Archive for April, 2022

Notes From Underground: Into the Weeds on Yen/Yuan

April 28, 2022

In the first post about the YEN/YUAN, we discussed the current significance of the cross, and with it a rising dollar. Now we will provide CONTEXT and NUANCE as to the backdrop of this cross’s significance. It is easy to forget that the Chinese economic miracle is only 40 years old as it began under the direction of DENG in 1978-79 and his rise as China’s leader. By 1994 China is beginning to feel the positive effects of Deng’s policies of white cat/black cat in pursuing modernity and western-style economic growth.

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Notes From Underground: The Meaning of the Yen/YUAN Cross

April 26, 2022

In the past three weeks I have had the pleasure of doing two major podcasts with two of the most highly regarded global macro thinkers and traders: Zoltan Pozsar and Louis Gave. Our discussions led to an attempt to explain the importance of the Chinese yuan during the current period of CAPITAL ANXIETY. During the past two years the Chinese YUAN has rallied from 7.13/dollar to 6.35, where it has sat for the last six months (a gain of 12%). And, as I have argued for the last 18 months, the strengthening YUAN during the pandemic was a signal that the Chinese were shifting to a more domestic-oriented economy using a stronger currency to enrich its nascent middle class.

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Notes From Underground: Time to Escalate and Deescalate the Fed and Putin?

April 10, 2022

There was an article in Foreign Affairs this week by Graham Allison, the dean of American political scientists, titled, “Putin’s Doomsday Threat: How to Prevent a Repeat of the Cuban Missile Crisis in Ukraine.” The piece raises an important tactical question about escalating the violence in an effort to prevent a greater catastrophe similar to what President Kennedy was threatening in 1962. It’s worth a read as it was Allison’s book, “The Essence of Decision,” that provided the understanding of the bureaucratic mindset during the nuclear age. It provoked me to think that the escalate to de-escalate seems to be the paradigm of the FOMC as complacency over zero interest and transitory inflation has given rise to policy makers’ more hawkish jawboning. Uber-doves Charlie Evans, Mary Daly, Jerome Powell, Lael Brainard have been on a mission to find their INNER VOLCKER (at least rhetorically).

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Notes From Underground: Are Central Banks the Grand Illusion?

April 1, 2022

This week I had the extreme pleasure of recording a Financial Repression Authority podcast with Zoltan Poszar (moderated by Richard Bonugli, of course). We covered the entire global scene from yield curves, petro dollars and the underlying basis to all fiat money transactions. It is worth a listen to learn that the fabricated, algo-driven headlines are not the contextual basis of major shifting sands in the global financial system. There is far more nuance locked underlying the moves by policy makers around the world.

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