German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.
The NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed granted MF Global primary dealer status a mere nine months before the latter went bankrupt?
As we noted in yesterday’s article, the Fed is already splintering on the benefits of QE. For the US to print such an ugly GDP number right after QE 3 and QE 4 were announced doesn’t bode well for more aggressive policy from the Fed. But then again, we are talking about the Fed here, so they could very easily claim that the bad GDP print is because QE 3 and QE 4 are not big enough.
The Fed is growing increasingly splintered as an organization. The media hasn’t really picked up on this issue yet. But once they do things could become quite problematic for the Fed... and the financial system.
How long will the other Central Banks tolerate this before they initiate a currency war? Both Germany and China have fired warning shots at the Fed. And we all know that just beneath the veneer of goodwill, tensions are building between the primary players of the global financial system.
Underneath the veneer of goodwill and the occasional necessary coordinated intervention, tensions are rising between Central Banks. When the US debases the US Dollar it pushes the Euro higher. This hurts German exports which in turn angers the Bundesbank.
Things are so corrupt in China, that as soon as the new Government stated it would crack down on corruption, a fire sale of luxury properties began as corrupt officials sought to dump their illegal holdings.
The great global rig of 2012 is ending. Central Banks used up their last remaining ammo trying to convince the world all was well. What ahppens when the markets call their bluff?
A little known fact about the Spanish crisis is that when the Spanish Government merges troubled banks, it typically swaps out depositors’ savings for shares in the new bank.
The investment world is convinced that China is about to engage in another massive round of stimulus. After all, this is what China did in 2008 when its economy slowed, so surely this is what they’ll do now that the economy is slowing again.
The fiscal cliff situation has made it clear that when it comes to issues such as cutting the deficit and debt, US politicians are totally clueless. Remember, Congress hasn't passed a budget in four years, which incidentally goes a long ways towards explaining why we're about to breach the debt ceiling again.
