First and foremost: Notes From Underground has become a global community and the outpouring of support and condolences to my family has been phenomenal. Again, my heartfelt thanks to all who expressed such wonderful thoughts.
Much has transpired since last Sunday as the Swiss franc and the Japanese yen have continued their recent weakness as intervention with the intention of forcing the YEN and FRANC lower have been very successful. Also, as usual, I will poke at this weeks circus in Davos, Switzerland. From my perspective, the entire conclave of insider trading–as the rich and business elites gather to discuss ways to save the world–in the last 20 years are a direct result of the political and economic movers and shakers exchanging ideas in the Swiss Alps. Yes, we go from crisis to crisis.
The idea of paying exorbitant amounts of money to rub elbows and hopefully get a leg up on the lower echelon of financial investors reeks of a giant gathering of insider information. The capricious nature in which the U.S. regulators prosecute “insider trading” just lends me to call for the break-up of the ridiculousness called Davos.The economic theorists that all faux free marketeers love to quote, Adam Smith, succinctly summed it up 250 years ago:
“People of the same trade seldom meet together,even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
The last 20 years has certainly been the outcome of predicted conspiracies.I do not know what course others may take,but for me.“PEPPER SPRAY DAVOS.”
***Yesterday Jens Weidmann spoke and warned of the “politicization of the exchange rates.” This is nothing new but it will be a reminder that the recent silence of the Bundesbank president will not last and his rhetoric will become more vibrant as the German election nears. The German regional election over the weekend in Lower Saxony was a defeat for Chancellor Merkel, but because the results were very close there was not much to glean about the antipathy toward the policies of Frau Merkel’s government. Many are predicting that the German economy is steadying but I am doubtful of growth in the peripheries and am sure that the weakening YEN is going to have a very negative impact on the German industrial exports and thus the overall economy. The German national elections may be determined more by Tokyo than Brussels.
***Tonight the Bank of Japan (BOJ) moved to set a policy of a 2.0% inflation target as well as a program of opened-ended asset purchases. Prime Minister Abe is in full control of economic policy as even the present sitting BOJ Governor, Mr. Shirakawa, voted in favor of the 2.0% inflation target, though the vote was 7-2. The vote on the open-ended asset purchase program was unanimous. The market may well have priced this in but the words of Weidmann about possible currency wars rings loud.
The Japanese action is going to create problems for Mario Draghi, especially as he openly continues to cling to the promises of the G-20 to allow market set rates. Again, Europe is in no economic condition to solely bear the brunt of currency depreciations. In a Sunday article, Ambrose Evans-Pritchard writes Japan being at the center of economic action. Pritchard ends the piece by quoting from BOE Governor Mervyn King, “… but yen manipulation snatches market share, incites protectionism, and takes us into the brave new world of ‘actively managed exchange rates.'” The BOJ has most certainly tossed the ball back to Mario Draghi.
Tags: BOE, BOJ, currency war, Davos, German election, Jens Weidmann, Mario Draghi, Mervyn King, Prime Minister Abe, QE, Shirakawa
January 22, 2013 at 7:52 am |
Nice to see you again, full of global macro energy! Great point about Germany-Japan… Germany cut its forecast for economic growth this year to 0.4%, from previous estimate of 1%. Europe’s biggest economy grew by 0.7% last year, compared with 3% in 2011. It may have shrunk in the fourth quarter, according to a preliminary assessment of the data (The Economist / Federal Statistics Office / Haver Analytics).
January 22, 2013 at 10:50 am |
Yra. Thanks for the Rotten Heart of Europe tip. I’m in the UK so bought the ebook. Have just finished the new introduction Mr Connally wrote, wow is all I can say.
Love the way he builds the politics in with the economics, not many seem to make that connection, or at least the connection he does.
I think I’m going to have to get my mother to buy some physical Gold, she’s all in cash at present. I cannot think of any other way of weathering the storm and protecting her nest egg.
January 22, 2013 at 11:13 am |
Thank you, Yra. You must have been speaking with Mr Santelli because he spoke of this topic – Germany vs Japan – last week on his show. Appreciate it!
January 22, 2013 at 11:19 am |
Hi Yra-
Spot on as usual… especially on the Europeans finally raising their exchange rate concerns. Those who haven’t seen it would do well to take a look at your CNBC appearance with Santelli last week… ‘Draghi Denial’ was a hoot!!
And kudos on the Adam Smith reference. Especially as the US sinks into the quasi (or maybe not so quasi) Socialist morass it is one of those hugely ironic coincidences of history that Wealth of Nations was published in 1776 as an overt attack on the British mercantilist ruling class oppression of free market principles. As much as any specific tax, restriction of Colonial trade was the driver for the Revoution.
Maybe the academics should be required to teach it along with all their Socialist claptrap!!
-AR
January 22, 2013 at 11:30 am |
Alex –remember that the book was originally written in 1995.Many of the players are the same which makes the book so poignant as it is a scorecard and program of who is really making the decisions—the media will never report what the book details out–although there are a few exceptions—my advice is to buy a hard copy of the book from me at cost and i will mail it to you—-10 dollars plus shipping so yopu can underline and make notes—and don’t rush any idea because many prices have moved dramatically over the last 10 years but knowledge is power and Bernard provides much power
January 22, 2013 at 11:31 am |
Donna–if you watch when I was on with Rick -together we covered the euro/yen and its impact
January 22, 2013 at 1:01 pm |
Yra,
I’ll supply the pepper if you’ll offer to load and aim….
Just back from a month travelling with only my ipad mini and unable to comfortably use it for services like Amazon.I have from a friend a cherished hard bound of Rotten Heart and want to order 10 copies to give as gifts, much the way I have done with other good books in the past. Can you provide us with a way to order and pay directly from you?
Welcome back.
January 22, 2013 at 3:40 pm |
US fear index plummets to a 5½-year low, VIX index… your thought? overconfidence or recovery?
January 22, 2013 at 4:37 pm |
JK—thanks for the huge support with 9,000 copies to go it is needed—we are shipping as soon is payment is made–went to the ups yesterday for larger orders and today to the post office in skokie and the people there have been terrific–go to rottenheartofeurope@gmail.com——–if you have a problem let me know
January 22, 2013 at 4:40 pm |
arthur–this is a short time perios where money is driving everything–the entrance of the Japanese into the immediate game provided a boost—now we will await the Europeans although Draghi may believe he can get away with jawboning and hope the global growth becomes real and he can ride the wave of increased global growth—but Germany is critical here
January 22, 2013 at 4:54 pm |
OK. THANK YOU SO MUCH!
April 8, 2013 at 8:39 pm |
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