In 30 seconds: Brad Setser and others debate China's currency manipulation, CNY undervaluation, and the need for coordinated G7 action or a new Plaza Accord to rebalance global trade demand. Bianca Research reveals that Anthropic's valuation jump from $380B to $965B in Q2 generated over $150B in S&P 500 'other income' via Google and Amazon, making a private non-member company the single largest contributor to index earnings. Luke Gromen and GestaltU argue that Western fiscal dysfunction and sovereign debt fragility are driving a structural bull case for gold and hard assets as alternatives to dollar-denominated reserves. Analysts warn that surging US interest and entitlement obligations now exceed federal receipts, with the debt-to-GDP ratio structurally difficult to reduce even under optimistic growth assumptions.
The case for a coordinated currency rethink on China keeps getting louder. Over the last 12 months, China has purchased roughly $500 billion in foreign exchange reserves; in 2026 the CNY is clearly undervalued and FX settlement shows that manipulation is back. The yuan is managed against the dollar exclusively by China, meaning dollar weakness versus the world can result in a weaker CNY — a key price for both countries that only one of them controls. The fix is the lever: setting the fix stronger will cause the CNY to strengthen, with plenty of dollar conversion sustaining the move, as is clear from the last 12 months. Prices in China are falling relative to prices in the rest of the world, but changes in the CNY/USD or CNY versus the basket haven't had a noticeable impact on that factor, so nominal moves have translated into real moves. Meanwhile, Chinese goods import growth has decoupled from Chinese demand growth due to Xi's import substitution policies, which implies that exchange rate moves have to do more of the work closing the gap. On the trade side, net exports have been contributing heavily to China's growth, and export volumes have been growing faster than internal demand. Chinese exporters chose to go for volumes instead of raising prices to preserve margin, given the CNY's tiny move over the last 12 months. There is precedent for pressure working. Schumer Graham did have an impact on China's fx position in 07/08 and certainly in 10/11. After China lifted its GFC era repeg in late 2010, the yuan appreciated 10 percent. And Macron got rebuffed by Trump back in 2018 or 2019 when he suggested a soft form of coordination on China, a reminder that coordination requires willing partners. Gold: $4,501.90. Gold up 0.53% on the day.
Here is a fun thing about index earnings. Anthropic is not a public company. It is not a member of the S&P 500. And yet in Q2 2026, it was the single largest contributor to S&P 500 earnings. For the first time ever, the single largest contributor was neither an S&P 500 member nor even a public company. You might reasonably ask how that works. It works like this. Anthropic's valuation jumped from $380B to $965B during the quarter. Include that line item and S&P 500 earnings grew 51% year over year. We have never seen such a mid-cycle earnings acceleration in history. The downstream effects on valuation metrics are notable. The S&P 500 forward P/E now looks fairly average for the post-COVID period. Mag 7 forward earnings are near a decade low, making them very cheap right now. This circular financing dynamic is, according to the same analysis, the most bullish thing to happen to stock valuations in the last few years. It is a very tidy loop. The S&P 500 itself closed at 7,686.14 on 2026-08-31, down 0.33% on the day. The index had rallied 5.74% in the week of 7/29-8/4. The market is sitting with an earnings boom that is largely one private company's paper valuation showing up in public companies' income statements.
Gold closed at $4,501.90 on 2026-08-31, up 0.53% on the day. Gold is already a globally approved tier-1 reserve asset. Gold reserves are no country's liability, which means they can't be tracked the way currency holdings are tracked. Gold miners, for instance, are up 275% since December 2019, outpacing the SPXTR's 175% over the same stretch. Electrical infrastructure, since 2022, has delivered 106% against 99% for the index. One speculative extension: China may eventually demand gold-backed stablecoins — not dollar stablecoins — for factory goods sold to American companies, with gold stored in Hong Kong as collateral. Large sovereigns, meanwhile, have powerful incentives to avoid ever granting BTC reserve status, which makes gold the path of least institutional resistance.
The arithmetic of US federal debt is starting to resemble a trap with no obvious exit. Total marketable debt now sits at $32 trillion, of which $7 trillion is in bills that reprice continuously at prevailing rates. The remaining $25 trillion in non-bill marketable debt carries legacy coupons, but $17 trillion of that stock will roll over at market rates over the next 10 years. Every basis point matters when the notional is that large. The compounding problem is that interest expense is not the only quasi-fixed obligation. Entitlements, which are essentially denominated in a hard currency the US can't print, combine with interest to form a block of commitments growing at nearly twice the rate of receipts. Those are heroic assumptions stacked on top of each other, and the payoff is still measured in generations. Non-bill marketable debt refinancing at market rates over next 10 years: $17 trillion. Meanwhile, the policy mix is pulling in opposite directions. The administration has been talking up a supply-side agenda and then unleashing negative shocks, a combination that traditionally does not coexist well. Marketable debt: $32 trillion.
Here is what your weekly spend looks like right now.
Gas (per gallon): $4.08, up 0.89% on the week
Groceries (CPI food at home): 346.68, up 0.08% on the month
Eating out (CPI food away from home): 349.88, up 0.08% on the month
Average hourly earnings: $37.62, up 0.05% on the month