Around the Globe 05.13.2013

A Top Contender at the Fed Faces Test Over Easy Money –

Janet YellenHere are the reasons that the Janet Yellen will be nominated as next head of the Federal Reserve.

First, Dr. Yellen has been an outspoken advocate for money printing.  In fact, the current policy is probably a bit too hawkish for her.  If you think the printing presses are running at full speed now, wait until she takes over in the beginning of 2014.  While the current Fed chatter is revolving around an exit strategy, she will advocate raising the Fed’s monthly bond purchases once she assumes the chairmanship.  This position guarantees her the support of the TBTF banks.

Second, the current administration would love to nominate the first female Fed head.  This is the type of maneuver that will strengthen the Democrats’ support with female voters.  While she is not a close supporter of the Obama administration, she is not an enemy either and has played the political game rather well.  In fact, President Romney may have nominated her for the position, too.

Last, Jon Hilsenrath just wrote this puff piece extolling her virtues and keeping the criticism light, just the way chairmen like it.  This article will assist him in retaining his title as unofficial Fed spokesman.

Bank of Israel Unexpectedly Cuts Lending Rate – