Warning: There’s a great deal of colorful language in this very important discussion regarding the nomination of Christine Lagarde to the post of European Central Bank president. This is another political move by the EU elite to avoid placing a German at the helm of the ECB. Jens Weidmann may be a tough choice but Lagarde is preposterous, as Jean Claude Trichet might say. If you thought Mario Draghi was a politician and a dove by design, Lagarde will make Draghi look like a HAWK. In my opinion, IMF Director Lagarde has been and remains the ultimate politician. The role she played in the Greek bailout was pure politics and the price paid by the Greek citizenry has been steep. All in an effort to bailout many European financial institutions. Ask Yanis Varafoukis what he thinks of the Lagarde nomination.
Archive for the ‘France’ Category
Notes From Underground: ECB, Political Pawn?
July 4, 2019Notes From Underground: Wednesday, 6:45 CST … Our Day Begins
April 9, 2019There are so many issues plaguing Europe right now, and surprisingly, Brexit is not the most significant. On Wednesday morning — yes, Wednesday — the ECB announces its rate decision and it is expected that rates will remain unchanged, with the main refinancing rate at zero. The only possible news will be that the ECB actually engages in a tiered financing. This would mean that some banks would get relief from the -0.40% rate that the ECB charges banks to deposit cash at the central bank. There have been rumors that the ECB was planning on raising interest rates in the hope that boost for some European domestic rates would help lift the equity valuations of some profit-stressed financial institutions.
Notes From Underground: Germany and France Codify the Premise of Europe
January 22, 2019In a desperate attempt to deflect from the damage to his presidency, Emmanuel Macron on Tuesday codified what Bernard Connolly has written about for 25 years. As Charles de Gaulle supposedly said to Konrad Adenauer: “Europe is France and Germany, the rest trimmings.” In a resurrection of European history, Angela Merkel and Macron signed a new Treaty of Aachen. While the treaty language is vapid, the symbolism cannot be minimized. Germany and France promise to come to each other’s defense if attacked while also promising to work for a more unified financial and fiscal system.
Notes From Underground: Around the World With Yra + Rick
September 20, 2018On Thursday Rick Santelli pushed and prodded and as a result, we were able to travel from Japan to Europe in an effort to discuss some of the more pressing issues confronting the global macro world. First, we stopped in Japan to discuss how the BOJ and Governor Kuroda will be able to extricate itself from five years of QQE which has seen the BOJ accumulate Japanese debt and equities. Of course the end game is to reach the self-imposed inflation level of 2 percent that has proved to be an agonizing level to achieve. As a reminder, when a nation is saddled with huge debts the best relief is to be found in inflation, which results in an ultimate money illusion as debts are paid back with an ever-depreciated currency.
Click on the image to watch me and Rick discuss global policy.
Notes From Underground: The Magician of Frankfurt Will Be Called to Answer
May 22, 2018We’ve been discussing the problems in the Italian debt market at NOTES FROM UNDERGROUND for many years but with the Five Star/Lega coalition coming into government many of the issues that were once theoretical are now an increasing possibility. The Five Star group is openly proposing a debt restructuring for Italy in the hopes of spurring growth and improving the Italian unemployment situation. Economic growth in Italy has lagged the developed world economies and none more so then its neighbor, Germany.
Notes From Underground: Is Macron a Moron?
September 12, 2017On September 7, I had the pleasure of chatting with Richard Bonugli of the Financial Repression Authority, covering topics previously discussed on Notes From Underground. The podcast allows for a much deeper analysis of topics covered here (and usually over a shorter span). Enjoy the conversation, and, as usual, please follow-up with questions so we can all benefit from the intelligence of Notes From Underground readers.
Notes From Underground: Santelli and Harris Down By the Schoolyard
May 9, 2017This is the most recent CNBC hit with Rick Santelli as we try to educate the world in another three-minute segment. This unrehearsed spot attempts to dig deep into the financial issues confronting traders and investors. The discussion about France is a continuation from the Notes From Underground post I wrote last night. I stress that the period ahead for Emmanuel Macron is going to be difficult, especially if the center-right wins the Parliament and thus the prime minister position. This summer will be fraught with street demonstrations as the Left moves to prevent any installation of German-initiated fiscal austerity and labor market reform. In typical French political fashion, labor and student groups are warning against Macron governing by decree and bypassing Parliament.
(Click on the image to watch me and Rick discuss French elections.)
Notes From Underground: Au Revoir, Marine Le Pen
May 8, 2017Now we can finally put the French elections behind us as its citizens maintained the status quo and elected Emmanuel Macron to a five-year term. Parliamentary elections follow in June but the two main parties, Socialists and Republicans, aren’t expected to face challenges. But, if the more conservative Republicans gain control of the Parliament and the prime minister post it will force Macron to move further to the right-center. If Macron moves away from the Hollande Socialist camp it will result in political protests from the Left. Macron will experience a difficult presidential term if the government is gridlocked by continual demonstrations. The German chancellor is going to ask a great deal from Macron: fiscal austerity, as well as a restructuring of the French domestic economy.
Notes From Underground: This Is a Vinny Barbarino Market (Or, I Am So Confused)
April 25, 2017The global reaction to the first round of the French presidential election was not confusing. Capital was sitting on the sidelines as the polls reflected a possibility of a second round Le Pen/Melenchon faceoff, which would have been devastating for global investors because fear of an EU break-up would have led to a massive repricing of risk premia. The avoidance of such an outcome led to a rush of capital into European markets, which provided support to Asia and the U.S. The German/French 10-year spread reacted as expected. The yield differential narrowed by a significant 20 basis points. The BUND yields rose against all European sovereign debt as Berlin’s haven status was rendered null and void for at least another two weeks. The GOLD and YEN also performed as expected as money rushed to purchase a risk on profile in a global zero interest environment. The EURO rallied by 2% as global capital flows into European stocks forced previous short euro positions to the sidelines. There’s nothing confusing about any of these outcomes. But let me throw some confusion onto some of the other geopolitical events making the front pages:
Notes From Underground: The Politics of the IMF and French Election
April 19, 2017First, I am reposting part of the January 29 post as a reminder to pay attention to the narrative of Trump rolling back to the concept of Pax Americana. As the Trump administration begins to reveal its ambitions, there is a great deal of conversation about Trump becoming more presidential and that the “grown ups” are taking charge of policy. The demotion of Stephen Bannon ignited a discussion about the Wall Street crowd (Mnuchin, Ross, Cohn, Kushner) becoming aligned with the “Deep State.” The concept of the deep state is really the power of the entrenched bureaucracy as the primary source within the beltway.