In an effort to stay abreast of news and markets while in Boston, the two most interesting items on the global financial stage are causing a push/pull in the market. The Spanish elections certainly impacted the markets. Weakness in the EURO began on Friday as Bloomberg ran a story about the sad state of municipal finances in Spain that would be revealed after the Socialists lost most previously held local governments. It seems that the Spanish authorities have been fudging their local municipal finances and this will put more pressure on Spain to enact austerity budgets even with an unemployment rate above 21%.
The problem with Europe is the same as the problem the FED is facing: LACK OF CREDIBILITY. As the Socialists in Spain suffered a route at the ballot box, there may be more pressure on PM Zapatero to get the economy moving. Yet with the Germans and other creditor states pushing for greater austerity measures for the PIIGS, we are left to wonder what tools will be available to the individual nation-states to provide the needed stimulus. There was also a Der Spiegel piece that appeared online today in which it interviewed Jean-Claude Juncker and took him to task for being an ARROGANT, LYING EUROCRAT, thus undermining the little credibility that the political elite in Europe possess.
The Spanish election, S&P’s revision of Italy’s outlook to negative, and more Greek problems sent the EURO reeling against the DOLLAR and most other currencies. The market also sold off the COMMODITY CURRENCIES as the idea of EUROPE and the U.S. both suffering economic decline is forcing a selloff of risk as the Aussie and Canada seem in lockstep with the global equity markets. GOLD was the best performer as investors are leery of any FIAT CURRENCY.
In the Sunday New York Times, Christina Romer, former chairman of the Council of Economic Advisors, wrote an opinion piece titled, “Straight Talk About the Dollar.” Almost two years ago, I wrote a blog about a speech Romer gave at the Council on Foreign Relations and it more than hinted at a WEAK DOLLAR POLICY as a necessary tool to get manufacturing restarted in America. In this weekend’s piece, Romer is much more direct in her call for a weak DOLLAR to aid the U.S. economic recovery. In a quick discussion about the DOLLAR, Romer makes clear to his eminence, Larry Summers, that the value of the U.S. DOLLAR is just a PRICE, just like any other value set by a market.
This is critical because it is as clear and concise as it gets and it makes light out of the Secretary Treasury’s mantra of a strong DOLLAR policy that has been handed down from Bob Rubin to Larry Summers, to Paul O’Neill, to John Snow, to Hank Paulson and, of course, Secretary Geithner. The strength of the DOLLAR is determined by U.S. fiscal and monetary policy–even the Chinese students that laughed at Secretary Geithner understood that reality. The only time we get plain, straight talk from policy makers is when they are out of office and not seeking a new position. Professor Romer’s piece is to be read and digested for it speaks to what the policy of the Obama administration and which the FED is relying upon. The only thing supporting the DOLLAR in the short-term is EUROPEAN malfeasance and deceit.
In a world short on veracity it is no wonder that the world’s wealth holders are desirous of GOLD for that asset price seems INTRANSITORY while so much uncertainty remains. I Wonder how high the CFTC will raise margins to create an illusion of truth? It was Harry Truman who was the plain speaker and after 60 years of deception we could certainly use a replacement.
Tags: Bob Rubin, CFTC, Christina Romer, commodity currencies, credibility, Dollar, elections, Euro, Europe, Fed, Gold, Greece, Hank Paulson, intransitory, Italy, Jean-Claude Juncker, John Snow, Larry Summers, Paul O'Neill, PIIGS, S&P, Spain, Tim Geithner, U.S., Zapatero
May 24, 2011 at 5:16 am |
[…] Christie Roemer discovers a new dollar thesis. Yra applauds. […]
May 24, 2011 at 6:32 am |
You remember when Yeutter left the Merc to become Trade Minister under James Baker, Clayton took our view that a weak $ could revive the economy and need not be permanent. The charts prove that was the answer. Then not now was there the media coverage. All Sec. of Treasury must state they are infavor of a strong US$ but know sparking exports are most important. The real problem now can countries be bailed out? Multi-National have been restructured and thrived but I sight Walter Risten then CEO of Citi thought a country such as Brazil couldn’t default (how can a country go broke?). If the European Union breaks apart then “wake up LeRoy cause he never got to see a wreck like this one promises to be”.
May 24, 2011 at 7:42 am |
great stuff
May 24, 2011 at 7:56 am |
Romer is advocating Geithner and Bernanke’s dollar devaluation policies isn’t she? She’s giving them cover while the vast majority of Americans are finding it increasingly difficult to buy dinner, or get to their jobs. So truth will out, but I’m not inclined to applaud Romer for telling it.
May 24, 2011 at 9:41 am |
[…] the global equity markets. GOLD was the best performer as investors are leery of any FIAT CURRENCY.More… Jim Sinclair’s CommentaryFrom CIGA Las:"The smart money in Asia continues to […]
May 24, 2011 at 9:49 am |
As we watch Europe unravel before the worlds stage, I marvel how anyone such as Yra could marvel at Christina Romers remarks at ‘hinting’ at a week dollar two years ago, and ‘much more direct’ about a weak dollar policy in a recent article last week. With all the respect that is due Yra for his work in the financial community, I must say that anyone that has stayed away from watching MSM and it’s daily output of lies has seen this weak dollar ‘a-commin’ for a long time. Many non MSM analyst’s have seen this coming. What I would be more impressed with Christina Romers remarks about a weak dollars would be her referencing in depth how devastating it would be to the working middle class american. How come it is always with 20 20 vision our politicians publicly orate while going thru life looking in a rear view mirror, but never publicly cognizant about future reality….perhaps Christina Romer could give us all a ‘hint’ at the fact of what is happening in Europe today is coming here to America tomorrow, and how it is going to affect the middle class!
May 24, 2011 at 9:06 pm |
Right on. Monetary policy intended to paper over the sins of our economic forefathers is hardly comforting to those on the receiving end. The devaluation of the dollar is only necessary because the ever more powerful oligarchs have made it so. Now they want to finish gutting the middle class in the name of economic competativeness. How ’bout we redistribute some of their wealth?
May 25, 2011 at 1:42 am |
Unfortunately for America, and contrary to Ms. Romer’s argument, the cheap dollar will fail to proportinately augment employment, yet tax disproportinately the low and average income earner via higher gas and food and other nlife necessities (look up ‘screwflation’). Isn’t that obvious?
May 25, 2011 at 2:51 pm |
For all who wrote—The politics of the Romer piece are not the subject here for the fallout of the the weak dollar policy is immense and who gets the short end of the stick is open to debate.The interest is how it will effect markets rather the societal outcomes.I will leave the socio-political outcomes to others as I wish to provide the readers of NOTES with a relevant investor/trader outlook and merely call attention to the possible impacts.I know it may appear parasitical but as I have said for 34 years of trading–I don’t make the rules of the political realm and I certainly have to get above the is/ought debate and try to understand the financial world as cause and effect.Every once in a while I will postulate a piece of “IF I RAN THE WORLD or the ECB or FED”—but I will leave the political discussions to the ranters or otherwise go broke trading my emotions.The point was to juxtapose Romer coming clean as she slapped Geithner and Summers while showing the calculated distortions of the European elites—the rest is commentary
December 2, 2011 at 5:41 pm |
buy guaranteed twitter followers…
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