First, why was Janet Yellen summoned to the White House to meet with President Obama and Vice President Biden? The most ostensible reason is PROBABLY to get the Fed’s view on the economic impact of Trump and Bernie Sanders. Is the anger in the land a result of stagnant wages and is there any policy impact the White House could pursue without distorting the economy? Is fiscal stimulus a possible positive response and would the Fed be receptive without immediately raising rates? There are no certain answers to why Yellen went only conjecture. But one thing that caught my attention was the headline in today’s Financial Times: “Lew Urges IMF to Get Tough on Exchange Rate Manipulators.”
The article said: “The comments amount to a call for the IMF to be less diplomatic with its members and more active in naming those who engage in currency manipulation to gain trade advantages and other dubious economic policies.” Lew was adamant that the IMF had to “… intensify scrutiny of critical issues like exchange rates, current account imbalances and shortfalls in global aggregate demand.” The DOLLAR, of course, is the responsibility of the Treasury and not the FED but if the U.S. president was going to be more assertive about the need for correcting imbalances, Obama may have wanted to discuss the ramifications of any potential fallout from an aggressive position towards Germany and China–the two major sources of global imbalances–with Chair Yellen.
The Japanese have already seen a 6% appreciation in the YEN since the G-20 meeting of Finance Ministers and Central Bankers in Shanghai at the end of February. The threat of the rise of Trump and Sanders may be worrying the White House regarding the success of the Trans Pacific Partnership (TPP) and they may be willing to muscle the G-20 to put up a strong front in an effort to save the major trade deal.This is something to watch as the G-20 meets in Washington, D.C. this week.
The second piece of nothing to hide is: Who kidnapped Jens Weidmann? The bombastic ECB board member and Bundesbank president was Ghandian in his approach today as he openly criticized German politicians for their attack on the ECB. Mr. Weidmann was defending President Draghi and the ECB, citing its independence as a key to its effectiveness. This is not the same Jens Weidmann who has used Mario Draghi as a punching bag in his effort to undermine TLTRO and QE. It is Jens Weidmann who laid out the economic rationale for the birth of the AfD and its economic protagonists who challenged Draghi in the German Constitutional Court.
In all fairness Weidmann was back on the attack in regards to the concept of “money rains.” “Some academics might find this instrument a thrilling possibility, but it should not be part of the policy debate.” He summed up his argument in the FT article by claiming that ‘money rains’ acted to “… blur the boundaries between monetary and fiscal policy.” The Bundesbank may have softened its stance on QE but has now moved the battle lines to so-called helicopter drops. But seriously, if Merkel has nothing to hide what black-op group is hiding Jens Weidmann?
***HOMEWORK: Read the Ambrose Evans-Pritchard piece in the Telegraph about Olivier Blanchard. We will discuss.
Tags: Biden, Dollar, G-20, IMF, Jack Lew, Janet Yellen, Jens Weidmann, Obama, TLTRO, Yen
April 12, 2016 at 8:22 pm |
I think this unexpected meeting in the White House may have a much more significant reason than a political assessment. It follows on the heels of another surprise meeting the day before, a meeting called on Friday by Yellin for a Monday “expedited procedures” meeting with the Fed governors. Hmmm . Some important decision has just been made. What that may be I will leave to each of us to speculate. But my guess is that it is IMPORTANT. Stay tuned.
April 12, 2016 at 10:00 pm |
Yellen: Not a surprise that the one world currency agenda aligns with President of the entire world vs just the free world. Jens Weidmann has been the one voice in the world understanding structural barriers to growth. That said,structural changes could be on deck with Yuan in the mix for SDR’s.
April 12, 2016 at 10:59 pm |
(somewhat off topic) You are spot on Led Zeppelin’s Stairway to Heaven intro is a complete rip-off of Taurus by Spirit. The trial is set for this May. But this is no new Page (pun intended) for Zeppelin. They have been sued and accused of ripping off at least 7 other songs.
http://www.musictimes.com/articles/6250/20140520/7-songs-other-than-stairway-to-heaven-that-led-zeppelin-stole.htm
Here is a great Spirit clip of I’ve Got a Line on you Babe.
https://www.youtube.com/watch?v=2aKNhvMd_5U
(Check out Jeff “Skunk” Baxter (very long hair guy playing the acrylic Fender Stratocaster standing by drum kit) playing with Spirit. Skunk was the lead guitarist for Steely Dan and then the Doobie Brothers. He is having more fun than anyone.) Great song.
On a financial note it sure looks like the 5 Billion euros to bail out the Italian Banks hit a flat key. Italy, Spain and Portugal banks don’t look any better than in 2011 and actually are in worst shape in a race to the bottom.
As they say ” The Song Remains the Same”.
April 13, 2016 at 4:31 am |
That’s the most musicians I’ve seen on 1 stage in a very long time Thanks Frank C.
As for the Evans-Pritchard and Blanchard piece I read it earlier in the day and said this is what Yra has us prepared for. Scary what’s comin makes you not want to leave your house but it’ll be exciting watching it unfold.
Fortunately “In the Long Run We Are All Dead”
April 13, 2016 at 5:39 am |
Good insights. I thought Jim Rickards was wrong in positing that Obama could threaten Yellen with filling the Fed vacancies with “her worst enemies”. That would require Senate consent which won’t happen.
