Posts Tagged ‘IMF’

Notes From Underground: Depending On the Outcome of Rational Actors?

August 19, 2018

So much of social science is dependent on various actors making rational decisions. Economics has regularly proven that “actors” certainly fail to act rationally as manias, crashes and panics in repeated form are proof (see Charles Kindleberger). In the realm of politics, the dependence on nation-states to behave rationally has led to many major policy errors. During the Cold War the balance of nuclear weapons prompted both super powers to remain reticent to embark on direct confrontations and avoid an unthinkable shooting war. The fear of world destruction also meant that the USSR and UNITED STATES would leash their “allies” to prevent any direct conflict between the two major hegemonists.

(more…)

Notes From Underground: New FRA Podcast

April 22, 2018

On April 19, the FRA’s Richard Bonugli moderated a discussion between the highly regarded Cal Professor Barry Eichengreen and yours truly. The discussion centered around the issue of China and the Trump administration’s trade policy. The podcast was a result of a piece Eichengreen published at Project Syndicate that I cited in a recent blog post. It was a great honor to partake in a direct discussion with the professor as I have read his work on the global political economy for many years. I advise googling his earlier work on analyzing gold role in the Great Depression and many of his other articles on the EU and the EURO.

(more…)

Notes From Underground: Who Gets Eaten and Who Get’s to Eat (Sweeney Todd)

October 15, 2017

As Stephen Sondheim wrote in the dark musical Sweeney Todd, “What’s the sound in the world out there. It’s man devouring man. The history of the world, my sweet, is who gets eaten and who gets to eat.”

I open with this thought in regards to a wonderful op-ed piece in the Barron’s over the weekend by John Curran titled, “The Coming Renaissance of Macro Investing.” Curran has the pedigree of writing this piece as he served his time at one of the greatest global macro funds, Caxton Partners. There are no greater thinker/traders than Stan Druckenmiller or Bruce Kovner. When it came to understanding the role of foreign currencies in creating investment opportunities Kovner is the wisest I have ever had the pressure to read. The last 10 years have been difficult for the global macro discretionary crowd but as John Curran suggests the winds of change are blowing. This is also a theme I have been discussing of late. The big difference in my opinion is that short-term trades will morph into momentum investments.

(more…)

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.

(more…)

Notes From Underground: Let’s Look at Global Yield Curves

February 7, 2017

One of the most important indicators for financial markets is yield curves. They are predictive as they have historically shown coming economic turmoil, or, more importantly, the end of a business cycle. The severity of any recession depends on the amount of debt that has preceded the onset of an economic slowdown. I will remind readers that before the 2007-08 financial crisis, the U.S. 2/10 curve actually INVERTED to NEGATIVE SIX BASIS POINTS. Some financial pundits like to cynically advise consumers that the STOCK markets have predicted 10 of the last 5 recessions, but that is not so with yield curves. The difficulty with the signalling mechanism of yield curves is predicting the time for even during the GREAT RECESSION equity markets continued to rally even as the curve flattened.

(more…)

Notes From Underground: Looking for Headwinds In All the Wrong Places

August 18, 2016

It’s tough to enjoy the final days of summer when the FED can’t just relax their wind pipes. The continued contradictions emanating from those who sit in the same meetings is jeopardizing the Fed’s credibility … AGAIN. Last Monday, San Francisco Fed President John Williams published an economic letter in which he posed the concept of either raising the inflation targets, or the Fed ought to target a NOMINAL GDP level. This was perceived to be an extremely DOVISH view as it would keep the FED on HOLD far longer than the market currently predicts. The problem was that Williams had voiced a HAWKISH view just two weeks earlier. The quick about-face makes me wonder if the Fed’s logo should be the Roman god Janus.

(more…)

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.”

(more…)

Notes From Underground: Gee, What’s the G-20 Thinking About?

April 17, 2016

The Japanese leave Washington with no support for alleviating one-sided currency moves. For China it is all about respect for growth, wherever it may be. The Chinese GDP was released on Thursday and it came out exactly as forecast at 6.7% (shocking, I know). There was virtually no criticism of the Chinese as the nations are watching closely while China commences its transition from an export-dominated economy to a more balanced growth model, where domestic consumption takes on increased importance. In contrast to the G-20 view on Japanese currency intervention, SNB President Thomas Jordan announced that the Swiss would increase its balance sheet through currency intervention “… to prevent an already ‘significantly overvalued’ franc from strengthening.”

(more…)

Notes From Underground: CNBC Santelli Exchange–Central Bankers’ Timing

April 17, 2016

Yra & Rick, April 15, 2016

Click on the image to watch me and Rick discuss central bank policy timing.

Notes From Underground: Prelude, Nothing To Hide (In the Spirit of Stairway to Heaven)

April 12, 2016

First, why was Janet Yellen summoned to the White House to meet with President Obama and Vice President Biden? The most ostensible reason is PROBABLY to get the Fed’s view on the economic impact of Trump and Bernie Sanders. Is the anger in the land a result of stagnant wages and is there any policy impact the White House could pursue without distorting the economy? Is fiscal stimulus a possible positive response and would the Fed be receptive without immediately raising rates? There are no certain answers to why Yellen went only conjecture. But one thing that caught my attention was the headline in today’s Financial Times: “Lew Urges IMF to Get Tough on Exchange Rate Manipulators.”

(more…)