 Private Credit Collapses Spark Fears of ‘Subprime’ Risks in New Lending Frontier.
The Bank of England has compared the collapse of US private credit firms to the 2007 subprime crisis. Governor Andrew Bailey says it’s an ‘open question’ if collapse of First Brands and Tricolor is merely idiosyncratic or “the canary in the coalmine”. Boss of JP Morgan, Jamie Dimon, warned over further losses linked to the private credit sector, saying more “cockroaches could emerge” and they could be crawling to Europe. The collapse of two US firms has highlighted the risks in the private credit market, and compared it to the subprime mortgage failures that preceeded the 2008 financial crisis. Sarah Breeden Deputy Governor has suggested the First Brands and Tricolor collapse illustrate some of the risks the Bank has been talking about in this market for some time. “It’s about high leverage, it’s about opacity, it’s about complexity and it’s about weak underwriting standards. These factors appear to have been at play in the context of the two defaults. Last week, the boss of JP Morgan, Jamie Dimon, warned over further losses linked to the private credit sector, saying more “cockroaches” could emerge and they could be crawling to Europe. Both firms had been backed by private credit within the so-called shadow banking sector, which is not directly regulated and is not forced to disclose the level of risks on their books. Regulated banks such as JP Morgan are exposed to the private credit sector, either by lending directly to private businesses, or lending to the private credit firms themselves. What do we mean by the private credit market? The private credit market refers to lending conducted by non-bank lenders, such as private credit firms, asset managers, or private equity funds, who provide loans directly to businesses, typically outside of traditional public or syndicated markets. These private loans are customized, often targeting small-to-mid-sized enterprises or companies with less-than-investment-grade credit profiles. They are held to maturity in “buy and hold” style portfolios rather than traded on a public exchange. Private Credit has become the financial markets' new frontier. Beyond banks, direct lenders and global funds are writing loans for companies who don't fit the public bond mould. The market's exponential growth, now a $3 trillion force, brings greater flexibility but also echoes the hidden risks of the subprime mortgage crisis. The recent collapses of First Brands and Tricolor remind us that opacity and rapid expansion can breed systemic tremors. As policymakers urge caution, it's time for market participants to focus on risk, resilience, and transparency. References https://www.theguardian.com/business/2025/oct/14/jp-morgan-jamie-dimon-losses-private-credit-sector https://www.theguardian.com/business/live/2025/oct/21/uk-borrowing-outstrips-forecasts-reeves-amazon-web-services-outage-resolved-bank-of-england-stock-markets-business-live-news
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 Donald Trump’s Dream Palace of Puffery
The Pentagon’s ban on real journalism looks to be a preview of where the White House is headed. Susan B Glasser The New Yorker October 16th 2025 Trump, it appears, is building a dream palace of endless puffery for himself, a gilded safe space where there will be no more tough questions, no more pesky reporters or impertinent demands for information that he does not want to give. And imagine how very powerful the President, who already believes the Constitution gives him the power “to do whatever I want,” will feel then. The Pentagon’s move to effectively ban journalism from its halls this week was not an outlier—it was a preview. You might think that the Kremlinization of the White House press pool doesn’t really matter at a moment when there are so many other Trump-generated crises in the country. Or that it is simply self-serving of journalists to complain about their own perks being taken away. Or that the President has no obligation, legal or otherwise, to answer questions from anyone. All of which are fair points. But the reason to pay attention to what’s happening with the coverage of the Presidency is that Trump cares about it perhaps more than anything else. There has never been a more media-obsessed President, nor one for whom the regard of others, even if it is suck-uppery in the crudest form, matters so much. He is known to spend hours a day consuming cable-news reports about himself. There is no detail of his public portrayal that does not concern him. In a lengthy social-media post this week, he berated Time for a cover about his Middle East diplomacy which was so complimentary it was headlined “His Triumph.” Trump’s beef was with the accompanying photo of himself, which he deemed “the Worst of All Time.” The point being: there is no pleasing a leader whose need for affirmation is so bottomless. The template for Trump’s second term so far has been to remake the White House as a place increasingly devoid of constraints or criticism. Gone are the first-term advisers such as John Kelly or Jim Mattis who saw themselves as checks on Trump’s tendency to go rogue. Only