Posts Tagged ‘Christine Lagarde’

Notes From Underground: Torn Between Two Lovers, Feelin’ Like A Fool

July 21, 2019

This Mary MacGregor ballad released in 1976 notes how a woman is torn between two men she loves and it is “breakin’ all the rules.” This is the situation Federal Reserve Chairman Jerome Powell and the FOMC finds itself: The love of its dual mandate and its torrid affair with the beloved Phillips Curve. Now it appears that the FED leadership is abandoning its affair with Phillips Curve while it grows more attached to its other love, Mario Draghi and the European Central Bank.

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Notes From Underground: ECB, Political Pawn?

July 4, 2019

Warning: There’s a great deal of colorful language in this very important discussion regarding the nomination of Christine Lagarde to the post of European Central Bank president. This is another political move by the EU elite to avoid placing a German at the helm of the ECB. Jens Weidmann may be a tough choice but Lagarde is preposterous, as Jean Claude Trichet might say. If you thought Mario Draghi was a politician and a dove by design, Lagarde will make Draghi look like a HAWK. In my opinion, IMF Director Lagarde has been and remains the ultimate politician. The role she played in the Greek bailout was pure politics and the price paid by the Greek citizenry has been steep. All in an effort to bailout many European financial institutions. Ask Yanis Varafoukis what he thinks of the Lagarde nomination.

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Notes From Underground: What Hath ALGOS Wrought?

April 2, 2018

The speed at which markets react to political and economic headlines in an ALGO-driven world can create volatility that preys upon key levels. Today was a classic example as the long revered 200-day moving average in the E-mini S&P futures was violated and momentum moved quickly to the sell side. The S&Ps closed below the frequently tested long-term moving average of 2589.76 on a CQG continuation chart of the e-minis. In the last 30 minutes of trading at the New York Stock Exchange, there was a report that the Trump White House was pushing for a NAFTA overhaul deal within two weeks. The Mexican peso staged a late rally for it had been unable to withstand the intense selloff of the U.S. equity market. Several of the regular haven investments experienced rallies (YEN, GOLD, SILVER), but the U.S. Treasuries closed virtually unchanged as economic data reflected fears about underlying price pressures since ISM manufacturing prices rose.

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Notes From Underground: The Politics of the IMF and French Election

April 19, 2017

First, I am reposting part of the January 29 post as a reminder to pay attention to the narrative of Trump rolling back to the concept of Pax Americana. As the Trump administration begins to reveal its ambitions, there is a great deal of conversation about Trump becoming more presidential and that the “grown ups” are taking charge of policy. The demotion of Stephen Bannon ignited a discussion about the Wall Street crowd (Mnuchin, Ross, Cohn, Kushner) becoming aligned with the “Deep State.” The concept of the deep state is really the power of the entrenched bureaucracy as the primary source within the beltway.

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Notes From Underground: Authorities Reveal Their Intentions To Financially Repress the Germans

May 9, 2016

There were two articles today that exist in direct contradiction to each other in substance, but when taken together reveal how ECB President Draghi and IMF Director Lagarde HOPE to punish and repress the German saving class in an effort to salvage the EU via the alleviation of debt owed by the so-called peripheral nations. The first article of significance is an op-ed piece by the FT’s Wolfgang Munchau titled, “Draghi, Schauble and the high cost of Germany’s savings culture.” The article lays it on the line that the Germans bear a great deal of responsibility for the ECB’s negative interest rate policy because of Chancellor Merkel’s push for austerity budgets to correct the massive deficits of the heavily indebted “peripheral” nations of the EU. The Germans were pushing themselves into AUSTERITY simultaneously by pushing forward a law on its own BALANCED BUDGET RULE. The battle cry from Germany was growth through austerity. In July 2012, when the debt plagued EU was on the verge of financial collapse, the profligate peripherals were willing to accept any demands put forward by the Germans in an effort to gain access to the Berlin credit card. As Munchau notes: “If German fiscal policy had been neutral during that period, the ECB’s job would have been easier. It would have been able to achieve its inflation target and would not have had to cut rates by as much.”

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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: All Quiet On The Western Front … Not

December 22, 2015

As the markets are settling into the holiday mood of eggnog and the decorating of Tannenbaums, Germany’s EU partners were castigating Berlin for its continued emphasis on fiscal austerity. The ECB’s chief-economist and executive board member Peter Praet was maintaining that ECB policy would be accommodative for a very long time. This was a shot fired at Bundesbank President Jens Weidmann. Make no mistake about it, Mr. Praet was speaking on behalf of President Draghi who didn’t enjoy being “bested” by Weidmann at the December 3 meeting. The German “block” had raised its concern about more QE and prevented Draghi from delivering what he had previously promised.

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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: Why Bill Gross Is Right and Wrong

April 21, 2015

Bill Gross was the darling of “access media” for promoting his favorite trade (what he called the short of a lifetime), the German bund. It captured the headlines on financial blogs but it is the wrong trade. If an investor wished to trade the “short of a lifetime,” the more appropriate tool would be the FRENCH OAT (the name for the French 10-year bond). It seems that Gross’s logic is based on the fact that the German BUND can only drop to -20 basis points because the ECB has determined that it will not purchase sovereign debt yielding less than its official reserve rate so over the time the BUND  has a ceiling on its potential value. Gross is making the case that the ECB has so badly distorted the sovereign debt markets through its QE program that valuations are badly misaligned, BUT THE FRENCH OAT IS MUCH MORE OVERVALUED.

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Notes From Underground: Fed Loses Its Patience While I Regain My Voice

March 17, 2015

Never has so much money been riding on ONE WORD from a monetary authority. The issue isn’t the idea of FED PATIENCE in regards to raising rates for if the FED increases the effective rate to 37 basis points from 12 basis points IT IS MEANINGLESS. The issue for the FED is the huge pile of bank reserves sitting at the central bank to the tune of $2.7 TRILLION (and let’s not forget the FED‘s $4.5 TRILLION balance sheet). If the economy begins to heat up and banks begin to circulate those RESERVES, the FED will have a velocity of money problem as the ECONOMY MAY BE AT SOME LEVEL OF FULL EMPLOYMENT. It’s not an interest rate problem for the FED but a RESERVE PROBLEM.

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