Posts Tagged ‘Thomas Jordan’
Well, the famed modeler from M.I.T. has finally admitted that he has been an avid reader of Notes From Underground and in the world of global macro finance, 2+2=5. The FOMC statement was a surrender to the work of Michael Woodford as was pre-released in a Janet Yellen speech a few weeks ago. The FED will give great credence to a 6.5% unemployment and a 2% inflation threshold, give or take a 0.5% discretionary prerogative. The 6.5% unemployment threshold is also subject to FED discretion for it seems to depend on whether or not the labor participation rate is increasing while the unemployment rate declines.
Notes From Underground: SNB Fights the Battle of the Bulge and Thomas Jordan Says Nutz to a Sovereign Wealth FundNovember 28, 2012
The Chairman of the Swiss National Bank delivered a speech today in Bern, “SNB monetary and investment policy and the impact of the strong Swiss Franc.” The investing world knows that the Swiss have pegged the franc to the euro at 1.20 more than a year ago and have been successful in keeping the floor of the EUR/CHF in place. The result has been a massive growth in the Swiss foreign reserves as the SNB has had to diversify out of some of the euros and into other currencies. Mr. Jordan made it clear that the SNB was “prepared to buy foreign currency in unlimited quantities.” The Swiss will continue to keep the EUR/CHF floor in place as part of its mandate on monetary policy for an overly strong FRANC has a deflationary impact on the Swiss economy.
Jackson Hole is over and the ECB and BOE meet on Thursday so let’s take a minute and look at what is going on with the Swiss National Bank and the impact its EURO policy is having on world asset pricing. As the SNB maintains its present floor on the EUR/CHF cross rate–REMEMBER 1.20 is the level–the BANK is forced to continue buying EUROS to maintain the PEG. All those EURO PURCHASES have to go somewhere as the SNB does not want to be left holding the proverbial bag if the Germans say NEIN to the EU and the EURO would collapse. The SNB has been forced to buy German, Dutch, Austrian, French and Finnish sovereign debt, but with those instruments yielding negative rates on 2-YEAR NOTES the Swiss are forced to seek out alternative assets to alleviate the massive exposure to the peripheral sovereigns.
The loser in Brussels was … FRANCE. The markets were giddy as they drank deep from the KOOL AID spring of separating BANK AND SOVEREIGN SOLVENCY … did this really occur? It is far too early to tell. For all the “PUNDITS” it seems that Chancellor Merkel has capitulated to the needs of Spain and Italy as France cheered on the brinkmanship of Mario Monti. The French, led by President Hollande, has now ended the 50-year-old policy of Gaullism as France will no longer be deemed a responsible partner for Germany as being the mainstay of Europe.