153.21, the highest since February 13.

The euro, meanwhile, has dropped since Prime Minister Sebastien Lecornu tendered his and his government's resignation on Monday. The political paralysis has made it challenging to pass a belt-tightening budget sought by investors that are increasingly worried by France's expanding deficit.

French President Emmanuel Macron’s office said on Wednesday he would appoint a new prime minister within 48 hours.

The single currency was last down 0.15% at $1.1608. The dollar index gained 0.15% to 99.00 and reached 99.10, the highest since August 1.

The dollar is being aided by some more hawkish commentary by Federal Reserve officials.

Minutes from the U.S. central bank’s September meeting released on Wednesday showed that officials agreed that risks to the U.S. job market had increased enough to warrant an interest rate cut but remained wary of high inflation.

“We are seeing a more hawkish tone from Fed policymakers, both in the minutes from September's meeting as well as ongoing commentary. And that's pushing back on market expectations for further aggressive easing,” said Schamotta.

Traders are pricing in a 95% chance that the Fed cuts rates by 25 basis points at its October 28-29 meeting, while the odds of an additional cut in December have dropped to 82%, from 90%, in the past week, according to the CME Group’s FedWatch Tool.

New York Fed President John Williams backs more interest rate cuts this year given the risk of a further slowdown in the labor market, he said in an interview published by the New York Times on Thursday.

Traders are also focused on how long the U.S. federal government shutdown will last, with the economy likely to take a bigger hit the longer it drags on.

The U.S. Internal Revenue Service said on Wednesday it will furlough more than 34,000 employees due to the government shutdown, effectively shuttering taxpayer call centers.

In cryptocurrencies, bitcoingained 0.44% to $123,478.87.

Source: TradingView

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Adam

Economic

JPMorgan Chase (JPM.N) CEO Jamie Dimon warned of a heightened risk of a significant correction in the U.S. stock market within the next six months to two years, the BBC reported.

"I am far more worried about that than others," Dimon said, adding there were a "lot of things out there" creating an atmosphere of uncertainty, pointing to risk factors including geopolitical tensions, fiscal spending, and global remilitarization.

"All these things cause a lot of issues that we don't know how to answer," he told the BBC in an interview on Wednesday, highlighting that the U.S. stock market faces increased risks of being overheated.

Dimon also expressed mild concern about inflation but remained confident in the Federal Reserve's independence despite criticism from the Trump administration of Fed Chair Jerome Powell.

Dimon expressed caution about the U.S. economic outlook last month, warning that the full impact of tariffs, immigration, geopolitics, and President Donald Trump's tax and spending policies remains uncertain due to their long-term cycles.

Source: reuters

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Adam

Cryptocurrency

Bitcoin (BTC-USD) and gold (GC=F) climbed to record highs this week, underscoring two sides of the so-called debasement trade as investors hedge against weakening fiat currencies.

Even traditional gold bulls are taking notice of bitcoin’s growing role as “digital gold.”

“The bitcoin trade is too large to ignore,” Paul Karger, Twin Focus co-founder and managing partner, told Yahoo Finance on Wednesday. “Everybody that's been calling bunk on bitcoin the last decade has been proven wrong."

On Thursday, bitcoin hovered below $122,000, down from Monday’s all-time high north of $125,000. The world's largest cryptocurrency is up 31% year to date.

Karger said he still favors a larger 5% allocation to gold, with a smaller holding in bitcoin across client portfolios, but acknowledged that the world’s largest cryptocurrency “has a place in a diversified portfolio.”

Karger suggested restructuring the fixed-income portion of the traditional 60/40 portfolio, which typically allocates 60% to equities and 40% to bonds.

He recommended diversifying away from long-dated bonds in favor of shorter-term debt, real estate, digital assets, gold, and broader commodities such as copper and AI-infrastructure plays.

Gold has been a stellar trade this year, surging to a record high above $4,060 per ounce. The precious metal retreated slightly from that level on Thursday, but is still on pace for its best annual return in more than four decades.

“Absolutely, you should own gold,” said Karger. “It's just a great store of value. Gold has had a 2,000-year history of calling bunk on currencies.”

For those holding physical bullion, he recommended coins over bars, which can be harder to resell, though either form should be stored securely.

Gold futures have risen in nine of the past 10 sessions, setting new all-time highs for 10 straight trading days, an extraordinary run that’s driven year-to-date gains of around 55%.

Source: finance.yahoo

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Golden Gleam

Commodity

Gold prices held above $4,000 an ounce on Thursday as investors assessed the Israel-Hamas ceasefire deal, while broader geopolitical and economic uncertainty alongside expectations for U.S. rate cuts sustained bullish sentiment towards the metal.