yes-men and flatterers need apply, and more and more they seem to be competing with one another to come up with the most over-the-top compliments possible for the boss. Last weekend, during a rally in Tel Aviv to celebrate the Trump-brokered deal to release the Israeli hostages, Trump’s Middle East negotiator, Steve Witkoff, proclaimed him “the greatest President in American history.” It doesn’t take much imagination to think what talk like that from his advisers does to a man with Trump’s ego. Those questions from reporters may soon be the last thing left tethering the President to at least some form of reality. ["Democracy Dies In Darkness", The absence of a press pool helps'] Check out the full article here :  Gold Reserves Surpass U.S. Treasuries for First Time Since 1996
A watershed moment in global finance has arrived. For the first time in nearly three decades, foreign central banks now hold more gold than U.S. Treasury securities in their reserves, marking a fundamental shift away from dollar-centric monetary policies and toward hard assets. This crossover represents the most significant realignment in reserve composition since the breakdown of the Bretton Woods system. Historic Reversal in Reserve Management The milestone occurred in late 2025 amid persistent central bank gold accumulation and rising concerns about U.S. fiscal sustainability. According to data from Crescat Capital macro strategist Tavi Costa, central bank gold holdings now exceed their U.S. Treasury positions for the first time since 1996. This development signals what Costa describes as "likely the beginning of one of the most significant global rebalancings we've experienced in recent history”. Central bank gold reserves have reached approximately 36,000 tonnes globally, with their market value now estimated at $4.5 trillion compared to roughly $3.5 trillion in Treasury holdings. The International Monetary Fund reports that gold's share of global reserves has climbed to approximately 18% in 2024, representing a sharp increase from mid-2010s levels. Unprecedented Buying Momentum The pace of official sector gold purchases has accelerated dramatically since 2022. Central banks acquired a record 1,136 tonnes in 2022, followed by 1,037 tonnes in 2023 and 1,045 tonnes in 2024. This represents more than double the 473-tonne annual average between 2010-2021. The sustained buying has continued into 2025, with central banks adding 244 tonnes in the first quarter alone. China has emerged as the most significant purchaser, with the People's Bank of China adding gold for consecutive months and reaching total holdings of 2,280 tonnes by end-2024. Other major buyers include Poland, which added 90 tonnes in 2024, India with 73 tonnes, and Turkey maintaining its 27-month consecutive buying streak. The World Gold Council's 2025 survey reveals that 29% of central bank respondents plan to increase their gold reserves over the next twelve months, while 81% expect global central bank holdings to rise—the highest proportion recorded since the survey began in 2018. Driving Forces Behind the Shift Several fundamental factors are propelling this historic rebalancing: De-dollarization and Sanctions Risk: The weaponization of the dollar through sanctions, particularly following Russia's 2022 invasion of Ukraine, has heightened concerns about vulnerability to financial exclusion. Central banks increasingly view gold as protection against potential asset freezes or restrictions, with many opting to store physical gold domestically rather than in Western jurisdictions. Fiscal Sustainability Concerns: The U.S. national debt trajectory and persistent fiscal deficits have raised questions about the long-term stability of Treasury securities as safe assets. Current U.S. Treasury gold reserves account for merely 2% of total outstanding government debt, one of the lowest levels in history. Monetary Policy Divergence: Federal Reserve independence concerns and expectations of continued rate cuts have reduced the opportunity cost of holding non-yielding gold. Real interest rates on Treasuries have declined, making gold relatively more attractive to reserve managers. Geopolitical Fragmentation: Rising tensions between major powers and increasing global multipolarity have reinforced gold's appeal as a neutral reserve asset free from counterparty risk. Market Impact and Price Dynamics The structural shift in central bank demand has provided fundamental support for gold prices, which surpassed $4,000 per ounce for the first time in October 2025. Gold has gained approximately 50% year-to-date, making it one of the best-performing assets of 2025. Central bank purchases now account for approximately 20% of annual physical gold demand, establishing a durable price floor despite volatile market conditions. The sustained institutional buying has occurred despite record-high prices, indicating that reserve managers are prioritizing diversification over cost considerations. Major investment banks have dramatically revised their gold price forecasts upward. Goldman Sachs now projects $4,900 per ounce by December 2026, while Deutsche Bank raised its 2026 average forecast to $4,000. These projections assume continued central bank accumulation at elevated levels. Dollar's Declining Reserve Status The crossover in gold versus Treasury holdings reflects a broader erosion in the dollar's reserve currency dominance. The dollar's share of global foreign exchange reserves has declined to 57.7% in the first quarter of 2025, down from over 70% in the early 2000s. When gold is included in total reserve calculations, the dollar's share falls to approximately 48%. European Central Bank analysis shows that since Q3 2023, the dollar's share of foreign exchange reserves has fallen below 50%, with gold being the primary beneficiary of this diversification. The euro has also gained ground, increasing its share to 20.06% in Q1 2025. Strategic Implications This historic reversal carries profound implications for the global monetary system. Central banks are effectively signaling reduced confidence in the sustainability of current fiscal and monetary policies in developed markets, particularly the United States. The shift toward gold represents a return to more traditional concepts of monetary sovereignty and independence from digital financial systems. The trend appears structural rather than cyclical. Unlike previous gold rallies driven by retail investor panic, current accumulation reflects deliberate institutional strategy. Central banks are integrating gold into quantitative reserve management models that balance diversification, liquidity requirements, and geopolitical risk mitigation. Regional Dynamics Emerging market central banks have led the gold accumulation trend, with particularly aggressive strategies from China, Russia, Turkey, and several Eastern European nations. These countries are using gold accumulation to reduce vulnerability to Western sanctions and dollar-based financial systems. Advanced economy central banks have also increased their gold focus, though from higher baseline allocations. Countries like Germany and France maintain gold shares of 60-70% of their reserves, while emerging markets typically hold much lower percentages, suggesting potential for continued catch-up buying. The crossover of central bank gold holdings above Treasury positions marks more than a statistical milestone—it represents a fundamental reassessment of monetary assets in an era of heightened geopolitical tensions and fiscal uncertainty. As reserve managers prioritize durability and neutrality over yield, gold's role as the ultimate monetary asset appears to be experiencing a historic renaissance.  The dollar was at risk of losing its safe-haven status at the height of US tariffs uncertainty in April, as foreigners sold the currency fearing further declines in its value, the International Monetary Fund said.
In its latest outlook on fragility in the financial markets, the IMF said some foreign investors became “net sellers” of the dollar in the aftermath of President Trump’s “Liberation Day” announcements, the reverse of the usual trend where investors seek the safety of the US currency at times of high volatility. The dollar fell sharply on April 2 as traders dumped the currency over worries about US protectionism and to hedge against future declines. The IMF said that selling by foreign investors “was stronger and more persistent, suggesting evolving shifts in market responses to uncertainty”. The US currency depreciated more than 10 per cent in the first half of the year, its largest slide in almost 50 years. The pace of the depreciation slowed after the Trump administration announced a 90-day pause on tariffs later in April. Ken Griffin, chief executive of Citadel, one of the world’s largest hedge funds, said on Monday he was “concerned” about the dollar losing its position as a safe haven for investors to assets like gold. Gold prices hit a fresh record of $3,983.60 an ounce this week over worries about the US government shutdown, inflation in developed market economies and the ability of America to hit countries with dollar-based financial sanctions. Analysts at Goldman Sachs have estimated gold could trade at $5,000 by the end of next year. “We’re seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarise, or de-risk their portfolios vis-à-vis US sovereign risk,” Griffin said. “Inflation is substantially above target and substantially above target in all forecasts for next year. You now see individual investors around the world go: ‘You know what? I now view gold as a safe harbour asset in a way that the dollar used to be viewed.’ That’s what’s really concerning me.” The IMF warned that the $10 trillion foreign exchange market remains “vulnerable to adverse shocks. That means policymakers should strengthen surveillance to monitor systemic risks arising from market stress. Enhancing liquidity stress tests and conducting scenario analysis are essential to assess specific funding vulnerabilities across financial institutions.” Mehreen Khan Economics Editor at The Times today. https://lnkd.in/dtR-ZNET  More than 800 top military brass sat quietly Tuesday as President Trump declared a new "war from within”, an American battlefield he claimed to be more dangerous than any foreign war zone.
