The four living Fed chairmen have gathered in New York for a panel discussion for International House. News Flash: The discussion was disappointing as the moderator had too much censoring power at his discretion about who would answer the audience questions. Paul Volcker had a great response regarding concerns about the Chinese yuan replacing the dollar as the world’s key reserve currency. Volcker said if the U.S. would qualitatively deal with its responsibilities it was not a concern but would probably represent the Chinese becoming a real open economy. Also, Greenspan let it be known that the dual mandate is a nice talking point but the reality is that the FED does not make decisions in a vacuum. After Greenspan’s answer Yellen basically agreed. The moderator should have allowed Yellen to answer first since she is the sitting Fed Chair. Allowing Greenspan to answer first diminished Yellen’s response. Overall, the discussion was … meh.
Posts Tagged ‘Bernanke’
Please, PEPPER SPRAY ALL THE ATTENDEES OF DAVOS in order to halt the rape of taxpayers and consumers across the globe. This annual conclave is responsible for more wealth destruction and the widening disparity in GINI coefficients than any public policy. I believe that the cost of attending Davos is priced at such an extravagant rate because it is a giant insider scam. Hobnob with politicians and policy makers in an effort to be part of the “smart money” crowd. It was the great moral philosopher and economist Adam Smith who so presciently noted: “People of the same trade seldom meet together, even for the merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” The conspiracy against the public has been the financial repression of the global middle class in an effort to bail out those who are attached themselves to the public treasury to maintain the “animal spirits” of crony capitalism.
Almost 18 months ago I wrote a blog in response to an Ambrose Evans-Pritchard piece in the London Telegraph. I think readers of NOTES will find it more than a passing interest. More importantly, Mr. Evans-Pritchard wrote a new piece in yesterday’s London Telegraph, “China Cannot Risk the Global Chaos of Currency Devaluation.” Evans-Pritchard stresses the deflationary shock from a significant Chinese yuan devaluation in response to the Chinese plague of overcapacity from an excess of capital investment for a Chinese effort to increase exports to ease the burden of excess production would weight heavily on an over indebted world struggling with falling prices.
This is the greatest fear for the world ‘s central bankers and why I always referred to Bernanke and Yellen as the ultimate 1937ers for Bernanke promised Milton Friedman that the FED would not repeat the errors of 1937 and allow deflation to become the major dynamic in the world economy and certainly not the U.S. Evans-Pritchard is hopeful that the recent weakness of the YUAN is not really a new policy:
“The slowdown in China is not yet serious enough to justify such a risk. True, the trade-weighted exchange rate has soared 22% since-mid-2012,the result of being strapped to a rocketing dollar at the wrong moment.The YUAN is up 60% against the Japanese Yen.”
Read the article and be aware that the Chinese are not targeting the dollar but are very concerned about the YUAN strength versus the rest of the world.
As the U.S. Congress and executives continue the pursuit of political one-upmanship, it seems as if nothing else matters in the global finance. European banks, German politics, the Trans-Pacific Trade Agreement, IMF upgrading the British economic outlook … nope nothing going on except in the BOWELS of Washington. The U.S. has the media’s focus but today the Washington drama affected the bond markets in a very serious way. At 10:30 a.m. CST, Treasury auctioned 4-week TREASURY BILLS at 0.35%, the highest since October 2008, as markets are beginning to WORRY about some type of U.S. government default. There was a lack of bidders for the short-term BILLS as bond traders and market makers worry that default fears will make certain debt instruments unacceptable as collateral.
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:
Today was the most anticipated FED news conference since TRANSPARENCY became the buzz word of the post-Greenspan era. The FED Chairman took center stage (he was deputized) to bring clarity to the issue of ending the FED‘s large-scale asset purchase program. Mr. Bernanke made sure that the financial world understood that tapering was not tightening. Well, the market may have heard but it did not listen. The Chairman’s words gave impetus to a selloff of EQUITIES, BONDS and precious metals. Overall, the rise in interest rates evidently led to a deleveraging of a mass of positions dependent upon massive leveraged positions, especially in EMERGING MARKET CURRENCIES. The Brazilian real made four-year lows and the Mexican peso was also under severe pressure as higher U.S. interest rates are expected to force a repatriation of funds back to the safe waters of the U.S.
This is the question investors all over the world are asking after the massive selloff on Friday. I have argued that gold was a tired bull for the last six months and that global equities had replaced gold as investors’ and traders’ haven and store of value. Gold has done yeoman’s work as a store of value in the world of central bank hyperactivity resulting in negative real yields all over the globe. As gold prices have stagnated, investors have sought out other asset classes to supplant the need for increased risk and hopefully positive returns. Multinational corporations with high dividends have become the new store of value and the rush to unload traditional hard assets for productive real assets has gained traction. The Cypriot debacle scared global investors and sent them scurrying from bank deposits to corporate assets, with a higher yield via dividends and possible appreciation. (Especially if the assets are domiciled in a jurisdiction that has a court system that protects property rights.)
Click on the image to watch Yra discuss the ECB meeting with Rick Sanely