Blog
12/30/2020 - Reposted – The Roundtable Insight – Chris Barnard and Kai Weiss on Market Environmentalism
12/24/2020 - Louis-Vincent Gave: The 10 Important Changes of The Past Year
1. A dramatic shift in Western economies’ fiscal policies
2. The embrace of MMT (the magic money tree)
3. China forging its own policy path
4. A change in renminbi policy (China’s currency)
5. A stop to Ricardian growth (more on what that means below)
6. Taiwan emerging as the new geostrategic fault line
7. The capital war between the US and China, and the Hong Kong takeover
8. A rapidly shifting energy landscape
9. Moving from a north-south European divide to a west-east divide
10. Japan’s quiet bull market
12/22/2020 - Yra Harris: Never Have Been and Never Will Be
“The U.S. Treasury named the Swiss a MANIPULATOR on December 16. And it just so happened that the SNB happened to have a meeting the following morning. The Swiss response was terse: “The SNB is keeping the SNB policy rate and interest on sight deposits at the SNB at -0.75%. In light of the highly valued Swiss franc, the SNB remains willing to intervene more strongly in the foreign exchange market.”
The SNB is concerned about an overly desirable Swissie having a continued deflationary effect on the Swiss economy. This is the same RATIONALE used by all central banks as they keep interest rates lower for longer. The FED is “guilty” of using the same rationale to embark on a continued its ZIRP in an effort to meet its inflation target. Could the Treasury be more DISINGENUOUS? The only concern for markets is that this use of the LABEL will keep continued downward pressure on the DOLLAR as there are some central banks that fear being so labelled with all the negative effects, possible financial repercussions.
This sums up the negative aspects that fiat currencies find themselves. Bitcoin and precious metals, anyone?”
12/21/2020 - New Federal Reserve Mandate – Climate Change
“The public will expect that we do figure out what are the implications of climate change for financial stability, and that we do put policies in place,” Jerome H. Powell, the Fed chair, said this month at a Senate hearing. “The broad response to climate change on the part of society really needs to be set by elected representatives — that’s you. We see implications of climate change for the job that you’ve given us, and that’s what we’re working on.”
12/18/2020 - Yra Harris: Was Powell’s Press Conference Loaded for Bears?
“Powell went out of his way to note the FED wasn’t worried about TRANSIENT INFLATION in some prices because this is not like the 1970s where a 6% annual increase led to a 6% increase in all prices the following year, promoting a cycle of ever higher prices. What Powell didn’t explain was to WHY. Private sector unions have been decimated by the flow of money around the globe seeking cheap labor, which has DESTROYED private sector negotiating power.
The collapse of the Soviet Union and rise of China freed hundreds of millions of workers to join the world economy and compete for jobs. It seems that the FED is aware that the rise of India will bring even more workers thus giving credence to my view of NEHRU not NAIRU. The FED is bent of lower for longer.
The Fed also released an addendum statement about extending the DOLLAR SWAP LINES to the central banks in need of DOLLARS last March when the U.S. DOLLAR SOARED IN RESPONSE TO FEARS OF A GLOBAL DEPRESSION brought on by COVID. The DOLLAR is currently making multi-year lows so what is the need to extend this special program except to allow the world to know THE WINDOW IS OPEN. That’s truly a statement of LOWER FOR LONGER.
In the 24 hours post-meeting, the markets have responded with an equity market rally, a large appreciation of the precious metals commodity prices — now at the highest level since mid-February — and most importantly, a sizable selloff in the U.S. DOLLAR. Now, if the FED were to actually announce any ostensible YCC look for these outcomes to continue in a major momentum move. LOWER FOR LONGER to combat incipient global deflation doesn’t appear except in the bowels of the FOMC. Do you see what I see?”
12/17/2020 - Dr. Marc Faber on Commodities and other Investment Opportunities
12/16/2020 - Mohamed El-Erian on the 2021 Expectations for the Global Economy
12/15/2020 - Alejandro Tagliavini – Cuando el relato ortodoxo se desmiente
“La brecha cambiaria cae por una baja en la emisión monetaria total, que a su vez, se achica porque baja el gasto en términos reales. No obstante, el gasto no podrá ser reducido mucho más y la economía, promete seguir cayendo.”
12/14/2020 - Yra Harris: Going Around and Around
“Watch the yield curves as a barometer for investor sentiment on any outlook for a COVID stimulus pact ..
The ECB and the FED would do well to disappoint markets in an effort reinject some pain for investors. Capitalism demands it. In addition, central bank inaction would force governments to rely more on fiscal stimulus to generate activity, something all the central banks are promoting…
Listen for this type of policy action from the FOMC at this week’s meeting. By ensuring the FED will be there to BUY the longer duration assets “it could potentially avoid some of the tantrum dynamics that have led to premature steepening at the end of the yield curve in several jurisdictions.” This would be the final arrow in the quiver of financial repression. Brainard has been silent about YCC lately but this meeting may bring her work back to the fore as the FED is stuck at the zero lower bound while encumbered with an intransigent Congress.
