Archive for the ‘G-20’ Category

Notes From Underground: After the G-20 and Nonfarm Payrolls, There’s Laborious Trading Ahead

September 5, 2016

As we bid farewell to the dog days of summer, here are some issues that will set the agenda for the month ahead:

1. Friday’s employment data made the picture murkier for the FOMC meeting later this month. The nonfarm payrolls were on the weak side, and, as Art Cashin correctly pointed out on CNBC, the bigger issue was a drop in the hours of the work week, which when measured in terms of jobs gained/loss resulted in a loss of 300,000 jobs. The FED jaw flappers keep orally pushing for a rate hike on September 21 but this jobs report clouds the issue.

The talking heads report ad nauseam that several Fed members believe a rate hike possible but as I wrote last week, if the fed funds rate is not raised the critical component of the FOMC release will be the outcome of the vote. If Stanley Fischer doesn’t vote for a RATE HIKE then HE SHOULD RESIGN FROM THE FOMC. It is that simple for if Chair Yellen prevails in achieving another 9-1 vote then it is without question Yellen’s FOMC and all other ivory tower mouthpieces should remain silent. The Federal Reserve Board is under mounting criticism due the inconsistency of its members’ public pronouncements. The FED‘s credibility is being called into question, a potentially disastrous  situation in a FIAT CURRENCY SYSTEM.

2. The G-20 meeting presented great selfies and photo-ops but little else. THIS MEETING REFLECTED THE STRAINS IN THE GLOBAL ORDER WHICH HAVE BEEN “PAPERED OVER” BY THE CENTRAL BANKS. Japan set the tone of the meeting by releasing a paper to the G-20 warning the world and especially Europe about the negative fallout from an acrimonious end to the BREXIT negotiations. Japanese corporations have massive investments in British capital projects and if British exports are to be penalized then Japan threatened to remove production and jobs from the U.K. and other European centers. I THINK THE JAPANESE WANTED TO SEND A MESSAGE TO ALL THE PARTIES IN THE BREXIT DISCUSSION, BUT MORE IMPORTANTLY, THIS WAS JAPANESE OFFICIALS RETALIATING FOR BEING SINGLED OUT AS A CURRENCY MANIPULATOR AT THE PREVIOUS G-20 MEETING. Japan prevented the Chinese from making them the focal point … yet again.

Before the release of the G-20 Communique, the U.S. and China held a bi-lateral meeting and one of the main issues discussed between Presidents Obama and XI was foreign currency movements. A fact sheet released after the meeting said, “China and U.S. Agree to Refrain From Competitive Currency Devaluations.” It may be a major political victory for the Chinese if the U.S. Treasury was deemed to be a serial currency manipulator in a similar vein of the PBOC. And this would be a serious blow to U.S. prestige. The actual language of the final communique was generic and sanitized: “We affirm our previous exchange rate commitments, including that we will refrain  from competitive devaluations and we will not target our exchange rates for competitive purposes.” This is nonsense of the first order for as many critics of the Fed and ECB have argued over the previous six years: QE POLICY is a domestic monetary program with a weakened currency as a desired outcome. The G-20 reference is mere political posturing for the domestic constituency.

3. The Reserve Bank of Australia and the ECB have scheduled meetings this week. Tonight at 11:30 CDT the RBA will announce its interest rate intentions. The consensus is for no change from its current 1.5% overnight cash rate. The Aussie dollar is very weak against the Kiwi dollar, its main trading partner, so I’m in agreement with consensus. The important point is that it’s Governor Stevens’s last meeting and what he says about the Chinese economy should be of interest. THURSDAY will be an important day as Mario Draghi will hold a press conference following the ECB’s meeting. President Draghi has been very quiet of late and has allowed his underlings to speak about policy. Draghi didn’t even attend the Jackson Hole Conference. The European economy is sputtering. Italy is facing a November referendum. And, more importantly, German Chancellor Merkel’s CDU party suffered a miserable election result on Sunday with the anti-Euro AfD party garnering the largest increase in support.

The media paints the AfD success as a response to an anti-immigrant agenda. There may be an element of fact in that but the German middle class is raising its voice against the FINANCIAL REPRESSION  foisted upon German savers as a product of ECB policies. If President Draghi is threatened by German domestic politics look for an increase in the ECB QE program to 90/100 billion euros a month from 80 billion in an effort to build the ECB balance sheet, weakening the euro and simultaneously pushing borrowing costs lower. Draghi is a man in a hurry as the political winds turn against the ECB. The problem for Draghi is that the  massive QE programs promoted by Bernanke and the BOJ have failed to have the desired effects. Bloated balance sheets for the sake of bailing out debt-stressed nations provide political fodder for the anti-euro political tide rising across the EU. Mario Draghi has grabbed unlimited power for the ECB, BUT FOR HOW LONG? Yes, our work has just begun.

Notes From Underground: On Bondage to the Hallucinations of Global Policy Makers

July 25, 2016

Over the weekend there was a new and improved G-20 communique, which was supposed to offer reassurance that the primary economic decision makers have things under control. It is disconcerting that so much time was spent discussing the global uncertainty posed by BREXIT for the global equity markets have deemed the British vote to Leave the EU as non-event (at least for now) and maybe even a positive for the Davos elite to adjust previous policy decisions. It appears that some G-20 members look forward to dealing with the U.K. on trade issues outside an EU establishment that is reticent to foster trade agreements because of German and French elections scheduled for 2017.


