Five Recent Provocative Posts

1. Here are some reflections on the ECB and Fed.  We try to understand the meaning of the low participation rate at the ECB's first TLTRO. In addition, look and on how the organizational structure of the Federal Reserve helps explain why the dot plot and the FOMC minutes are more hawkish than the FOMC statement. 

2.  There is a general argument, with various expressions, that essentially claim that we are experiencing a structural crisis in the international political economy.  The US support for the international open-economy has waned, and at the same time, the newly rising powers show no particular affinity for multilaterlism.  It seems to so obviously and intuitively true.  Here is a different view.  

 3.  Many people think about the Australian dollar as a commodity currency.  Yet, we know that the capital flows outstrip trade flows by a wide margin.  The price of the currency needed to clear the trade account may be different than the price to clear the capital account.  The Australian dollar has become a minor reserve currency. Kangaroo bonds, and Australian dollar-denominated Samurai bonds in Japan have been popular.  Look here and see how the decline in iron ore prices does not line up well with the Aussie's weakness until now. 

4.    The Bundesbank's Weidmann is the next likely ECB President.  If Draghi concludes that sovereign QE is necessary,  perhaps a deal with Germany could be worked out.  Italy's President would like to step down around the middle of 2015.  Draghi could arguable do more help for Europe by helping Italy enact structural reforms, and making it a truly competitive economy.  Draghi would step down early, and the ECB would implement QE under the direction of German's Weidmann.  Is this far-fetched?  See the argument in this note about the September ECB meeting.  

5.  Here is a table showing different bull and bear markets for the US Dollar Index and what happened to the S&P 500.  The results may surprise you.