Post-FOMC meeting it seems the FED move is fraught with all types of dangers as the even all the bitterness and acrimony flowing out of the loose lips of EUROCRATS could not prevent a slide in the U.S. DOLLAR. FED AGGRESSIVENESS AND ITS FINANCIAL REPRESSION TRUMPS THE LUNACY THAT IS EUROPE. It is apparent that the FED‘s policy is to push U.S. rates lower across the entire curve–WE KNEW THAT–and to get ahead of any political criticism that is surely to arise as Chairman Bernanke appears before the House Budget Committee on Thursday. Paul Ryan will certainly give Mr. Bernanke a difficult time as the republicans will want to make the FED and its policies part of the election debate.
The FED did not initiate another QE for fear of political backlash as in the coming weeks Chairman Bernanke has to provide his semi-annual testimony (part of its mandate). BILL GROSS referred to the recent move by the FED as QE 2.5. It’s probably correct but the politics of it are significant. The FED chairman can tell Congress that the FOMC STATEMENT extending the period of low rates until 2014 was determined by the members of the FED Board based on the economic projections issued individually. The FED may need to increase its QE program in the future but as of this time is was being more cautious and only moving to extend the time period of its zero rate policy.
This move by the FED reflects concerns it has about being dragged into the election debates and while the media may accept it the markets were not fooled. The politically troubled EURO rallied more than 2% since the FOMC release and the GOLD rallied over 4%. YES, I KNOW THE 10-YEAR NOTES ALSO RALLIED INDICATING THAT THE BOND VIGILANTES BELIEVE THAT THE FED POLICY IS APPROPRIATE. Enter the DEBT markets at your own blind risk.
The biggest impact from the FOMC STATEMENT is that its puts renewed pressure on DRAGHI AND THE ECB TO BE VERY AGGRESSIVE WITH THE SECOND TRANCHE OF THE LTRO AT THE END OF FEBRUARY. If I am correct in this analysis, we OUGHT TO SEE THE GOLD/EURO MAKE ALL-TIME HIGHS.
*** News from the weekend from EUROPE: 1. In a very bothersome story, it appears that Chancellor Merkel is going to campaign in France for President Sarkozy. This whole Merkozy thing is nonsense and the fact that a German politician is going on the campaign trail in France for the French president reflects the extremes that Sarkozy is willing to go to remain president. I hope that Merkel doesn’t pull a Dukakis and get photographed wearing an army helmet while posing driving a tank.
2. The Germans are pushing the Greeks to surrender their fiscal authority to an EU budgetary bureau before any second tranche of bailout money is handed out. An EU budget commissioner is to be put in charge of Greek state finances, thus rendering the power of the Greek Parliament null and void. Germany’s demands include prohibiting the future disbursement of any bailout if Greece were to threaten a default. In a Financial Times article it said: “If a future (bailout) tranche is not disbursed, Greece cannot threaten its lenders with a default, but will instead have to accept further cuts in primary expenditures as the only possible consequences of any non-disbursement.” This is madness as the whole concept of national sovereignty has been erased and it didn’t take long for others in Europe to see the aggrandizement of power by the EUROCRATS.
3. The IRISH POLITICAL PARTIES were quick to push for a REFERENDUM ON ANY ACTION BY BRUSSELS, PROMPTED BY THE GERMANS, TO MOVE TO INVOKE A FISCAL DOCTRINE ON ALL EU NATIONS. The Irish will be punished on any move to initiate a national vote on EU-wide fiscal policy, for remember that the PAPANDREOU AND BERLUSCONI GOVERNMENTS WERE REMOVED BY BRUSSELS AFTER THEY THREATENED TO HOLD REFERENDUM’S ON THEIR EXTERNALLY IMPOSED AUSTERITY BUDGETS.
The INSANITY OF EURO POLITICS IS ONLY TRUMPED BY THE CONTINUED MONETARY MADNESS OF THE BERNANKE CLIQUE. As the FED pushes harder to bring the entire curve lower, the pressure mounts on Draghi, and, of course, the IMF to up its ANTE. With Chancellor Merkel aiding the wounded, Sarkozy can the monetary power of the IMF be far behind. After all, it was President Sarkozy who was responsible for the appointment of IMF MANAGING DIRECTOR CHRISTINE LAGARDE makes the markets long for Dominique Strauss-Kahn.
Tags: 10-year Treasuries, Bill Gross, Draghi, ECB, Euro, Eurocrates, Fed, FOMC, Gold, IMF, LTRO, Merkel, QE, Sarkozy, U.S. Dollar
January 30, 2012 at 7:41 am |
The INSANITY OF EURO POLITICS IS ONLY TRUMPED BY THE CONTINUED MONETARY MADNESS OF THE BERNANKE CLIQUE.
Well done!
January 30, 2012 at 6:21 pm |
It would be best for the Irish, Greeks, etc to tell the EU and their insolvent domestic banks to go hang, default on the debt that their political class borrowed and withdraw from the EU. Rather than reduce themselves and their children to debt slaves for idiot bankers who’s risk management consists of “let the taxpayers bail us out”, they need to go the way of Iceland. (Who, by the way, are back in the capital markets.)
The irony of this entire foolish EU experiment is it may likely lead to the very thing – war – it was purportedly designed to prevent.
January 30, 2012 at 8:21 pm |
Writer X–no question about it.This experiment in monetary union devoid of political legitimacy has left the EU in a very precarious situation.Germany is trying to enforce the GOLDEN RULE–he who has the GOLD makes the rules—Sarkozy is playing a very weak hand and it will cause great problems for the EU in the next year—Iceland has indeed begun to escape from the clutches of deflation and this has been during a very difficult global environment.