10 Oct 2025
The US government faces its 15th shutdown since 1981 due to budget impasses and political disagreements, threatening significant economic and public disruptions. Meanwhile, Ken Griffin warns that the surge in gold prices and persistent inflationary pressures indicate an overly optimistic market outlook on economic stability.
The US government is experiencing its fifteenth shutdown since 1981 due to a budget lapse, with no progress on a new funding bill. Republicans advocate for current spending levels, while Democrats seek concessions on policies like ObamaCare and Medicaid, alongside limiting White House powers. Public opinion historically opposes shutdowns, blaming the party initiating the demands, and internal Democratic divisions make them politically vulnerable. Economically, a three-week shutdown could increase unemployment by 0.4% to 4.7% and reduce annual GDP growth by 0.2% per week, causing widespread disruptions to air travel, military pay, taxpayer services, and potentially costing the tourism sector $1 billion weekly. There is hope that this painful shutdown might compel both parties to reform the flawed budget process, potentially by implementing automatic funding extensions. To resolve the impasse, Democrats should agree to the funding bill, Republicans should negotiate healthcare honestly, and all parties must acknowledge that no one benefits from governance in crisis.
Canada's Prime Minister has criticized former US President Trump's protectionist policies in the auto industry, emphasizing that North America's integrated supply chain makes US producers more competitive. The USMCA agreement is crucial for strengthening the US auto industry and enabling its global competitiveness. Trump views the auto sector as a 'natural conflict,' insisting on domestic car production, and his tariffs have significantly impacted both Canadian auto companies and US firms like General Motors, which closed a Canadian plant, and Stellantis, which reduced shifts in Ontario. Separating the long-standing and interconnected US-Canada auto supply chain is challenging, with Canadian-assembled cars typically containing at least 50% US parts. Last year, the US exported $29.5 billion in auto parts to Canada and imported $19.5 billion, while Canada remained the largest foreign buyer of US passenger cars and light trucks, purchasing approximately $23 billion worth. The Canadian Prime Minister declared that the relationship between the two countries 'will never be the same again.'
Ken Griffin, a highly successful investor with substantial personal wealth, views the recent surge in gold prices as a 'yellow flag' signaling potential economic instability. Gold's 121% increase since late 2022, reaching nearly $4,000 per ounce, is historically associated with severe inflation, geopolitical volatility, or financial crises. Griffin suggests that gold's rise and the emergence of digital currencies reflect a decreasing influence of the dollar as investors seek to reduce their dependence on it and hedge against US debt. He acknowledges the concept of a 'weak dollar trade' where perceived dollar vulnerability drives up gold and Bitcoin prices, but notes that the traditional inverse relationship between gold and the dollar has weakened in the past five months. Despite past events that prompted some countries to reconsider dollar reserves, the dollar maintains its global dominance, evidenced by its presence in 89% of global currency transactions and a stable share of world reserves, with foreign investors actively participating in US debt and equity markets. While gold's historical role as a crisis predictor is inconsistent, its current surge warrants attention as a potential 'micro-crack' in the system. Griffin believes markets are prematurely optimistic about inflation being fully contained, arguing that restrictive immigration policies, reduced labor supply, massive budget deficits, and recent expansionary monetary policies create a highly inflationary environment. He trusts the Federal Reserve can curb inflation if it maintains its independence and cautions the White House against undermining the dollar's credibility with aggressive trade actions or attacks on the central bank's autonomy.
Key economic data releases include the minutes from the European Central Bank's (ECB) policy meeting, which may provide important insights, and US unemployment claims. Additionally, a pre-recorded welcome message from Federal Reserve Chair Jerome Powell for a local banking event is scheduled, though it is not expected to contain significant policy announcements. Remarks from other Federal Reserve members, however, remain relevant for market analysis.
Despite the recent attention-grabbing surge in gold prices, the dollar's global dominance remains unrivaled, with no clear signs of its decline.
| Topic | Key Insight | Impact/Significance |
|---|---|---|
| US Government Shutdown | Political deadlock over budget leads to the 15th shutdown since 1981, highlighting systemic budget process flaws. | Potential 0.4% rise in unemployment, 0.2% weekly GDP reduction, widespread disruptions to public services, and a $1 billion weekly loss for the tourism sector. |
| US-Canada Auto Trade | Trump's protectionist tariffs strain integrated auto supply chains, despite the mutual benefits and interdependence. | Resulted in GM plant closures and Stellantis shift reductions in Canada; Canada remains the largest buyer of US vehicles, underscoring critical trade ties. |
| Gold Price Surge | Gold is up 121% since late 2022, nearing $4000/oz, signaling a 'yellow flag' for potential economic instability. | Reflects investor hedging against inflation and perceived dollar dependence, though historically, gold is not a consistent crisis predictor, warranting careful observation. |
| Inflation Outlook | Markets are overly optimistic about inflation containment, with several underlying factors pointing to persistent inflationary pressures. | Restrictive immigration, labor shortages, budget deficits, and past monetary easing contribute to a high-inflation environment; the Fed's independence is crucial for curbing inflation. |
| Dollar's Global Role | Despite gold's recent rise and political disruptions, the dollar maintains its unrivaled global dominance in trade and reserves. | Foreign investment continues into US treasuries and stocks; the White House is cautioned against undermining the dollar's credibility through trade actions or attacks on the Fed's independence. |
