Posts Tagged ‘adverse feedback loop’

Notes From Underground: Will Europe’s Declining CPI Deflate Draghi’s Ego?

November 4, 2013

ECB President Mario Draghi has been able to convince the world that the Euro’s problems have been contained and it is safe to re-enter the financial pool of credit assets throughout Europe. The July 2012 speech that proclaimed the ECB had no taboos and would “do whatever it takes” to preserve the euro has been a masterpiece of doing nothing while generating the desired outcome. The master plumber of all things credit (JA) alerted me to the ECB’s balance sheet (as seen on the Bloomberg terminal). After Mario Draghi pledged to offer the Outright Monetary Transactions (OMT) to any European country that contracted with the ESM or EFSF for help, the sovereign debt markets in Europe have quieted and yield spreads returned to a sense of normalcy. Many people believed that the euro currency would suffer from Draghi’s promise of massive liquidity to meet funding needs. The EURO shorts were wrong and the proof lies in the three charts I am providing.

(more…)

Notes From Underground: Touring Europe With Rose Colored Glasses

May 29, 2013

The Bank of Canada left interest rates unchanged and even maintained its “tightening bias” in the announced released this morning. It cited strengthening in the U.S. economy and the Japanese stimulus as positive global signs but noted that, “Europe, in contrast, remains in recession.” It is amazing that every central bank notes the weakness in Europe as a drag on global growth, but investors maintain a positive outlook on the European investment picture.” My glasses do not have a rose-colored tint and therefore I remain very skeptical about the ability of Europe to achieve any economic growth.

(more…)

Notes From Underground: Will Parliament’s Dissolution Become the Beginning of the Solution?

November 14, 2012

Last night , Prime Minister Noda decided to call for new elections in Japan and that automatically ends this session of the DIET. The elections will take place in a month and the present unpopularity of the DPJ means that the LDP is the favorite. It seems that Noda was willing to call elections on the promise that the new parliament would work toward some type of election reform. Hopefully some of the readers of NFU will help fill in the specifics about the issues of election reform. The YEN was sold off on the news of Parliament’s dissolution because the present strength of the YEN and its negative impact on Japanese manufacturing is certain to be an issue. The LDP’s leader, Shinzo Abe, has been very vocal about the BOJ/MOF doing more to raise inflation in the Japanese economy and to be more aggressive in efforts to weaken the YEN. While the YEN weakened, the NIKKEI index held its overnight gains even as the S&Ps, DOW and NASDAQ were knocked lower following President Obama’s press conference.

(more…)