Mario Draghi’s nonsense is a compost heap as he tries to continue his efforts to build the ECB‘s balance sheet to the point of no escape. The ECB president danced around inflation questions by generally holding to the view that inflation across the entire euro zone would have to rise to the 2% level for the central bank’s mandate to be met. Currently, Draghi holds to the view that the recent elevated levels of inflation are transitory due to higher energy costs. It was noted that there has been a decline in service sector costs, which could put downward pressure on inflation once the energy prices pass through the data. Draghi also emphasized that with the current unemployment levels in some EU countries there was far too much slack which keeps wages from rising. A positive point for the ECB is that it does not follow NAIRU as a major gatekeeper of wage levels. In his typical effort to elevate his position, Draghi applauded the ECB for saving the EU financial system and economy, but until the politicians make the needed structural changes there will be continued “substantial monetary accommodation” so the ECB can meet its inflation mandate.
Archive for the ‘Central Banks’ Category
In an interview with the Wall Street Journal, the tweeter-in-chief was reported to have said, “The DOLLAR IS GETTING TOO STRONG.” As some pundits discussed, instead of Trump calling China a currency manipulator it seems he wants to use the dollar as a cudgel to pressure others into not embarking on policies to weaken their currencies. As I wrote on April 2:
“The Trump Administration’s efforts to curb the U.S. trade deficit may see the executive branch try to depreciate the U.S. dollar if Secretary Mnuchin and Secretary Ross fail to persuade certain global actors to embark upon policies to adjust their current account and trade surpluses. The Fed’s recent tightening has not rallied the dollar–it actually closed lower on the quarter–so if the political status quo is sustained in Europe and no new political crisis emerges, the DOLLAR will become a barometer of Trump’s policies on trade.”
First things first, let’s talk about the gorilla in the room, former Richmond Fed President Jeffrey Lacker leaked confidential information and the entire FED has had its reputation tarnished (stifle your laughter). The bigger question is how much is being covered up. Who else was involved in discussing matters of great sensitivity? As my readers know I have raised the issue of the G-30 and Davos being convocations for the exchange of very privileged information. Just google the G-30 and look to see its membership. The dissemination of potentially sensitive market-moving information to highly paid analysts raises serious questions of impropriety. In an effort to the level the playing field (and yes, I was most probably harmed by the leaks to Medley), the FED should not release its speeches or market information to any journalists covering the Federal Reserve.
First, let me apologize to my readers. I erred when I said Marine Le Pen made it to the second round of the 2012 French presidential election. Reader Al 13 corrected me. It was her father Jean-Marie Le Pen who made it to the second round in 2002 and got trounced, garnering 18% of the vote to Jacque Chirac’s 82%. But read Al 13’s comment on the previous post because he notes that if the second round were to be a choice between Le Pen and one of the two far-left candidates–Melenchon or Hamon–the impact would be highly volatile for European markets.
The biggest news in a very slow week of news is the beginning of the Brexit plan as Prime Minister May sent a six-page memo to Brussels as Article 50 begins and the two-year time period allotted for extrication from the EU starts the clock ticking in a very formal fashion. I SAY THIS TO ALL MY READERS: Two years is a very long time. There are many political and economic events (unforeseen by the static minds of entrenched power elites) that can dynamically change currently perceived outcomes. The fragility of global politics can wreak havoc with the certainties laid down by the likes of Jean Claude Juncker. The current position of the Brussels bureaucrats is the desire to punish Britain for the temerity of its citizens to vote to exit the “UTOPIAN” construct of the European Union.
The vote on the Trump health care plan is important only from the perspective of what the Freedom Caucus was promised in return for acquiescing to the desires of the White House. President Trump is desirous of a win, any win and the Freedom Caucus seems to know they have great leverage in the current political scrum. Whatever the House passes the Senate will have home field advantage and last bat so the initial Trump victory will Pyrrhic at best. What was compromised to assuage the conservative wing of the Republican party? How far will Trump have bent to bring this deal to fruition? The strident nature of the Freedom Caucus has been elevated and what value was extracted?
In an inane study of the world’s countries by the U.N. and released on World Happiness Day (what an absurd concept) the land locked nation with its active printing press was heralded as ranking FOURTH while the U.S. fell to 14th. To paraphrase Tolstoy: Happy countries are all alike; every unhappy country is unhappy in its own way. On March 17 Bloomberg ran a story, “Swiss National Bank (SNB) Foreign Reserves Soar, Signaling Interventions.” In February the SNB’s reserves increased by 3.8% to 668.2 billion francs, “the biggest increase since December 2014.”
In reviewing the March 9 ECB and March 15 FOMC meetings, the press conferences emceed by President Mario Draghi and Chair Yellen revealed little but raised questions about serious issues confronting the world’s two key central banks. The ECB maintained its current policy and will scale pack monthly QE activity to 60 billion euros starting April 1 while keeping its deposit rate at NEGATIVE 40 basis points. Draghi bowed deep and heaped praise upon himself and his fellow board members by proclaiming that they saved the EU and the euro. Draghi said “without a single currency there could not be a single market.” It was Draghi’s July 2012 speech of “we will do whatever it takes” to preserve the euro, which saved the currency and logically means the ECB saved the EU.
We had to get back home
And when we opened up the door
Please Donald, will the POTUS STFU, PLEASE. This is not a political statement. It is free advice because the more you communicate the less impact you will have. You may be trying to use the bully pulpit to jawbone the DOLLAR lower but every tweet diminishes your influence. Peter Navarro tried to create a weaker dollar but you have lessened the impact of his misinformed missives. Historically, jawboning has had a short-term market effect, but your late-night 140 character references are losing the power to persuade. You must learn that words are like your campaign sexual references, less is more. SO PLEASE, STFU.