Notes From Underground: Gee, What’s the G-20 Thinking About?

April 17, 2016

The Japanese leave Washington with no support for alleviating one-sided currency moves. For China it is all about respect for growth, wherever it may be. The Chinese GDP was released on Thursday and it came out exactly as forecast at 6.7% (shocking, I know). There was virtually no criticism of the Chinese as the nations are watching closely while China commences its transition from an export-dominated economy to a more balanced growth model, where domestic consumption takes on increased importance. In contrast to the G-20 view on Japanese currency intervention, SNB President Thomas Jordan announced that the Swiss would increase its balance sheet through currency intervention “… to prevent an already ‘significantly overvalued’ franc from strengthening.”


Notes From Underground: He Goes Running For the Shelter of His Mother’s Little Helper

February 28, 2016

(Larry Summers had to run to his medicine cabinet to take Prozac (not Diazepam as in the Rolling Stones song) after he read the G-20 communique. The finance ministers and central bank heads meeting in Shanghai failed to come to terms with any of the issues concerning the global economy. There was no PLAZA ACCORD and no  deep discussions about the need for massive fiscal stimulus. The tone of the Communique was TEPID at best and views the present state of the global economy as slow but steady. There was certainly NO URGENCY about a rise in the prospects of a global recession. The finance ministers downplayed the recent volatility and slide in global equity markets, suggesting by those domiciled in ivory towers and model-based rat holes that the MARKETS ARE MISTAKEN AND THE MODELS ARE CORRECT. The arguments among the participants was such that there were some issues that seem in direct contradiction of any policy response.


Notes From Underground: A Quickie On the G-20, Or the Summers of Enchantment

February 25, 2016

It was nice to be away, playing some golf and visiting with friends. And now it’s back to work. (Confession: I was engrossed in reading for part of my days.) There two key issues before us: BREXIT and this weekend’s G-20. (Side note: I did a radio interview yesterday with Anthony Crudele on #FuturesRadio. Anthony did a great job and we covered a lot of ground. Listen to the piece and it will rehash much of what my blog readers have been reading during the past six years.) Here is my take on the G-20 meeting and it is interesting how the British elites are trying to co-opt part of the G-20 meeting to get support for the British Prime Minister David Cameron and his bumbling sidekick George Osborne.


Notes From Underground: The G20 Is as Shaky as a “Fiddler On A Roof”

April 20, 2015

Indulge me, my readers. When I saw the movie Fiddler On the Roof 43 years ago with my now-wife, there was a line that made me laugh for it mirrored conversations that we shared about my nose always being buried in a book about history, economics and probably politics. In the movie, the young radical Perchik wishes to ask Tevye’s daughter, Hodel, to marry him. The question takes place in this dialogue:

Perchik: Hodel there’s a question, a question I … I wish to discuss with you
Hodel: Yes?
P: It’s a political question
H: What is it?
P: The question of marriage
H: Is this a political question?
P: Well, yes. Yes, everything’s political. Like everything else, the relationship between a man and a woman has a socio-economic base. Marriage must be founded on mutual beliefs. A common attitude and philosophy toward society.
H: And affection?
P: Well, yes, of course. That is also necessary.


Notes From Underground: Germany Will Be Tied to the Whipping Post at This Week’s IMF/G20 Meetings

October 7, 2014

Remember the good old days when China suffered the wrath of the toothless tiger of International Organizations and their worthless photo ops and selfies? The Germans are the target of the policy makers struggling to combat global financial imbalances as the German current account surplus as percentage of GDP far exceeds that of China, making the Germans the target of the world’s slings and arrows for creating such outrageous fortunes.


Notes From Underground: Why Is The FED Being Disingenuous???

October 14, 2013

Last year the FED turned over $ 88.9 billion in profit to the U.S. Treasury, which was the “earned income” from the Fed’s QE program, for Bernanke’s Fed is the world’s largest coupon clipper. The Fed’s earnings are supposed to be turned over to the Treasury at regular intervals so why isn’t the Fed forwarding its gains to help the Treasury have more income to pay off the governments immediate expenses. If last year’s profits totaled $88.9 billion, this year’s gains should be larger as the balance sheet has grown by almost $850 BILLION. So where is the money, Ben?


Notes From Underground: September, the Potential for An Investment Wasteland

September 4, 2013

Yesterday, I had a global macro session with some of the best users of the Notes From Underground. They are disciplined in pursuit of profit but as most of my readers try to do, pursue causation as a prelude to correlation. Carl had prepared a white board chart of all of the relevant events that are set to play out in September. April may be the cruelest month but September 2013 will certainly give T.S. Eliot’s poem a run for the grand title. The desire to anticipate any of the events may lead to a “wasteland” of capital. So thanks to Carl, let me restate the list of events:


Notes From Underground: G-20 Communique is Anything But (Seems Like an Agenda for a Political Platform)

July 21, 2013

This weekend brought the results of two days of meetings of the financial ministers and central banks chiefs from the 20 “most significant” economies. The purpose of this visit to Russia was to set the agenda for the September G-20 meeting in St. Petersburg. Reuters posted a piece, “Text–Closing Communique From G20 finance Ministers Meeting,” which filters the results of two days discussions to seven main points. It is a WORTHLESS effort as the communique is filled with diplomatic language that assuages the egos and policies of every participant. The finance leaders OUGHT TO BE EMBARRASSED to release this nonsense. From Reuters: