Notes From Underground: Narrow-Minded Hypocrites, All I Want Is the Truth

Gimme some truth. That is what John Lennon craved back in 1971. In 2018, it seems that investors and traders crave the same thing:

       I’m sick and tired of hearing things
       From uptight, short-sighted,narrow-minded hypocrits
       All I want is the truth, just Give me some truth
       I’ve had enough of reading things
       By neurotic, psychotic, pig-headed politicians
       No short-haired, yellow-bellied, son of tricky dicky
       Is going to mother hubbard soft soap me
       With a pocketful of hope
       Money for dope, money for rope

The musings of ECB President Mario Draghi and SNB President Thomas Jordan, plus the constant flow of TWEETS from CEOs and policy makers all wanting to control the public narrative I retreated into the Imagine album for some solace. Let us examine the SNB and ECB interest rate decisions. The Swiss held true to form and held its deposit rate at negative 0.75%. The Swiss maintain negative interest rates in an effort to make its assets less attractive to investors seeking a haven. Why? Because the combination of European politics and the ECB’s negative interest rate policy kept in Swiss institutions, which are close to HOME. The official statement said very clearly: “The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.”

The SNB continues by noting that the EUR/CHF cross rate is virtually unchanged since September 2018. On Thursday the EUR/CHF settled at 1.129.

The statement continued: “Overall, the Swiss franc is still highly valued and the situation on the foreign exchange continues to be fragile. The negative interest rate and the SNB‘s WILLINGNESS TO INTERVENE in the foreign exchange market as necessary remains essential. These measures keep the attractiveness of Swiss franc investments low and reduce upward pressure on the currency.”

This blatant contravention of the G-20/G-7 proclamations against currency manipulation is HYPOCRISY of the first order.

When the home of the BIS and its real makers violate international agreements what does any standard mean. The Swiss have excelled at financial currency through its own interventions by selling FRANCS and buying baskets of other currencies in which they use to purchase a cacophony of foreign stocks. The effort to weaken its currency makes the GOLD/SWISS chart a very important barometer of central bank malfeasance.

The ECB also kept its interest rate steady at zero with a deposit rate of NEGATIVE 0.40%. The Magician of Frankfurt dodged every question and responded in long meaningless statements in order to render the post-decision press conference, NULL AND VOID. The key word was UNCERTAINTY: geopolitical uncertainty fomented by trade protectionism, specific factors of political uncertainty in Europe, lessened uncertainties in the Emerging markets but overall just general uncertainties. One great dodge was an obtuse answer to a question about bank profitability during the age of uncertainty created by negative rates. President Draghi stated that the ECB was studying this. Save your money Mario and bring up a chart of Japanese bank stocks. Also, in the U.S. commentators raise the specter of a flattening yield curve as the primary reason for bank stocks performing so poorly.

In Europe, yield curves are much steeper, resulting in larger profits if the theory holds. However, check the European bank stocks and you will be dissuaded of that viewpoint. There was a very pertinent question concerning how the ECB would model the impact from trade frictions. The answer was anything but … and so it goes. The ECB has created a monster balance sheet, and, similar to the FED, it is struggling to comprehend the impact on the financial system as it attempts to steer it. Mario seems to have just one desire: Keep the situation steady and leave it for his successor to confront. This adds new meaning to “whatever it takes.” Please, just give us some straight talk for a change. Like Putney Swope, “How many syllables Mario?”

There was one attempt at truth today. Rick Santelli had a great piece on CNBC when he challenged the conventional wisdom about the economic fallout from a HARD BREXIT. The conventional wisdom is for Britain to go into an economic tailspin from all the projected negative outcomes. But Rick raised an important question: Wouldn’t Europe be adversely impacted if the British pound collapsed versus the EURO as British goods would attain a great advantage versus its main trading partners. There would be pain for importers and thus consumers of some tradeable goods but the economic result would be much more dynamic than the static analysis of so many model builders.

Would Germany move more auto production to the U.K. even if the EU didn’t provide a non-tariff entry point. If WTO rules were followed British goods could flow to many places in an effort to boost the British economy. Remember that the structure of the British empire is still in place because of the dominions. Santelli made an effort to shine some light on the established narrative of static thinkers and their platforms.