The impact from active YCC would be a negative for the DOLLAR, positive for equities and many commodities. The FED will not be alone in YCC for the Aussies, Canadians, Brits Japanese — and to some extent the ECB — are already there. But the U.S. role as the world’s reserve currency is a variable unknown to the other central banks. These are global financial policies spinning like a dreidel.”
Yra Harris Blog Post – LINK HERE
12/10/2020 - William White: Will the Next Decade See the Return of Inflation?
“Should inflationary expectations suddenly rise, as they suddenly fell in the early 1980s, inflation might hit much higher levels. A vigorous central bank response might be impeded by a growing focus on resisting slower growth, as well as by lobbying from governments and others exposed to high debt levels.”
12/10/2020 - The Roundtable Insight – How the Austrian School of Economics can be used in Managing Organizations and Businesses
12/09/2020 - Reflections over the Past Year to Today – Yra Harris, David Rosenberg, Peter Boockvar, Chris Whalen
The post Covid era and associated responses by governments and central banks have presented challenges, stimulus and policy changes which have affected the financial markets:
December 2020:
December 2019:
October 2019:
12/08/2020 - Alejandro Tagliavini – Hasta dónde subirá Wall Street (Argentina sin piso)
“El Gobierno habló de salir adelante con “empresarios que inviertan y den trabajo”, pero sin ninguna solución en el horizonte. Las inversiones en argentina ya no rinden y se da en un contexto de incertidumbre por la pandemia. Los detalles del mercado financiero y sus movimientos.
12/07/2020 - Two Ways the Indebted Western World may Employ to Address Unsustainable Debt
- Inflation – over time this will reduce the burden of debt
- Perpetual Bonds – either issuing new bonds as perpetual bonds – the principal is never repaid, you only get the interest yield distribution .. or restructuring existing debt towards a change to perpetual bonds
In this article George Soros suggests using perpetual bonds in Europe:
12/07/2020 - Yra Harris: Return of the Bond Vigilantes?
“If the U.S. central bank remains RETICENT to move its QE further out in duration — targeting the LONG END of the curve — the BOND VIGILANTES will ride again by continuing to SELL THE LONGEST DURATION BECAUSE IT IS THERE THEY WON’T HAVE TO FIGHT THE FED. The LONG END WILL BE the area of least resistance. How high will the yield on the 30-YEAR BOND have to rise until the FED’S SOMA DESK BECOMES THE IMMOVABLE OBJECT? Mike Temple believes Yield Curve Control will be necessary in the first quarter of 2021. I see no reason to argue.”
12/06/2020 - Louis-Vincent Gave: “The Renminbi Will Gain Wider Use Globally”
“The Covid response in the U.S. has been a $12,800 increase in debt per capita; in the United Kingdom, it’s $7,000, and in Germany and France, $5,300. In China, it’s $1,200. The Western world responded with massive increases in budget deficits, which could constrain future policy options, while Asia, especially China, hasn’t.”
“I look at currencies like computer operating systems. Most Gavekal clients use Microsoft because everyone else uses it. The dollar is Microsoft. Go back to 2005-06, when Apple was trading at nine times earnings and viewed as making a niche product. In 2007, Apple said it would create a parallel system and went straight to the consumer, who took [Apple] not because it was cheaper but because it was easier. So the renminbi is Apple.”
12/04/2020 - Yra Harris: Closing In On Critical Levels
“In January 2015 the SWISS NATIONAL BANK pulled the PLUG on the EUR/CHF PEG, sending the Swiss franc soaring. This was predicted in several posts here at Notes From Underground weeks before the event resulting in major profits for those currency traders who followed our musings. The week of the SNB action resulted in a trading range of 1.0241 to 0.7360.
The following week saw the markets calm as the range was 0.8840-0.8502 with the weekly close at 0.8803. This week we have seen a dollar/Swiss low of 0.8891 so getting close to a major market action critical low. This has resulted in a huge move in the FRANC even as the SNB is printing large amounts of its currency in an effort to STEM its appreciation.
We refer to the SWISS as the greatest ALCHEMISTS of all time as it prints currency and uses it to buy baskets of global equities. Over the last five years, the SNB has become one of the major shareholders in stocks such as APPLE. The Swiss central bank is a hedge fund with its own printing press. Look for the SNB to get aggressive in an effort to halt the rise in the FRANC. Again, interesting times and the value of the Swiss franc is certainly a reflection of the madness.”
12/03/2020 - The Roundtable Insight – Charles Hugh Smith on Parallels of the Great Fire of Rome 64 AD to Today
12/03/2020 - Marillac Saint Vincent Family Services – see note from Yra Harris
from Yra Harris: “I ask my readers to contribute to a fund affiliated with the 50-year work of my friend Mike Sturch, which feeds the hungry and clothes the naked and every penny goes where intended, to the following address:
Marillac Saint Vincent Family Services
c/o Peter Beale-DelVecchio
6340 N. Magnolia Ave #1 S
Chicago, IL 60660
I hope that those who have benefited from NOTES FROM UNDERGROUND will be generous as the needs of the community increase everyday.”
12/01/2020 - The Roundtable Insight – Andrew Sheng and Yra Harris on the Global Economy, Financial Markets and Trade
