While the rate cutters were busy dumping on ECB President Christine Lagarde for not cutting and only announcing an increase in bond purchases I opined that Lagarde was getting more by doing less. Lagarde did not go down the Draghi route and lock up with Jens Weidmann and the Fiscal Austerians in the Hanseatic League. The ECB president played for a bigger prize and tonight she delivered with an announced 750 billion euro bond buying program of both public and private issues.
Archive for the ‘Currency’ Category
Notes From Underground: Three Cheers for Christine Lagarde
March 19, 2020Notes From Underground: The G-7 Was All About the Dollar
March 5, 2020The other day I called question to the tepid G-7 statement, which was followed by a 50 basis point CUT from the Federal Reserve. On Thursday the Financial Times published a story saying the Fed’s move was counter to a history of G-7 collaboration. Let us first dissuade the popular mythology of the G-7 as relevant to any serious global action. The colonial remnants of the authority of the bailiwick of the mechanism for the containment of the Soviet Empire are a JOKE. During the financial crisis it was the moves made by China that did more to stabilize global growth than any action by the G-7.
Notes From Underground: Into the Dark Recesses of My Mind
March 3, 2020Three weeks ago we at NOTES FROM UNDERGROUND suggested the Fed needed to cut interest rates by 50 basis points in an effort to get ahead of the potential negative economic fallout from a DEMAND SHOCK caused by the Covid-19 virus. But the rate cut was to be presented with the caveat that this was an economic cut and financial considerations were not involved. If the demand shock from the VIRUS never materialized the cut would be RESCINDED. After announcing an emergency cut Tuesday Chairman Jerome Powell took a few questions from the media.
Notes From Underground: A New Form of Asian Contagion
February 23, 2020On July 2, 1997 the Thai baht entered crisis mode, kicking off what become known as 18 months of Asian Contagion. The so-called Asian Tigers experienced massive capital disruptions as the Chinese economic miracle undermined the capital expenditure projects that were creating the manufacturing capacity to lift the TIGERS out of poverty and into significance in the global supply chain. The emerging markets learned that as fast as capital flows in to support foreign direct investment it can hurriedly depart as it seeks alternative venues with a better competitive advantage .
Notes From Underground: Man Plans, God Laughs
February 2, 2020It has been three weeks since I have sat down to articulate my thoughts on the global macro financial system in an effort to profit from trade/investment potentials. A lot of the discourse with many readers the focus was on the situation in the Middle East.
Notes From Underground: Whistling Past the Tombstones
December 29, 2019As we approach 2020, it seems as though the financial world is unconcerned about the dramatic increase in DEBT. Yes, the airwaves are alive with news of the extremely low level of mortgage delinquencies but fail to discuss the growing delinquency of 90-day auto loans and the $1.5 trillion pile of student loan debt, an albatross for college graduates over the 20 years. Corporate debt has increased by the magic of financial engineering in which share buybacks and dividend increases are greased with the benevolence of central banks caught in a trap of their design.
Notes From Underground: “It’s Good News Week”
December 10, 2019What an appropriate song for the band Hedgehoppers Anonymous. This week is loaded with potential market-moving outcomes. On Wednesday we have the final FOMC statement of the year followed by Chairman Jerome Powell’s press conference. The CONSENSUS is for no change in the current fed funds target range of 1.5% to 1.75%. The real key will hopefully be Powell’s press conference as market participants are hoping for any sort of dialogue about the Fed’s role in the repo market.
Notes From Underground: The Jobs Picture Is Robust, But Where Is the Wage Increase?
December 8, 2019This is a rhetorical question of course, for the lack of wage growth is to be found in the vast amount of money chasing a global labor pool.
It is capital that had benefited from the last 30 years of the unleashing workers after the fall of the Soviet Empire and the black/white cat policies of Deng in pursuing growth in China. Now that other emerging economies are attracting capital in an effort to create jobs, there still remains a great deal of downward pressure on wages. Even the movement of supply chains out of China will act as a drag on global earnings as manufacturers will act to hold down wages as way of remaining attractive to foreign direct investment. The world has been watching as Chinese earnings growth has accelerated over the last 10 years but one of the outcomes from the Trump tariffs will be to force a slowdown in China’s wage inflation.
Notes From Underground: Was Trump Addressing Mnuchin or Powell?
November 19, 2019On Monday, Treasury Secretary Steven Muchin and Federal Reserve Chairman Jerome Powell met with President Trump at the White House where the duo “advised” and “forecasted” the economy to the president as 2020 election posturing is in full swing. NOTES FROM UNDERGROUND has maintained that Trump used the tariff threat to cajole Jerome Powell into lowering interest rates, weaken the DOLLAR and end the balance sheet runoff that the administration believed has held back the U.S. economy. What was Powell buying insurance against?
Notes From Underground: I Am Not Your Beast of Burden
October 29, 2019In the global financial system, the central banks are indeed the are system’s beasts of burden. With the November FED FUNDS contract pricing in 93% chance of a rate cut, Federal Reserve Chairman Jerome Powell will attach himself to the plow and till the soil, spreading more fertilizer for equity purchases and further financial repression of creditors. As we discussed Monday, the week is filled with central bank meetings of importance and further impacted by unemployment and GDP data. But there is so much more in the political realm that we haven’t even entertained:
