Question: Why does the Swiss National Bank become an important topic for discussion?
Answer: Since Mario Draghi’s “whatever it takes” and “no taboos” comments in 2012 about saving the euro. The SNB has been in a defensive position of trying to prevent a dramatic appreciation of the FRANC as the SWISS acts as a haven for Europeans. The geographic location provides for what economists refer to as home basis.
On Friday the world “celebrated” May Day, when the red flags of the world’s workers united in solidarity are traditionally unfurled. The fall of the Berlin Wall unleashed the rush for economic development and a plethora of workers in search of capital to lift its productivity. And for the past 30 years have capital and wages have been elevated for the emerging economies yet stagnant for the developed region. It has been capital that has been the recipient of increased profits as global capital went to the lowest wage regions.
On Monday, the Bank of Japan promised to buy all the bonds (or as much as necessary). On Wednesday, the FEDERAL RESERVE will offer little as they will be following Dr. Fauci’s lead and proclaim to know little about the end of Covid-19, as Chairman Jerome Powell should. But the key will be the market’s search for a timeline in response to a turn in the economy. Wall Street is looking for forward guidance as to when the Powell Fed will PIVOT from the massive liquidity injections. Will it be an inflation target, employment condition or a return to positive GDP? Powell will use DON’T KNOW and will be patient in removing stimulus as wanting to see any secondary effects.
First off, I’d like to thank everyone who contributed to the Santa Mike/Covid relief at St. Vincent de Paul, a long-standing charity that gives every penny to those seeking help for hunger, clothing and medical assistance. Thanks to you, we have contributed more than $30,000 and for that Santa Mike is very grateful. As Mike keeps telling me, “Do you know how much $30,000 dollars of food is when bought in BULK?” This truly makes a difference for those struggling to get by in these extremely difficult times. SO THANK YOU ALL SO MUCH. Every donation matters and there are multiples because Peter at St. Vincent de Paul has procured some donors who are doing matches. That only makes NOTES FROM UNDERGROUND worth doing in even bigger ways.
It seems this would be a good headline for the New York tabloids if any mainstream U.S. media outlets actually paid attention to what took place in Europe. Again, EU leaders failed to agree on a large fiscal stimulus backed by a common funding mechanism, or as George Soros and others recommended, a perpetual EUROBOND of at least a TRILLION EUROS or more. The Germans and their running dogs fail to acknowledge that the collapse of the European financial system if the Italians choose the “nuclear option” and say CIAO to the EURO the cost will far exceed any amount being discussed.
ATTENTION: What you are about to read IS NOT A POLITICAL STATEMENT for I don’t care about your politics and you shouldn’t even know mine. The OVAL OFFICE provides the U.S. president a pulpit in which to amplify his/her voice in a an effort to tip the policy debates in their favor. But one a policy is ill advised from a trade/financial perspective and we will shout it from NOTES FROM UNDERGROUND.
The headline is from one of my favorite John Prine songs. The great wordsmith died due to complications related to COVID-19, so in a tribute to one of his great songs , “Sam Stone” (about a Vietnam wet who comes home a heroin addict), I use this to define the recent work of the FED and the U.S. Treasury.
On Monday, Treasury Secretary Mnuchin said the G-7 will be holding a video conference Tuesday, which will include all the central bankers. What is on the agenda? It has not been announced so we are left to GUESSING. The Swap LINES have been opened, massive asset purchase programs are in place, new facilities have been created and fiscal stimulus is raining down in all the old familiar places. The OIL agreement is in place and the FED has even embarked on a program of exchanging CASH for high yield bond ETFs in an effort to prevent a continued negative feedback loop in corporate debt markets. What is there for the G-7 to discuss?
I recorded this podcast on Sunday, April 5, 2020 with Anthony Crudele and it’s chock-full of analysis. Enjoy!
At this time of great chaos in the world I am going to take a 10 day hiatus to sit back and reflect as it is the time of Passover and Easter. These holidays will take on special significance this year as the Covid-19 impacts our plans.
So as I retrench I put forward the words of the Prophet Micah for something to contemplate: “To Act Justly, and to LOVE MERCY and to walk HUMBLY with YOUR GOD.” Wishing all my readers a meaningful period of the holidays before us. I may post a podcast I recorded this morning with Anthony Crudele but that will be it, although I will respond to all questions in an effort to stay alert to critical issues in a rapidly changing global environment. Now to the issues before us.
