Well things are on the bubble as the Russians and Saudis had a “falling out” as lovers often because the OPEC talks resulted in an ostensible all-out war to break oil prices. The consensus loser will be the U.S. oil patch as the FRACKERS are carrying huge amounts of debt, which will not be paid while prices sharply decline.
There will be talks about a credit crisis as banks and other oil creditors will have to absorb losses and probably restrict lending to other borrowers. Those with private equity investments in the Bakken, Permian and others will be taking inventory on how battered their portfolios will be. The wily Putin will finally have his way as the sanctimonious Americans will have to rescind the ill-devised/ill-advised SANCTIONS that have had little impact.
Whenever I have an appearance on CNBC with Rick Santelli, Europe proves itself as critical to U.S. monetary policy. The past five years have led to dialogue that questions the efficacy of ECB policy and the slight of hand moves by President Mario Draghi. As BUND yields drag all sovereign debt yields even lower, the central bank is struggling to find policies that will keep LOWER FOR LONGER going. It seems that the last play in the book is to provoke Jerome Powell to abandon any NORMALIZATION of interest rate policy regardless of the economic data reported by the U.S.
(Click on the image to watch me and Rick discuss Europe and monetary policy.)
Wednesday brings the results of the FOMC meeting and the official policy statement laying out Fed insights into the domestic and of recent concern the fragile state of the global economy. There will be no press conference so the “kremlinologists” of fedspeak will be busy parsing every nuanced word. I WILL BE WATCHING WHAT OUTFIT THE FED CHAIR IS WEARING. IF SHE IS WEARING A NEHRU JACKET I WILL ASSUME THE FED IS MORE CONCERNED ABOUT THE EFFECT OF GLOBAL MARKETS KEEPING DOWNWARD PRESSURE ON AMERICAN WAGES. Domestic-oriented analysts focus on the U.S. unemployment rate of 5.0% as the key factor for the need for the FED to raise rates. The flawed models of the FED fail to take into account the pressures on the U.S. economy from capital and labor situations worldwide.
Yesterday’s blog post addressed Boston Fed President Eric Rosengren’s interview with Jon Hilsenrath and New York Fed President William Dudley’s effort to communicate how the FED plans to deal with a bloated balance sheet in a “rising interest rate” environment. Today’s FOMC minutes from the April 29-30 meeting addressed just that. The Fed’s uncertainty in its methods has resulted in the need for Janet Yellen to get out front in explaining to the public, and, especially the markets, about the difficult task ahead in shrinking its balance sheet. The closed meeting of the Fed Governor’s ahead of the scheduled conclave was to discuss among a small group of Fed officials the tools that the System Open Market Account (SOMA) had been contemplating and testing.
It has been the best of times. It has been the worst of times. President Sarkozy began the year with such high hopes and aspirations as he desired to raise his stature on the world stage. He won his early skirmishes against Chancellor Angela Merkel by first defeating Germany’s desire for Axel Weber to attain the ECB Presidency and then forcing the German Chancellor’s hand for a larger pool of capital for the European Financial Stability Facility. But the taste of victory has now faded as the FRENCH BOND MARKET is suffering under the weight of its deeply troubled banks and the GERMAN/FRENCH10-YEAR BOND SPREAD CONTINUES TO WIDEN. France is deemed to be very vulnerable for its banks own so much EURO SOVEREIGN DEBT that of course is deemed to be riskless and require no haircut or capital to support it.
