This reference is to Janet Yellen’s testimony in her Senate confirmation hearing as the chairman-to-be cited the benefits of the Fed’s policy of über low rates for the average household. While many Senators challenged the negative effects of the Fed’s policy for savers–financial repression in the words of Carmen Reinhart–Yellen noted that people were not just savers but also consumers. Thus, Fed policy may harm the return on savings, but households may receive the benefit of lower home and auto loans and the Fed’s QE policy may have had the ripple effects of getting their college graduate a job. So financial repression was a very difficult outcome to measure against the broad economic outcomes.
Posts Tagged ‘Loonie’
First with a hat tip to RF for e-mailing the JOKE of the DAY:
Overheard in the Athens Airport:
Greek Immigration Official:Nationality?
Greek Immigration Official: Occupation?
Tourist: No. Just On Holiday
For many years the carry trade has been the mainstay of the RISK-ON profile. For some periods the ZERO INTEREST RATE POLICY of Japan forced money out of its system and in search of high-yield currencies in Australia, New Zealand, Brazil and other attractive venues. One of the best carry trades ever was LONG BRAZILIAN REAL/SHORT YEN as investors could fund the trade by borrowing YEN at very low rates and placing it in high yielding Brazilian bank accounts. As the Brazilian currency attained status as a commodity currency and, thus, a proxy for the China growth story, the BRAZILIAN REAL soared and the carry trade was a major win/win. When the U.S. FED went to an extreme low interest rate, the U.S. DOLLAR became a funding currency as the U.S. became a much less attractive place for global capital flows.
It was a day of dueling flapjawing as the European elite was out talking about everything that needs to be done to save the EURO and Sarkozy promising that there would not be any European defaults. Again to paraphrase Jimmy Breslin: Sarkozy is a little man in search of a balcony. The time for public orations is past and the call to action is immediate and real. Global investors don’t want any more rhetoric. Next Friday is considered the day of reckoning but if the EUROCRATS have any sense all the needed policy will have been put in place by the December 9th meeting so that the markets will have absorbed the “shock and awe” and there will be no disappointment.
(AN HOUR LATER THE MARKETS WILL BE HUNGRY FOR MORE RUMORS)
Another day and another round of rumors. As the financial markets awaited the EU LEADERS’ statement, the rumor of China agreeing to buy European SOVEREIGN DEBT and EFSF paper provided a boost to a falling EURO and a BID TO the U.S. EQUITY MARKETS. It seems that the market wants to BELIEVE that the Chinese are going to ride to the rescue of the EU and provide the backstop that the Germans are so reticent to bankroll.
(Another day older and deeper in debt.)
No surprises from the ECB as they held rates at 1.5% as Trichet ended his reign at the helm of European banking by paying homage to the FONZ: Never admit that you were wrong. The ECB did announce that it was extending its policy of providing liquidity to EUROZONE banks at extremely low rates for a period of 12 and 13 months in an effort to prevent any immediate bank run. Also, the ECB announced that it would buy up to 40 billion euro of covered bonds, but that should not be a big deal for covered bonds are the best collateral so many banks will probably not be running for funding posting the highest rated debt.
The unemployment report on Friday was much weaker than expected as zero net jobs were created. More disheartening was that average hourly earnings produced a negative number, which failed to confirm and support the earlier released personal consumption data. The equity markets went into risk-off mode as the economy went into the Labor Day weekend in a very fragile state.
Yesterday the screen watching and the trading became so exhaustive that my eyes glazed over and all of the quote boxes began melting together as if Salvador Dali was painting what I was analyzing and trading. Trading fatigue has definitely set in as the world moves from crisis to crisis and back again. The amount of news that gathers on my screen every hour reminds me of being back in graduate school, except that the tension now and the speed at which it arises overwhelms the mind. Not complaining as this is the way I have chosen to make my living.
Notes From Underground: Canada Casts Aside the Liberal Party as Ignatieff Rolled the Dice and Crapped OutMay 3, 2011
The election that never should have happened is in the books and the result proved that personal arrogance masquerading as public policy is a poison unless you live in a totalitarian dictatorship. Michael Ignatieff pursued a no-confidence in the hope of achieving his desire to become prime minister of Canada. His roll of the dice has cost the long esteemed LIBERAL PARTY its position in parliament and brought to the fore a more left-oriented NDP.
Elections are tomorrow in Canada. The polls are tight as the surprise is coming from the gains in the polls for the New Democratic Party (NDP), a party led by Jack Layton and is further left than the Liberal party that moved to start the NO-CONFIDENCE VOTE, which forced the early election. It seems that the TORIES will hold their numbers but the desire by Prime Minister Harper to become an outright majority party will not be realized. The political situation in Canada can become very confused as the LIBERALS/NDP may be able to forge a government if the most current polls are accurate. The markets have paid little attention to the polls as the Canadian Dollar closed the week and month out almost on its recent highs–another statement about the U.S. DOLLAR.