The FOMC doves were out today. Governor Lael Brainard and Minneapolis Fed President Neel Kashkari weren’t enough to prevent a selloff across global equity markets. The weekend brought louder noises from North Korea as Kim Jong-un revealed that the country had the wherewithal to place a thermonuclear warhead on an ICBM. In an effort to enhance the rhetoric it appears that the state detonated a thermonuclear explosion as radiation levels were elevated and a minor tremor registered on seismographs in the North Asian region. The world is on edge as the United States, China, Russia and the United Nations decide how to deal with the “rogue” nation, an irrational actor in a rationally modeled world. Maybe economics is not the only dismal science?
Posts Tagged ‘North Korea’
Notes From Underground: When Fed DOVES Coo
September 5, 2017Notes From Underground: Missiles Over Hokkaido
August 29, 2017First of all, no matter what analysis we do it always pales in light of the human suffering that natural disasters bring upon people around the world. I am fortunate to be in a dry room, with warm clothes, food and, of course, an internet connection. It is often said that water is far worse than wind when it comes to the impact of hurricanes and typhoons. The human misery that deals with 40 inches of rain in a three-day period makes our prayers go out to all those affected by the devastation. Stop and take an inventory of the blessings we have on a daily basis. Houston, we can hear you.
Notes From Underground: Shelter From the Storm
August 9, 2017Not a word was spoke between us,there was little risk involved
Everything up to that point ,had been left unresolved
Try imagining a place where it’s always safe and warm
Come in, she said, I’ll give you shelter from the storm
When Bob Dylan released this song 42 years ago it was on the album Blood on the Tracks. When the FED embarked on its QE1, QE2 and QE3 it was to respond to the blood coursing through the streets of the U.S. financial system. The U.S. banking system was threatened with insolvency and the FED‘s monetary injections sheltered the banking system from a storm of forced systemic liquidation of assets. QE1 coupled with a questionable TARP program did prevent a systemic liquidation but QE2 and QE3 I always believed were superfluous but in the land of counterfactuals it is an impossible point to prove.
Notes From Underground: This Is a Vinny Barbarino Market (Or, I Am So Confused)
April 25, 2017The global reaction to the first round of the French presidential election was not confusing. Capital was sitting on the sidelines as the polls reflected a possibility of a second round Le Pen/Melenchon faceoff, which would have been devastating for global investors because fear of an EU break-up would have led to a massive repricing of risk premia. The avoidance of such an outcome led to a rush of capital into European markets, which provided support to Asia and the U.S. The German/French 10-year spread reacted as expected. The yield differential narrowed by a significant 20 basis points. The BUND yields rose against all European sovereign debt as Berlin’s haven status was rendered null and void for at least another two weeks. The GOLD and YEN also performed as expected as money rushed to purchase a risk on profile in a global zero interest environment. The EURO rallied by 2% as global capital flows into European stocks forced previous short euro positions to the sidelines. There’s nothing confusing about any of these outcomes. But let me throw some confusion onto some of the other geopolitical events making the front pages:
Notes From Underground: Treasury Takes a softer Approach to Global Monetary Affairs
April 16, 2017On Friday April 14 Treasury released a report that deemed no major trading a currency manipulator but five countries have met two of the three criteria and therefore will be closely monitored. This report is very well laid out but it is not incendiary as it seeks to persuade with a very soft touch. The three criteria of meeting of being a “manipulator” are:
1. A significant bilateral trade surplus with the U.S.of a least $20 billion;2. S current account surplus is at least 3% of a nations GDP; and3. Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly and total at least 2% of a nation’s GDP in a 12-month period.
Happy Thanksgiving FROM NOTES : WE ARE GRATEFUL FOR OUR READERS AND THEIR THOUGHTS
November 23, 2010The markets were riddled with all sorts of political news today as North Korea felt neglected and found a way to move center stage. The North Koreans like to have the spotlight shine on them when they need something from the world. I figure they must need food and heating oil for the winter so they upped the tension on the PENINSULA by lobbing some artillery shells into a South Korean military exercise. It is sad that SOUTH KOREANS had to die while Pyonyang played their typical games. A boycott of the North cannot work as the corrupt dictatorship just raises the temperature on hostilities until the world provides them with what they want and need. It is time to start bringing the U.S. troops home. Let the Chinese and Koreas resolve the problems that result from the arrested development of the North Koreans. Let the South Koreans be under the U.S. NUCLEAR UMBRELLA and start cutting back on U.S. global overreach. Oh by the way, don’t forget the bread and the heating oil so the North can get on with its goal of sucking the life out of its “citizens.”
Notes From Underground: in a follow up to this morning’s piece …
May 26, 2010Today’s Financial Times reported that Admiral Robert Willard, commander of the U.S. Pacific Fleet, issued warnings regarding China’s new assertiveness in the Asian region. In reference to China’s recent noise about claims to territorial rights in the Asian region, the Admiral said it was “generating increasing concern broadly across the region and require address.”