On Tuesday the news was filled with the release of an analysis by the research combine at Goldman Sachs warning about the negative outcomes from the increasing amount of debt as interest rates rise, lifting the negative percentage of interest payments relative to GDP. (See the CNBC story, “Goldman Sachs Sees Red Ink Everywhere,Warns U.S. Spending Could Push Up Rates and Debt Levels.”) This is another voice warning about the ill-timed fiscal stimulus and budget deficit increase late in the economic cycle. In an interesting juxtaposition, the WSJ had an article published last week titled, “Cohn Downplays Concerns Over Rising Inflation, Bond Yields.” Speaking in his position as Trump’s top economic advisor, Cohn maintained that the White House is not worried about an overheating economy. Cohn emphasized, “We know how to deal with inflation. We don’t know how to deal with deflation in this country.”
Posts Tagged ‘Gary Cohn’
Notes From Underground: Further Into the Fray
February 20, 2018Notes From Underground: Fischer and Cohn, Out; Draghi In (the Spotlight)
September 6, 2017In keeping this note as short as possible, let’s start with Vice Chairman Stanley Fischer’s resignation. I am posting snippets from the August 20 entry, in which I noted the great piece in the Weekend Financial Times with its Stanley Fischer interview. The article noted the one open disagreement with Chair Yellen in which he was miffed about not being consulted about an FOMC decision. We don’t know if Stanley Fischer is resigning because of health reasons, personal issues or over policy disputes. But this I am sure: Lael Brainard has been elevated within the group of Fed Governors as she is the confidant of Chair Yellen, thus the FED takes a dovish stance. In her dovish speech she maintains that while desiring to keep FED FUNDS steady there is room to initiate some of the balance sheet unwind. This was also her stance in June when she presented arguments for QT versus raising the fed funds rate. The impact from the initiation of Boockvar’s QT would not be as great on the U.S. dollar.
Notes From Underground: Laboring to Comprehend Gary Cohn’s CNBC Interview
September 3, 2017CNBC promoted its interview with Gary Cohn for a couple of days so the head of the White House Economic Council could not have been caught off guard by any questions from the interviewers. Cohn was giving the recent unemployment data a positive spin, but that’s part of his job description. MY PROBLEM WITH COHN’S INTERVIEW WAS HIS PUSH TO CUT CORPORATE TAX RATES AS AN ANSWER TO FLAT WAGE GROWTH. His analysis that lower tax rates equals higher wages is preposterous and reflects the thought process of a Wall Street account executive. In response to David Faber’s query about the tax cut benefiting middle class workers COHN replied: “How does it not benefit the worker?” Cohn answers his own question by building the straw man argument: Any repatriation of foreign profits would boost equity prices as would any cut in domestic corporate taxes. For who owns most of the equity in the world today (another Straw Man by Cohn)? We know the biggest pool of owned equity are the pension funds, especially the public pension funds (fire, police, teachers municipal workers], “… thus we are helping Americans by delivering returns back to them.”
Notes From Underground: It’s All About the Narrative
August 27, 2017The Kansas City Fed Symposium was steeped in boredom as all the hype failed to live up to the expectations of the media. The excitement centered around Mario Draghi potentially dropping hints about the beginning of quantitative tightening (QT). Rick Santelli spoke with former FOMC Governor Mark Olson, who rightfully predicted Chair Yellen would not reveal any sense of Fed intentions but he was dead wrong about Draghi. Olson opined that Yellen put the spotlight on President Draghi, but the ECB President must have suffered stage fright as he very bland when speaking to concerns about the Trump administration’s move to economic nationalism. There was not a single word about ECB policy.
Notes From Underground: Its Was a Great Week for S&Ps
August 20, 2017The news was extremely positive for the equity markets last week. FOUR key points:
- Retail Sales proved to be much stronger than consensus;
- The FOMC minutes were very DOVISH as the FED was concerned about the inability of upward inflation to gain traction;
- The demise of anti-globalist Steve Bannon was greeted with cheers on the floor of the New York Stock Exchange. News of the removal resulted in a rally in the S&Ps on Friday, but it was short-lived; and
- The bobble heads of the access media reported the dismissal as an elevation of the Davos-inspired crowd, represented by the Gary Cohn wing of the Trump administration.