April 13, 2016 at 5:49 am |
Mark T–I absolutely agree with you even as the interview was good but as usual with Santelli and CNBC–too short for Rickards is worth hearing from just to create a serious discussion on what the main media deems “marginal” things.As somebody at Vine Street said—Rickards created the three cardinal sins of CNBC—-he is bullish gold,criticized Buffet and was on from Chicago.There is no reason for Obama to threaten Yellen for they are reading from the same Hymnal on stagnant wages and I am not offering a value judgement on that .I am been consistent on my views about the dovish leanings of yellen —the next vote from the FOMC will be interesting
April 13, 2016 at 6:45 pm |
It was nice of Draghi to provide an updated subject for Weidmann to “oppose”, “let’s change the subject”.
April 13, 2016 at 8:32 pm |
Lew was adamant that the IMF had to “… intensify scrutiny of critical issues like exchange rates, current account imbalances and shortfalls in global aggregate demand.”
“Who kidnapped Jens Weidmann? The bombastic ECB board member and Bundesbank president was Ghandian in his approach today as he openly criticized German politicians for their attack on the ECB.”
Rumor has it that Lew and Weidmann were simultaneously each assumed into the mother ship, promptly stripped naked, and made to have passionate love with female aliens that took on the appearance of an 18 year old labor economist. Once deposited back on the desert floor, each tried to resume their roles, but exhibited signs of seriously re-wired neurons. When the mother ship streaked out of view, a sixty-nine year old labor economist was seen seeking forgiveness and penance from Baron Overseer for failing to “save or create millions of jobs”
Stay tuned to this same bat-channel for our next chilling episode of “2 + 2 really does = 5 for very large values of 2”, next week. (from Chicago)
April 13, 2016 at 8:36 pm |
BOJ – “The central bank owned 34.5pc of the Japanese government bond market as of February, and this is expected to reach 50pc by 2017.”
Not sure why they don’t just begin forgiving the debt, sparking a new global race to the bottom, or are they paying the spread back to their Treasury equivalent, thus not actually accomplishing anything aside from forcing out savers into risky assets?
April 14, 2016 at 12:13 am |
Is there one location where I can find the Rick Santelli videos? I’ve tried to wade through CNBC’s video site but never can find them.
April 14, 2016 at 4:23 am |
Donna–I will check with his producer ,Lesley
April 14, 2016 at 8:27 am
Thanks so much, Ira.
April 14, 2016 at 12:12 pm
Donna–Lesley his producer who is great regrets that CNBC does not have a snatlli archive going back to forever,but if you click on Santelli at the top of the page you can go back 365 days of Santelli
April 14, 2016 at 8:01 am |
Here us the link for Rick’s segments. Only 10 minutes a day that you need to watch on CNBC:
http://www.cnbc.com/rick-santelli/
April 15, 2016 at 6:55 am |
Greece is the word?
April 16, 2016 at 3:56 pm |
http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html?_r=0
This NY TImes breaks a story about a meeting last month between Obama and a high ranking Saudi official threatening to sell $750 Billion in treasuries.
60 minutes run an episode last Sunday on the Saudi connection to 9/11. Which is fodder for the pending bill in Congress to hold the Saudi’s liable for terrosist attach in the US.
Last Monday Obama had an emergency meeting with Janet Yellen
at the White House.
Was the conversation between Janet and Obama related to the Saudi threat referenced in the New York Times article? And who leaked the Saudi meeting threatening Obama to the Times?
Sale of Treasuries drive up rates and hurt their remaining holdings. The Saudi currency is pegged to the dollar. And higher rates hurt the US and global economy which hurts oil demand. And the Saudi’s huge investment in American Stocks and bonds also gets pummeled. And in the end what market is deep enough for the Saudi’s to reinvest the money?
Perhaps Janet was giving Obama a primer in Economics.
Doha is this Sunday
Obama is in Saudi Arabia this Wednesday.
I am sure none of this is in Janet’s data dependent econometric model and will only make her more timid.
Or is congress trying to put a bill in front of Obama to veto, so the president looks like he is protecting the Saudi’s and soft on terrorism.
April 17, 2016 at 7:21 pm |
Frank c.–outstanding points and much to ponder.When I read this over the weekend iwas going to add it to the low probability ,high impact events…the saudis would not pull this move without securing support eleswhere–watch for something on Russia especially if the Saudis wish to embarass Obama—the FED could announce another QE program and purchase all of the saudi debt but this is a political problem before its an economic problem.Also,if the Japanese were looking for a way to weaken the YEN make a deal with the U.S.for them to purchase a large amount of the bonds put on offer–as usual this situation has many potential outcomes
Maybe the Saudis should call Jim Rickards and have him advise a plan to swap gold for bonds??
April 17, 2016 at 9:36 pm |
Off topic.
I realize this is an economic blog, but also know you enjoy music and apologize in advance if I offend anyone with my sidetracks.
This is a phenomenal article that any Rolling Stone fan would truly enjoy from April Vanity Fair.
http://www.vanityfair.com/culture/2016/03/mick-jagger-keith-richards-rich-cohen