We are coming to the end of Mario Draghi and the “Whatever It Takes” era. Remember, the head of the European Central Bank said he would do whatever it takes to preserve the EURO. This fealty to the currency has resulted in a -40 basis point deposit rate, a massive expansion of the ECB’s balance sheet via sovereign and corporate bond purchases.
Posts Tagged ‘Euro’
Notes From Underground: The ECB and the Swan Song of Mario Draghi
September 10, 2019Notes From Underground: Woody Hayes’ Advice to Mario Draghi
September 4, 2019Football season in the U.S. is just beginning. That said, it would be appropriate for President Mario Draghi to refrain from any type of new QE program or cut in interest rates at next week’s meeting. There have been several comments from ECB members during the past week advising against more QE or additional interest rate cuts.
Notes From Underground: Time It Was, What a Time It Was
August 27, 2019These Simon and Garfunkel lyrics could apply to the events of this past weekend, the bookends of Jackson Hole and the G-7 meeting. The meaning was best summed up i a Financial Times story that quoted St. Louis Fed President James Bullard, who said, “Something is going on ,and that’s causing I think a total rethink of central banking and all our cherished notions about what we think we’re doing. We just have to stop thinking that next year things are going to be normal.”
Notes From Underground: Another Fine Mess You Got Us Into, Olli Rehn
August 18, 2019The Federal Reserve just won’t admit that President Trump and the European Central Bank are holding its policy designs captive. Trump ramps up talk of tariffs in an effort to keep the financial markets uncertain while the ECB wishes to pursue an ever expanding balance sheet in an effort to reach an ambivalent inflation target. There is no doubt that REAL YIELDS throughout the European Union are NEGATIVE. Even the Italian 10-year is trading around 1.35%, which is below the inflation level however dubious it is calculated.
Notes From Underground: It’s a Drag For Draghi Getting Old
July 24, 2019On Thursday morning we will hear from the ECB about its desires to raise inflation to its self-imposed 2% target. But on Wednesday we received more tepid economic data from the EU. Then couple that with the ascent of Boris Johnson to the position of British Prime Minister. The rise of Boris Johnson is a problem for Draghi as the possibility of a HARD BREXIT increases dramatically. The market and its DAVOS media sycophants have sold the narrative of a hard Brexit as being devastating for the U.K. economy, the British GILTS, the British pound and the Footsie 100. President Draghi has to be careful that a severe rally in the EUR/GBP cross doesn’t damage the European exporters, especially Germany, who runs a 50 billion-plus surplus with Britain.
Notes From Underground: ECB, Political Pawn?
July 4, 2019Warning: 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.
Notes From Underground: Trump Has Weaponized The Dollar. Do the Longs Know?
June 12, 2019Some shots were fired last Friday, but it seems that the markets can only hear the siren song of White House tweets. There was an important story from Bloomberg reporter Saleha Mohsin titled, “Trump’s Currency War Plan Puts Treasury and Commerce at Odds.” The article noted that “a Commerce Department proposal to impose countervailing tariffs on countries that it determines have devalued their currencies has alarmed officials at the Treasury Department.”
It appears that President Trump has grown frustrated by Treasury’s failure to name any country as a “currency manipulator.” It has been Treasury’s bailiwick to monitor the foreign exchange interventions of countries who strive to artificially hold down the value of their currencies in an effort gain a competitive advantage versus any G20 country, especially the U.S. (from the Treasury Department perspective).
Notes From Underground: Just When It Couldn’t Get More Volatile
June 5, 2019The above reference is from the wonderful cult movie, Putney’s Swope. The CEO of a major advertising firm has a heart attack during a board meeting and the sycophants don’t realize it as they continue peppering him with questions. When he’s unable to respond they ask, “How Many Syllables, Mario?”
Notes From Underground: Back to What’s Driving Markets
May 8, 2019We have all been bogged down with tweets coming from the White House about China. Because high-speed traders force us to parse the messages and assess the immediate impact on the markets, we’re hostage to President Trump’s tariff policy. The bottom line is that Robert Lighthizer is left to inform the world when China will acquiesce to the U.S.’s demand for reliable and hardened enforcement mechanisms to solidify any genuine agreement. From my perspective, the critical point on global markets is that once China/U.S. trade agreement is done the president will set his sights on targeting the ENORMOUS TRADE IMBALANCE that favors Germany.
Notes From Underground: Draghi Is Waiting On a Sunny Day
April 10, 2019President Mario Draghi’s press conference proceeded as expected as the European Central Bank laid out its plans for dealing with a slowing global economy suffering from the slings and arrows of president Trump’s trade war threats against the Chinese and now the Europeans. The ECB plans on keeping its interest rate policy intact through 2019 and probably longer as it confronts the recent headwinds to growth. The media asked several times about the possibility of tiering of rates in an effort to remove the adverse impact from the NEGATIVE DEPOSIT RATE FOR RESERVES PARKED AT THE ECB.
