Archive for the ‘IMF’ Category

Notes From Underground: New FRA Podcast

April 22, 2018

On April 19, the FRA’s Richard Bonugli moderated a discussion between the highly regarded Cal Professor Barry Eichengreen and yours truly. The discussion centered around the issue of China and the Trump administration’s trade policy. The podcast was a result of a piece Eichengreen published at Project Syndicate that I cited in a recent blog post. It was a great honor to partake in a direct discussion with the professor as I have read his work on the global political economy for many years. I advise googling his earlier work on analyzing gold role in the Great Depression and many of his other articles on the EU and the EURO.

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Notes From Underground: Who Gets Eaten and Who Get’s to Eat (Sweeney Todd)

October 15, 2017

As Stephen Sondheim wrote in the dark musical Sweeney Todd, “What’s the sound in the world out there. It’s man devouring man. The history of the world, my sweet, is who gets eaten and who gets to eat.”

I open with this thought in regards to a wonderful op-ed piece in the Barron’s over the weekend by John Curran titled, “The Coming Renaissance of Macro Investing.” Curran has the pedigree of writing this piece as he served his time at one of the greatest global macro funds, Caxton Partners. There are no greater thinker/traders than Stan Druckenmiller or Bruce Kovner. When it came to understanding the role of foreign currencies in creating investment opportunities Kovner is the wisest I have ever had the pressure to read. The last 10 years have been difficult for the global macro discretionary crowd but as John Curran suggests the winds of change are blowing. This is also a theme I have been discussing of late. The big difference in my opinion is that short-term trades will morph into momentum investments.

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Notes From Underground: I Wonder If Arthur Okun Meant This Leaky Bucket

April 4, 2016

It was a very big weekend for information leaks that many in the world of policy making did not wish to have spread across the globe. The noted economist Arthur Okun posited that there was a trade-off between equality and inefficiency when it came to providing a social safety net for those suffering from the capriciousness of a capitalist system. In an effort to minimize the economic dislocations of a market economy, the redistribution of wealth through transfers was compared to a leaky bucket in which not all the money would make it to the intended recipients. Okun also posited that in an effort for some amelioration of the pain of economic dislocation taxes on the most successful actors would result in an effort to avoid any wealth confiscation through progressive taxation: “High tax rates are followed by attempts of ingenious men to beat them as surely as snow is followed by little boys on sleds.” (Library of Economics and Liberty)

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Notes From Underground: The IMF, an Atavistic Vestige of a Structural Colonial World

May 26, 2015

As Notes From Underground has been publishing for five-and-a-half years, a recurring theme has been the ineptness of the IMF. While there are many fine economists and researchers working for the IMF, its history is laden with policies that were devastating for the nations that used its facilities as an act of financial desperation. As the global lender of last resort, the FUND demanded onerous policies of raising interest rates, devaluing currency and undergoing fiscal austerity as a prerequisite for an IMF bail out. The recipients  of most IMF loans were “third world” nations that had run out of alternative creditors. The IMF was the “only game in town.” During the height of the Asian crisis of 1997-1998, many of the Asian Tigers shunned IMF advice and money and operated outside the bounds of the Bretton Woods-IMF system.

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Notes From Underground: How Do Markets Test the FED?

June 23, 2014

In following up on the theme of the last three blog posts, it’s always a question how  markets test central bank policies. As is frequently mentioned, when investors fear that central banks will err on the side of LIQUIDITY EXUBERANCE precious metals and hard assets are bought in efforts to prevent the POSSIBLE EROSION of asset values. In times when the market perceives the FED to be ahead of the inflation curve, investors buy long-term bonds and lock up higher rates in a belief that an aggressive Fed will successfully slow the economy. Thus, locking up high rates now will generate a higher real yield as the economy begins to slow, resulting in a flattening of the yield curves. When the Fed is deemed to be behind the curve, investors sell long-dated debt in belief that the FED will at some point have to aggressively raise rates to stem incipient inflation, resulting in a steepening yield curve.

