Notes From Underground: Brazil goes; New Zealand goes; and the ECB and England will hold steady tomorrow

Tonight, we got word that the Central Bank of Brazil raised their lending rate another 75 basis points to 10.25 percent. This was widely anticipated, especially after yesterday’s strong GDP numbers. Furthermore, the RBNZ raised rates another 25 basis points to 2.75 percent in a move that was not widely anticipated, which put a bid to the Kiwi dollar. The global growth story is definitely favoring the Asian and BRIC countries, while the developed economies are struggling to overcome the tremendous debt loads that carried their economies following the economic downturn from 2001-2003.

Emerging market banks are in far better shape than their Western counterparts. This is what makes the G-20 so meaningless. Think back 15 years and recall that the Western Banks were lecturing the world on how to conduct themselves. The Asian contagion has spread West and now the developing nations are in no mood to hear any lectures from the profligate nations of Europe and the poster child, USA.

We believe that Secretary Geithner is correct in admonishing Europe for withdrawing into a cocoon of austerity, which is preventing any real rally in the global equity markets.With global growth remaining tepid ,now is not the time to tighten budgets and rein in public stimulus. Geithner is furious at his European cohorts but we wonder if he should be advising his BOSS that raising taxes next year is not appropriate when growth is not strong enough for job creation. Geithner should be yelling at his fellow U.S. policy makers that the U.S. needs expansionary programs and not austerity. To remain silent while berating the Europeans is an act of great hypocrisy.

The FED is also to be criticized. In Bernanke’s testimony on the HILL today, he seemed to lose his voice when questioned by Rep. Paul Ryan from Wisconsin. Ryan asked Bernanke if 2011 was the time to raise taxes and Bernanke went into his Harpo Marx imitation after he had been very vocal about the tepidness of the recovery: BEN, strap a pair on and take a stance as you have just been reappointed and confirmed for four more years. Also Mr.FED CHAIRMAN, if the growth story is going to be as weak as advertised, you just might want to unload some of that MBS you bought. You may well be forced to begin another round of Quantative Ease so it may behoove you to reload by stashing some cash for another round. The Ben and Tim show better back off the revenue raisers soon before the next round of bad economic policies brings us back to 1937. It doesn’t take an economist to know which way DEFLATION is blowing!

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