Silver hit a record high, bolstered by gold's record-breaking rally, growing investor demand and a supply deficit.Spot gold was steady at $4,038.49 per ounce at 1132 GMT. U.S. gold futures for December delivery fell 0.3% to $4,057.80.Gold prices rose above $4,000 per ounce for the first time on Wednesday, hitting a record high of $4,059.05.

Silver was up 1.5% at $49.63 per ounce. The metal has gained over 70% this year, benefiting from the same factors as those driving gold's rally as well as tightness in the spot market.

"The interesting aspect about the silver market is that the net long positions are only modestly higher so this is not a rally based upon speculative interest. It's got some pretty solid fundamentals attached to this move in the silver price," said independent analyst Ross Norman.U.S. President Donald Trump announced that a ceasefire and hostage deal had been reached between Israel and Hamas under the first phase of his plan to end the war in Gaza.

"Gold's rally is facing resistance as the Gaza diplomatic breakthrough reduces risk-off flows, while the ongoing U.S. dollar recovery undermines bullion's strength, leaving it vulnerable to pullbacks," said Nikos Tzabouras, Senior Market Analyst at Tradu."However, the bullish bias remains intact, and the path to new all-time highs is still wide open."

The U.S. dollar index (.DXY), opens new tab hovered near a two-month high, making dollar-priced bullion more expensive for overseas buyers.

Geopolitical risks, including the Middle East crisis and the war in Ukraine, alongside strong central bank gold buying, ETF inflows, U.S. rate cut expectations, and economic uncertainties stemming from tariffs, have all contributed to gold's rally.

The metal has gained more than 53% year-to-date and is on track to record the largest annual gain since the 1979 oil crisis.

Federal Reserve officials agreed that risks to the U.S. job market were high enough to warrant a rate cut, but remained wary amid stubborn inflation, according to minutes of the September 16–17 meeting released on Wednesday.

Markets are currently pricing in a 25 basis-point cut in both October and December. FEDWATCH

"The ongoing U.S. government shutdown has injected momentum into (gold's) trade, alongside mounting fiscal concerns in Japan and France amid recent political leadership changes," UBS said in a note.

Non-yielding gold thrives in a low interest-rate environment and during times of economic and geopolitical uncertainty.

"If risk sentiment continues to improve, this may drag gold prices lower in the near term as investors rush back toward riskier assets," said Lukman Otunuga, senior research analyst at FXTM.

Platinum edged 0.1% higher to $1,663.71 and palladium gained 1.9% to $1,476.76, hitting a more than two-year high.

Source: Kitco

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Samantha Luan

Forex

Political

Economic

Key points:

● Kim Jong Un calls for renewed loyalty to socialism

● China's Li Qiang, Russia's Dmitry Medvedev and Vietnam's To Lam to attend celebrations

● Possible military parade to mark Workers' Party anniversary

North Korean leader Kim Jong Un has praised the legacy of the ruling party and called for renewed loyalty to socialism in a speech ahead of Friday's 80th anniversary of the founding of the Workers' Party of Korea, state media KCNA reported.Chinese Premier Li Qiang, a delegation from Russia's ruling party led by chairman Dmitry Medvedev as well as Vietnam's Communist Party chief To Lam, are among foreign dignitaries due to attend celebrations in the isolated state this week.

Vietnam's government confirmed Lam and his delegation had departed for Pyongyang on Thursday for the first visit by a Vietnamese Communist Party leader to North Korea in nearly 20 years. Cooperation agreements were expected to be signed during the visit, according to people familiar with the planning.Kim visited the Party Founding Museum in Pyongyang on Wednesday with senior party officials and delivered what state media called a "significant speech" honouring the party's founders and revolutionary forerunners, KCNA said.

The North Korean leader paid tribute to his late grandfather and state founder Kim Il Sung and anti-Japanese fighters for laying a "solid cornerstone" for the party's enduring strength and success, the report said.Reflecting on eight decades of party history, Kim said it was a time for the current generation to renew its understanding of its "revolutionary obligations and duties" to complete the socialist cause begun by its predecessors.Kim also pledged to preserve the party's ideological purity and vitality "without decrepitude and discolouration," calling the Party Founding Museum a "sacred sanctuary" representing the party's tradition.

Last month, the North Korean leader stood side by side with Chinese President Xi Jinping and Russian President Vladimir Putin at a massive military parade in Beijing to celebrate the 80th anniversary since Japan's defeat at the end of World War Two, a move aimed at bolstering Kim's diplomatic standing.Nuclear-armed North Korea has not yet confirmed whether a military parade will take place to mark this week's holiday.South Korean officials said there were signs that Pyongyang will stage a military parade to commemorate the founding of the Workers' Party of Korea, the Yonhap news agency reported last week.