Notes From Underground

The Fed Chairman’s remarks at Jackson Hole left those hoping for QE3 disappointed. The Wall Street crowd who have grown addicted to the “Greenspan Put” and its help in sustaining the BULL in equities were aghast that Ben failed to maintain the monetary injection. Mr. Bernanke backed off of aggressive new policy and did not mention wealth effect of the PORTFOLIO BALANCE CHANNEL. While in the serene surroundings of the Grand Tetons, it seems the FED Chairman has learned that the Fed cannot be held hostage to the daily machinations of Wall Street and the markets and fiscal policy stewards are going to have to be patient in regards to further monetary support.

The addicts in need of continued monetary boosts are actually going to have to analyze the market to determine its real value. Mr. Bernanke, I applaud your efforts to place the responsibility on the policy makers in the legislative and executive branches. It seems that Ben has been MONETARY ANONYMOUS meetings and that RON PAUL is his “SPONSOR.”

Now Mr.Bernanke, recite after me:

“GOD, grant me the serenity to accept the things I cannot change,

Courage to change the things I can,

And wisdom to know the difference.”

Quick Hitters: Saturday Trichet and IMF Director Lagarde spoke at Jackson Hole. The Trichet speech was so unclear and muddled that it lent credence to why the ECB raised rates in July. Trichet has lost his mind and is no longer thinking clearly. Reuters reported that Trichet “GIVES MASTER CLASS IN SAYING NOTHING.” Amazing that as the European crisis deepens the man in charge of its central bank seems to be devoid of ideas.

IMF head Christine Lagarde gave a very direct and purposeful speech as she called on European banks to shore up their capital bases in order to head off a new crisis. Ms. Lagarde does not explain how to increase the capital but it appears she believes that the EFSF would be a good source of this, which I believe implies the EFSF buying more sovereign debt in the secondary market, thus relieving many of the European Banks of their large holdings of sovereign bonds.

Quick Hitter #2: It appears that Lagarde’s comments did not resonate with the Eurocrats in Brussels as an article in tomorrow’s Financial Times- “European Officials Round On Lagarde.” It seems that the EUROCRATS believe that Director Lagarde misspoke and they want her to publicly clarify her remarks. The EU policy makers fear that Lagarde’s remarks will place more pressure on the banks as markets read her statement to be that the banks are truly more stressed than previously reported. When Lagarde outshines Trichet on a very public stage, Europe is in leadership turmoil–especially when discussing things of an economic nature.

Quick Hitter #3: To emphasize how bad things are in Europe this weekend, the London Telegraph has a piece by one of my favorite financial journalists–Ambrose Evans-Pritchard, “EURO BAIL-OUT IN DOUBT AS ‘HYSTERIA’ SWEEPS GERMANY.” It seems that the political heat on Merkel is at a boil as many MPs have stated they will vote against any increase in EFSF funding and are very angry over the discussion of EUROBONDS without a change to the CONSTITUTIONAL makeup of Europe. The political situation is so uncertain that Merkel has cancelled a long-planned trip to Russia set for September 7.

The Bundestag is set to vote on the planned increase in EFSF funding on September 7 and the German Chancellor has decided it is better for her to stay home. In a very disturbing statement, the term “HYSTERIA” was used by the head of the EFSF, Klaus Regling, a person not known for hyperbole or one easily flustered. Can the EURO continue to overcome all of this controversy and uncertainty? It is hard to believe that the EURO rallied on Friday after the speech by Bernanke. Now that Trichet has failed to reassure markets it is time to examine resistance levels in the EURO and the EURO crosses to see where technical resistance exists.

Tags: bull, Christine Lagarde, EFSF, EU, Eurobonds, Eurocrats, IMF, Jean-Claude Trichet, Merkel, monetary anonymous, portfolio balance channel, QE3, Ron Paul

This entry was posted on August 28, 2011 at 7:22 pm and is filed under Europe, Federal Reserve, IMF. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.