Notes From Underground

Last week we covered a great deal of ground on the economic front as the world’s central banks, from Beijing to Washington were busy generating versus types of stimulus programs. The Chinese government aided the cause by announcing an infrastructure program of $157 billion in an effort to generate even more stimulus to a slowing economy. As the Chinese authorities begin on a path of shifting the export model to a more domestic consumption type growth plan, there is a great deal of excess Chinese capital development that needs to be utilized and the slowdown in global economic growth mandates a shift in priorities for the POLITBURO.

European politics will reemerge as the main issue now that Draghi has bought Brussels and the individual nations some time to promote an economic plan besides austerity as the path to growth. This weekend brought news of Schaeuble openly criticizing Weidmann about the Bundesbank views on the OMT (outright monetary transaction). The German Constitutional Court has made its preliminary decision but with the role of the Bundestag promoted as the voice of the people in the euro-wide financial discussion, the political rhetoric in Germany and the other European capitals can be sure to generate much of the news going forward into 2013.

The FED has momentarily quieted the FISCAL CLIFF but even Chairman Bernanke warned in his news conference that fiscal policy going forward is a very serious issue and monetary policy cannot do all the heavy lifting. The political battle in the U.S. following the FED’s action on Thursday is sure to intensify as the FED becomes the target of many Congressional candidates make the Bernanke FED an election issue. The other side of the “ledger” had Michael Woodford out over the weekend saying that he would have done more but applauded the FED‘s action. The weeks ahead will be full of attacks on monetary policy … too much, too little.

Tags: Bundesbank, China, Draghi, Europe, Fed, Gazprom, OMT, poliburto, Putin, Russia, Schaeuble, Weidmann

This entry was posted on September 16, 2012 at 2:44 pm and is filed under China, Europe, Russia. 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.