The Myth of Resilience
Capital is fleeing the Eurozone. While mainstream headlines celebrate a 0.2 percent uptick in quarterly GDP, the underlying mechanics suggest a systemic failure. The narrative of global economic resilience is a facade built on aggressive fiscal deficit spending in the United States and a desperate inventory cycle in Germany. On November 7, 2025, the data reveals a stark divergence between equity market valuations and industrial reality.
The German Industrial Decay
Carsten Brzeski of ING has repeatedly signaled that the German locomotive is stalled. The latest industrial production figures released in the first week of November 2025 show a 0.8 percent contraction in core manufacturing sectors. This is not a temporary dip. It is a structural exit. Energy-intensive industries are migrating to North America and Southeast Asia. The cost of electricity for German manufacturers remains 140 percent higher than the pre-2022 average, rendering the “rebound” mathematically impossible for the medium term. According to the latest ING Think economic analysis, the Eurozone is trapped in a low-growth cycle that no amount of interest rate cutting can easily fix.
The US Fiscal IV Drip
In the United States, resilience is bought, not earned. The fiscal deficit for the 2025 fiscal year has exceeded 6.5 percent of GDP. This level of spending is typically reserved for deep recessions or world wars. Instead, it is being used to prop up consumer demand in a high-interest-rate environment. Per the latest Reuters market reports, the Federal Reserve’s struggle to bring inflation down to the 2 percent target is being undermined by this fiscal profligacy. The “soft landing” is actually a “fiscal suspension” where the ground is being moved to meet the falling aircraft.
Inflation is sticky. The October 2025 CPI print came in at 2.9 percent, higher than the 2.7 percent forecast. This stickiness is driven by services and housing, sectors that are less sensitive to interest rates and more sensitive to the massive liquidity injections from the federal government. Investors expecting a rapid return to 2 percent interest rates are ignoring the reality of a de-globalizing supply chain that is inherently inflationary.
Mechanical Breakdown of the Manufacturing Trap
The manufacturing rebound cited by many analysts is largely an artifact of the “Bullwhip Effect.” During the supply chain crunches of previous years, firms over-ordered. They then spent 2024 destocking. What we are seeing in late 2025 is a return to baseline ordering, which looks like growth on a year-over-year basis but is actually stagnation when compared to 2019 levels. This is the technical mechanism of the trap: growth that is merely the absence of further decline.
| Economic Indicator | Nov 2024 Actual | Nov 2025 Current | Percentage Change |
|---|---|---|---|
| US 10-Year Treasury Yield | 4.12% | 4.55% | +10.4% |
| German Industrial Output | -1.2% | -0.8% | +33.3% (Improvement) |
| Global Brent Crude Oil | $78.50 | $84.20 | +7.2% |
| Euro/USD Exchange Rate | 1.08 | 1.04 | -3.7% |
The Geopolitical Premia
Geopolitical tensions are no longer “tail risks.” They are baked into the cost of doing business. The fragmentation of trade into blocs (the US-led bloc versus the BRICS+ expansion) has added a permanent 50 to 100 basis point premium to global logistics costs. This is evident in the Bloomberg Commodity Index, which has remained elevated despite slowing Chinese demand. The resilience of the global economy is being tested by a transition from a “just-in-time” efficiency model to a “just-in-case” resilience model, which is fundamentally less profitable.
The Liquidity Squeeze in Emerging Markets
While the US manages its debt through its reserve currency status, emerging markets are facing a brutal reality. The strengthening dollar in late 2025 has forced central banks in Brazil, Indonesia, and Turkey to hike rates to defend their currencies, even as their domestic economies slow. This creates a feedback loop: higher rates lead to lower growth, which leads to further capital flight, further weakening the currency. The resilience seen in the S&P 500 does not reflect the silent crisis occurring in the global south, where debt servicing costs have reached 20 year highs.
The critical milestone to watch is the February 15, 2026, deadline for the US debt ceiling renegotiation. This event will coincide with the exhaustion of the Treasury General Account’s current liquidity buffers. If the fiscal stimulus is forced to contract in early 2026, the artificial floor beneath the US consumer will vanish. Watch the 4.75 percent mark on the US 10-Year Treasury; a breach of this level before year-end will signal that the market no longer believes in the soft landing narrative.
