Image: Mike and Wombo collaboration.

TL; DR

This year’s Jackson Hole Economic Symposium theme, “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy”, puts the spotlight on jobs, growth, and how central banks will balance policy in an era where debt, demographics, and deficits collide.

Behind the official agenda lies the deeper undercurrent: fiscal dominance, debt monetisation, and a Federal Reserve increasingly playing second fiddle to a Treasury that’s doling out more money than a bison can sh*t.

And with the QE Infinity train still running full steam (with a new conductor employed by the Bessent Treasury), investors will be listening closely for unscripted moments about liquidity, balance sheet management, and whether Powell and his peers can find a credible “exit track.”

Welcome to your Jackson Hole 2025 primer—yeeha!

Here we are again—the Tetons loom, the world’s top central bankers and economists gather, and markets lean in for hints about what the next chapter of monetary policy might look like.

The Kansas City Fed’s annual Jackson Hole Economic Policy Symposium has become shorthand for “the Fed’s mood music,” and this year’s theme signals that labour markets, not just interest rates, will be the headline.

The official focus is: “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”

But as with every Jackson Hole, the real story is what happens off-script, i.e., what’s said in casual press interviews and fireside chats, rather than the carefully prepared papers. This year, that off-script narrative is likely to swirl around a single background track, without mentioning it by name, and that of course is the QE Infinity train to nowhere. But will Powell spill the tea?

The economic backdrop to Jackson Hole 2025

1. Debt, deficits, and demographics

Since last year’s symposium, U.S. federal debt has ballooned past $36 trillion, with a debt ceiling now $5 trillion higher at $41.1 trillion. That’s a compound annual growth rate of ~9%, well above GDP growth of ~5.3% nominal, ~2% real.

Meanwhile, the Treasury General Account drew down from $577 billion to just $355 million as of late July, leaving about $4.5 trillion of headroom until the next ceiling fight. At the current pace, we’ll arrive at that station, no later than 2027.

Put simply, the U.S. is still firmly aboard the QE Infinity train to nowhere. And with demographics now tilting against growth, i.e., aging workers, slowing productivity, tighter immigration flows, the track ahead isn’t getting any easier to climb.

2. Labor markets, productivity, and the Sahm Rule déjà vu

Officially, this year’s agenda will explore how labour markets adapt to demographic shifts and productivity challenges. Unemployment remains historically low, but pockets of weakness are appearing, and productivity growth has failed to keep pace with the demands of a debt-driven economy.

We’ve been here before. In 2024, a tick-up in unemployment triggered the Sahm Rule recession warning. The Fed waved it away then, but the underlying question hasn’t gone away. How hot does the economy really have to run to service a debt stack compounding at 9% annually?

The math is stark. To balance current deficits plus ~$1 trillion in annual interest costs, U.S. GDP would need to grow closer to 10% per year. That’s not happening. Tariffs might help temporarily, but they are a blunt instrument and can’t be scaled forever.

Which leaves only one path forward. More liquidity. And that means a faster train to nowhere.

3. TIFFIT is still the operating system

As I wrote last year, Treasury and the Fed have become two sides of the same coin—Treasury Is Fed, Fed Is Treasury (TIFFIT).

The separation between fiscal and monetary policy has eroded. Treasury issues the debt, and the Fed ensures the refinancing calculus doesn’t blow up. If bond markets demand higher yields, the Fed becomes the release valve—via rate suppression, yield curve control, or outright balance sheet expansion.

Call it QE, call it liquidity facilities and discount windows, call it reverse repo gymnastics—it’s still debt monetisation dressed in new clothes.

So even while the Fed has let ~$2.3 trillion roll off its balance sheet from the $8.9 trillion peak, the political and fiscal backdrop all but guarantees that Powell’s “quantitative tightening” phase is nearing its end.

Why Jackson Hole 2025 matters

While the official papers will dissect labour markets, the real market-moving story is whether Powell acknowledges the structural reality: demographics and productivity can’t close the gap between debt and growth. That means liquidity is here to stay.

I doubt he will. The Fed may still talk tough about independence, but under fiscal dominance it has become the boiler mechanic on the QE Infinity train, stoking the fire when the Trump/Bessent tag team Treasury needs it. And from the President’s perspective, he sees independence as a roadblock to MAGA.

For investors, the implications are clear:

Trump wants more liquidity, and liquidity trumps rates. Balance sheet dynamics matter more than dot plots.
Debt monetisation is structural, not cyclical. TIFFIT is the baseline, not the exception.
Markets will keep hunting risk assets. Extra liquidity has to flow somewhere—into bitcoin, PMs, equities, other commodities, real assets, or whatever looks safest from debasement.

What to watch this week

Powell’s tone. Does he nod to structural fiscal dominance, even indirectly?
Labor productivity framing. Will the Fed argue productivity gains (especially via AI) can offset demographics, or admit the gap is too wide?
Liquidity hints. Any suggestion the Fed is preparing for balance sheet stabilisation or expansion will be more market-moving than labour papers.
The unscripted moments. As always, Jackson Hole’s real signals leak out in the informal Q&As, not the polished speeches.

Bottom line

This year’s symposium may be themed around labour markets, but the conductor of the QE Infinity train is still the Treasury, and the Fed is just there to keep the boiler from exploding under a TIFFIT construct.

Saddle up—it’s going to be another ride where liquidity, not rates, sets the destination to nowhere.

See you in the market.

Mike

Jackson Hole 2025, a Primer