Independence of central banks has been under question for many years. However, the disappearance of “higher for longer” in 2024 erased any doubt about the monetary authorities’ lack of independence.

The Federal Reserve panicked in June 2024 and decided to delay the normalization of its balance sheet, coinciding with a period of massive deficit spending and Treasury debt issuance at elevated rates.

The Federal Reserve proceeded to implement an unnecessary 50 basis point rate cut during a period when financial conditions were at their loosest in years, growth was allegedly robust, and employment was solid, according to the Fed, but inflation remained above target.

The German economy was once a global industrial powerhouse, showing a strong resilience in times of crisis as well as significant productive growth in periods of expansion.

Germany displayed robust industrial activity, solid productivity, and enviably low unemployment levels, which added to real high wages. However, in the past five years the economy has stagnated, and its GDP is 5% smaller than the pre-pandemic growth trend suggested, according to Bloomberg Economics. Even more worryingly, they estimate that four percentage points of that loss may be permanent.

Most analyses blame the weakness of the German economy on higher energy costs and the Chinese slowdown affecting its exports. However, the reality is more complex.

Germany’s stagnation is self-inflicted.

Markets and economists are beginning to recognize that a serious rationalization of spending is the only way to prevent a debt crisis and reduce inflation in the United States. In the latest estimates published by the Treasury, the accumulated deficit between 2024 and 2034 would reach $14 trillion. Considering the path of uncontrolled public debt and rising fiscal irresponsibility reached over the past four years, many feared a debt crisis looming. In a period of peace and recovery, a 6.4% budget deficit indicated the lowest economic growth, adjusted for debt increases since the 1930s. Market participants now appear relieved and are discounting a declining deficit as well as a stronger currency.

Many commentators cannot understand why Trump won the elections despite a robust economy. The reality is far more complex. I have repeatedly stated in my articles and TV appearances on Making Money (Fox News) and CNBC’s Squawkbox Europe that the U.S. economy was significantly weaker than the official headlines suggested. I called it a “private sector recession”.

Anyone who has delved into the supposedly solid headline figures can clearly see the real weakness of the U.S. economy. An unsustainable increase in government spending and federal debt bloated the official GDP, making gross domestic income significantly weaker than headline GDP. Additionally, the Conference Board and University of Michigan consumer confidence readings, well below 2019 and 2021 levels, indicated a stagnant economy. Significant negative revisions and concerning elements were evident in the job reports.