The election is over. It’s time for leadership and decisive action. Yes, there are winners and losers and promises to be kept. Six billion dollars was spent on elections in total and the money given to support candidates is not charity but an effort to purchase some modicum of influence. No problem with that for that has been the game since the birth of the republic and long before that in other political entities. If the “fiscal cliff” and its potential impact is as serious as some opine then leadership is needed to set the course of real action. President Obama, if you believe that the fiscal crisis is the most urgent problem, you will choose Erskine Bowles as your Secretary of Treasury because he has the ability to reach across party lines and get to rational levels of compromise. Mr. Bowles has the respect of party leaders and, most importantly, his plainspokenness is needed to get the American people to understand the rudiments of the looming financial debacle.
Posts Tagged ‘Obama’
Last night , Prime Minister Noda decided to call for new elections in Japan and that automatically ends this session of the DIET. The elections will take place in a month and the present unpopularity of the DPJ means that the LDP is the favorite. It seems that Noda was willing to call elections on the promise that the new parliament would work toward some type of election reform. Hopefully some of the readers of NFU will help fill in the specifics about the issues of election reform. The YEN was sold off on the news of Parliament’s dissolution because the present strength of the YEN and its negative impact on Japanese manufacturing is certain to be an issue. The LDP’s leader, Shinzo Abe, has been very vocal about the BOJ/MOF doing more to raise inflation in the Japanese economy and to be more aggressive in efforts to weaken the YEN. While the YEN weakened, the NIKKEI index held its overnight gains even as the S&Ps, DOW and NASDAQ were knocked lower following President Obama’s press conference.
Give the pollsters their due. They were virtually perfect in the predictions of electoral outcomes. Can the electoral algos now reduce all that data and tell us the policies that will be produced to deal with the problems that plague the U.S.? The Obama victory was greeted by a market selloff as the investment world woke up to the possibility of tax increases and spending cuts leading to a recession and decreased profits. The elections were widely anticipated as the bookies in London and worldwide had predicted. I am left scratching my head, wondering what caused the steep decline in the U.S. equity and commodity markets? The EURO currency was not sold hard enough to think that the Greek situation was the catalyst. Besides, the Greek parliament passed the austerity budget tonight. There is no way that Europe will not provide the Greeks with the promised funds as the outcome would not be worth the 30 billion euros that are in question. If the Obama victory and coming government standoff should have led to a selloff in the BONDS for one would have to be insane to purchase U.S. bonds priced at FED manipulated risk levels.
In what was a very slow new weekend the most significant story is that Spanish PM Rajoy’s political party held on to power in the PM’s home state of Galicia. This was considered to be an important test for Rajoy for if his support in his traditional support base had turned against him, there would be no chance that the PM would have proceeded down the road of further austerity. Now Señor Rajoy may be emboldened to surrender to the demands of German-imposed CONDITIONALITY so as to receive the proposed bailout from the ESM. This should be short-term bullish for the EURO as it will remove one of the obstacles that was blocking a massive dose of liquidity into the Spanish financial system. The trade-off game of financial support for enacting more austerity should help the markets as near-term fears of a Spanish collapse should be postponed.
Wednesday brings the FOMC announcement on interest rates. Can the FED really ease more at this juncture? It seems that the financial world has come to believe that Draghi’s comments from last week were intended to prod the Bernanke-led FED to promote a greater monetary response to a drastically imploding debt crisis in Europe. I don’t believe that Chairman Bernanke will be pushed into further monetary action–outside of some kind of extended language–for the FED wants to keep the onus where it belongs … the POLITICAL POLICY ARENA. If Bernanke were to get aggressive at this juncture, the controllers of fiscal policy would get an election pass and the REPUBLIC WOULD BE ILL SERVED. The pundits are all opining that the FED’S non-action will result in a dramatic sell off of RISK. I think that is a wrong read as a passive statement will put pressure on Congress and the White House to actually take the lead and find some compromise to the FISCAL CLIFF SYNDROME.
As I looked at the photos from the G-8 conference, this caption became obvious. The German Chancellor is the belle of the ball as her Germany has what the World is crying for: surplus wealth in a debt-laden world. The pressure was on Chancellor Merkel to provide enough EUROS for short-term triage on the European nations hemorrhaging wealth from the huge amount of debt owed to many global creditors. As the communique revealed, there were few concrete proposals provided by the G-8 “brain trust” except that Germany “ought” to provide the financial backstop for all of Europe and, thus, the rest of the world. President Obama is well aware that any financial collapse in Europe will weigh heavily upon his reelection potential.
As the tragedy/comedy of negotiations over the private sector involvement (PSI) in any form of debt relief for Greece continues, it is important to remember that the Institute of International Finance (IIF) has no real leverage in the situation and is merely trying to attain some type of outcome better than the supposed 90% haircut. The IIF represents the interests of large and medium banks as it seeks a compromise that is “fair” to all parties. Let’s remember that while the large banks are pressing for a better deal, many of them are being bailed out by the LTRO program put in place by the ECB.
Notes From Underground: Can the Obama Administration Please Find People Who Haven’t Been Responsible For Failed Policies?January 19, 2012
The Obama Administration has taken recycling way too far. There is a rumor that former economic adviser Larry Summers is a potential nominee for President of the World Bank. Is there no one else besides these retreads who have represented and worked for the FINANCIAL-POLITICAL COMPLEX? Summers is a horrible choice as he has been tainted by his work and exorbitant compensation for several Wall Street firms. The idea that the World Bank president has to be an American is a throwback to the times when it was ok to fight anti-colonial wars around the globe and at the same time using the World Bank’s funds to buy friends and influence people no matter how tyrannical the regime.
It is startling to think that the S&P downgrades could have any sort of effect on the markets. The sovereign debt markets have been telling those who are attentive that not all countries in the European Union are equal. Several of the GIIPS have had interest rate yields far above those of the German benchmark for almost two years. Even the French 10-year note has widened to 150 BASIS POINTS over the German 10-year BUND during the last six months. DO WE REALLY NEED S&P OR OTHER RATING AGENCIES TO CERTIFY WHAT THE MARKETS HAVE BEEN SAYING?