In an historic speech at the Quantico Marine Corps Base in Northern Virginia, Trump wiped out decades of civil-military restraint and proclaimed the armed forces as his weapon of choice against domestic "enemies." Both the content and setting were unprecedented: Generals and admirals flew in from across the globe to hear the president redefine the military's mission and attack his political enemies in blistering terms. "We're under invasion from within. No different than a foreign enemy, but more difficult in many ways because they don't wear uniforms," Trump mused during Tuesday's extraordinary hour-long address. On the campaign trail last year Trump vowed repeatedly to unleash the military on the "enemies within”. Trump already has ordered the National Guard to Los Angeles, D.C., Memphis and Portland, often over the objection of local officials. He sees those deployments as a playbook for other deep-blue cities such as Chicago, Baltimore and San Francisco, which he said Monday should be used as "training grounds" for the military. "We're going to straighten them out one by one. This is going to be a major part for some of the people in this room." Trump told the leaders of the world's most powerful military. "History is filled with military heroes who took on all enemies, foreign and domestic," he said, pointing to George Washington, Abraham Lincoln and other presidents who "used the armed forces to keep domestic order and peace.” "Many of our leaders used the military to keep peace. Now they say you aren't allowed to use the military," he lamented. By wrapping himself in historical precedent, Trump tried to normalize what would be a dramatic break from modern U.S. civil-military tradition. The Posse Comitatus Act of 1878 was designed to prevent presidents from using the armed forces as a domestic police force, a guardrail that has shaped American democracy for nearly 150 years. Trump has treated it more as a nuisance than a constraint — sidestepping it with repeated National Guard deployments, and establishing a new "quick reaction force" for quelling domestic unrest. Opening the Quantico gathering, Defense Secretary Pete Hegseth said the military would scrap "overbearing rules of engagement" and "untie the hands of our warfighters to intimidate, demoralize, hunt and kill the enemies of our country.” Trump then applied that sentiment to the home front, urging troops who are harassed or assaulted by protesters to "get out of that car and do whatever the hell you want to do." Democrats and civil rights advocates say Trump's speech confirms their worst fears: that he views the military as his personal police force. Critics have raised constitutional questions, including whether the president could use the armed forces to influence an election. As he departed the White House Tuesday morning, Trump told reporters that he would fire any generals he disliked "on the spot.” He then drew laughter from the brass by beginning his speech: "If you don't like what I'm saying, you can leave the room. Of course, there goes your rank, there goes your future.” The bottom line: A new New York Times/Siena poll underscores how polarizing Trump's vision is. 51% of voters said they're more concerned about Trump using the National Guard to intimidate his political opponents than they are about crime spiraling out of control in Democrat-led cities, while 42% said the opposite. "In cities across the country, the president's federal deployments are already creating conflict where there is none and instilling profound fear in people who are simply trying to live their lives and exercise their constitutional rights," the ACLU said in a statement. |
The Saturday EconomistAuthorJohn Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy. Archives
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