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Notes From Underground: The IMF’s Role Has Become Too Subjective to be Objective

June 22, 2014

One upon a time, the IMF‘s mission was to aid countries suffering balance of payments problems and dealing with the possible credit problems that would arise for over-extended nations. Recently, the Christine Lagarde-led IMF has acted in a more aggressive capacity when it became involved in the bailouts of the debt-plagued European peripheries. The IMF took a proactive stance in becoming one of the troika–ECB, European Commission, IMF–in an effort to stem the stress of Greece, Portugal, Cyprus (and possibly Spain and Italy). The IMF became involved not because Europe was lacking the funds but because the Germans were wavering as to how far the ECB should go in expending capital to bail out the so-called PIIGS. The European elites called upon the IMF to use its funding power to alleviate the pressure from Berlin’s demands that debtors undertake severe austerity in order to resolve the problems of recession and budgetary malfeasance. IMF Director Lagarde was very happy to open the IMF’s treasury to her comrade’s in arm: the European finance ministers. Remember, prior to Lagarde’s position at the IMF, she was the French finance minister.

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Notes From Underground: Hollande and ABE Discuss Nuclear Energy

June 11, 2013

The most important piece of the French President’s visit to Japan was to discuss a cooperative agreement with the Japanese Prime Minister on the development of new and improved nuclear powered electricity-generating facilities. The Japan Times and Bloomberg both reported that “Hollande and Abe discussed nuclear energy and agreed to promote joint development of a next-generation nuclear reactor as well as to support private-sector efforts to export nuclear power technologies to emerging countries.” Japan’s Mitsubishi Heavy Industries and France’s Areva Corp. are two of the main developers of nuclear technology for domestic purposes. As I have written previously, the issue of nuclear energy is a vital link in the ABE economic plan. Prior to the 2011 tsunami and Fukushima disaster, Japan produced most of its electricity through nuclear power generators. The tragic outcome from the tsunami forced Japan to curtail most of the nuclear generators and become more reliant on imported energy, especially liquified natural gas (LNG).

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Notes From Underground: As We Yada, Yada, Yada The EU/IMF Greek Debt Deal…

November 26, 2012

As the sun sets on the Greek drama, the most predicted outcome has indeed taken place as the IMF/EU and ECB/EFSF/ESM have come to an agreement about bringing the Greek debt load to a robust level of 124% debt-to-GDP ratio by 2020. There was no way the TROIKA was going to risk the entire EURO project on a mere 44 BILLION EURO payout to the Greek government. The game was played out to the 11th hour–oh those drama queens in Brussels–and although the OFFICIAL SECTOR did not take an official haircut, the core nations of the European financial system do stand to take a bath. IMF Director Lagarde was able to save face as the Greek debt levels will reach the previously promised levels of 120%. Madame Lagarde can now go to the IMF Board and report that all previously agreed to conditions have been ratified by the EU and await the signing of the memorandum of understanding with the Greek leadership. The IMF needed to get Greece out of the way so it can figure out the role it will play in the Spanish bailout and/or Italy.

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Notes From Underground: Reposting the IMF Piece From October 14, 2012

November 22, 2012

First and foremost, a happy Thanksgiving to all the readers of NOTES FROM UNDERGROUND. The growth in readership and the high level of discourse is something I am very grateful and certainly thankful for in full measure. As much energy as I expend in formulating the blog, it is worth the effort because it helps anchor my thoughts about the impact of the global political economy. It is certainly the definition of a give-get. So again, thanks to all my readers.

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Notes From Underground: Hollande Gets Saucy With the Germans

October 17, 2012

First, the equity markets continued this week’s rally as better data in the U.S. (housing) following upon the Monday retail sales report provided more fuel for the bulls and is causing great angst for portfolio managers that are underinvested and badly underperforming their benchmarks. These investment advisers must go to sleep and pray for the U.S. to bomb Iran so that they will have some type of opportunity to buy into the global equity rally. It’s tough to chase this one. As I wrote on Sunday, the IMF “volte face” on the impact of austerity budgets was a game changer as it will mean that austerity inspired programs, like the U.S. fiscal cliff, will force policymakers to be cautious in pushing for too much austerity in times of a balance sheet recession. The pushback from Spain, Italy and others is allowing the forces for unrestrained growth to gain ascendancy over the voices of austerity led by the Bundesbank.

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