The French are rioting as inflation hits 3.4% while wage growth and GDP remain stagnant. It’s higher in Trump’s America

Protests and riots erupted across France over the weekend as the country battles with stagflation. The unrest began last month, when students took to the streets to complain about a lack of investment in education, citing outdated classrooms, missing teachers, and facilities not suited for warmer temperatures. Others joined in solidarity while also criticizing police actions against student protesters.

Eventually, the demonstrations turned to the high cost of living and surging fuel prices, which have increased due to the U.S. war on Iran. This comes alongside a significant rise in inflation. Consumer prices in France jumped 3.4% in September compared to the previous year, the fastest increase since January 2024 and up from August’s 2.6%.

However, inflation is not limited to France. Countries worldwide, including the U.S., are experiencing higher inflation. Prices are rising globally, just as they are in the U.S., where affordability is the main concern in upcoming midterm elections expected to heavily penalize Republicans. Still, the situation in France is particularly dire.

For example, economic growth has been sluggish, with the government lowering its 2026 forecast to just 0.5% from 0.7% after GDP grew 0.9% in 2025. Meanwhile, wage increases have largely stayed flat, hovering around 1.7% in the second quarter, according to the Bank of France. Unemployment is also high, with youth unemployment reaching 20%.

The combination of slow growth, high inflation, reckless spending, and mounting debt has sparked a revolt on financial markets. French bond yields have surged to their highest levels in 24 years, echoing warnings not seen since the eurozone debt crisis in 2011. Investors also lack confidence that fiscal responsibility will return soon.

The leading candidates in the upcoming French presidential election in the spring are from the populist far-right and far-left. Mujtaba Rahman, managing director for Europe at Eurasia Group, described France as suffering from a crisis of liberal democracy, a crisis of fiscal mismanagement, and a youth disaffection crisis. "But the fiscal crisis is the most dangerous, underlying many of the country's woes and threatening to bring it to ruin," he wrote in a New York Times op-ed.

"France, truly, is on the brink." Meanwhile, the U.S. also faces its own political dysfunction, which has contributed to the national debt exploding to $40 trillion, with no sign of budget deficits being brought under control. However, the U.S. benefits from the "exorbitant privilege" of the dollar's global reserve currency status and a robust economy fueled by the AI spending boom.

GDP grew 2.2% in the second quarter, with third-quarter growth forecast to accelerate further to 3.6%. The U.S. jobless rate is 4.2%, indicating full employment, and youth unemployment is around 10%. Wage growth has also been strong, tracking around 3.9% annually. Despite these factors, Americans continue to spend, keeping corporate earnings strong and stocks near record highs.

U.S. bond yields have surged past 5%, partly reflecting faster GDP growth. The Federal Reserve has already raised rates last month and is expected to raise them further as the resilient economy adds upward pressure on prices. Market veteran Ed Yardeni noted that the economy is less sensitive to rates due to its services-heavy nature, aided by wealthy and lightly indebted retirees, and stimulated by large fiscal deficits and an extraordinary AI investment boom.

He also explained that stronger demand for capital and weaker growth in national saving may have pushed the neutral interest rate higher. That's why higher interest rates haven't led to the widespread expectation of weakened economic growth with a lag, nor do they seem likely to do so.