To juxtapose Rick’s commentary, CNBC interviewed Richard Branson who decried a hard Brexit for the impact it would have on his business for much of it was priced in DOLLARS so a dramatically weakened POUND would harm him the Virgin empire. Narrow-minded hypocrite, indeed. Just can’t get away from the need to bring balance to a world where 2+2=5. As always, from Notes From Underground.

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8 Responses to “Notes From Underground: Narrow-Minded Hypocrites, All I Want Is the Truth”

  1. Eugene Chumak Says:

    Thank you for the truth, Yra, there is mostly bull around these days and all these bulls scream bears. The world will come to end if hard Brexit were to happen – same people who promised market drop of 10% if Trump is elected. Negotiation is a death of Brexit because it is impossible to untangle this gordian knot (or rather straight jacket) sewn over 50 years. Santelli is right. There is no way to engineer Britains way out of Europe – that would be like hoping that first ever rocket launch in space loaded with passengers would be succesful without testing it out first. Does not matter how much you engineer and negotiate, chances are it is going to blow up anyway. May as well cut to the chase

  2. asherz Says:

    The SNB is one of the biggest hedge funds around. 130% of Swiss GDP. Now let’s suppose you get a market crash, as unlikely as Thomas Jordan might consider such a possibility, what would the consequences be? What if Apple’s growth rate disappointed expectations?
    What if Brexit did not end in calamity, while the UK secured its borders and had communications go in two directions with Brussels instead of one?
    What if Italy tells Mario to jump into the Main River, and Greece, Spain and Eastern European countries followed suit?
    The boys from Davos have created a Frankenstein who is now awakening and getting off his gurney.
    Interesting times ahead.

  3. Bojo Says:

    Keep it going, Yra! Harsh tone is welcome. And at any rate, you still have a lot of wiggle room compared to Dostoyevski..
    Also, it seems that in “Newspeak” anything goes, nothing matters. Like President of European Parliament claiming a few weeks ago, that ” Nazism was defeated thanks to the EU, and Communism was defeated when the Eastern block countries entered the EU
    (in 2004).” A statement warmly applauded right there, in plenary… Lie is Truth indeed.

  4. kevinwaspi Says:

    Bravo Yra for calling out the hypocrite ‘elites’ once again! After you finish listening to “Imagine”, I suggest a quick replay of “Psychobabble” by Alan Parsons Project
    This 1980s ditty flashes through my grey matter with with every interview, press release/conference, or CEO pandering event on display.

    Lastly, readers of notes may find interesting a piece now almost a year on, from Santiago Capital. ( )
    Set the playback speed at 1.5x, but you may find the Marvel Super Heros story quite sensible.
    Keep up the good work ‘calling foul’ when it smells it!

  5. Trader1 Says:


    If all we’ve done is pull demand forward during yrs of World Wide Central Bank QE: 1) Now World Wide GDP is slowing & 2) if your thesis holds that everything beyond 5yrs sees higher int. rates which slows GDP more —-

    How do you think Central Banks get themselves out of this mess?? Or is something like your World Wide Infrastructure the only way out???

    • yraharris Says:

      Trader—Mario the Magician in his babbling yesterday pushed the baton to the politicians to get going on the ability to lift demand through fiscal efforts—the ECB is a dead man walking in my opinion.The ECB has already sustained some losses on its corporate bonds what else is non performing on the books of the ECB especially if the global economy turns down—there are nights i ponder the idea of when we will begin to see assassinations taking place on a global basis as the anger of the yellow jackets enters into a contagion stage.I worry especially when i recall the time a protester rushed the stage at a Draghi press conference and dumped a small pail of garbage on the ECB President—it was very scary to watch .But as the bureaucracy remains ever aloof the anger grows.And as the ECB has shown with its audacious policy of the financial repression of all EU savers–there is a great deal of anger.Macron does understand he needs to spend in an effort to create jobs—the hell with deficit restraints when political tension is on the rise.As I caution over and over—the rise of populism in the time of economic growth is a very worrisome phenomenon –it is similar to increase in the USA deficit to a trillion dollars while unemployment is at 3.7%—

  6. Recession Obsession | Points and Figures Says:

    […] EU, take my friend Yra Harris advice and read The Rotten Heart of Europe.  By the way, Yra wrote a similar musing to this one at his blog.  I suggest you read […]

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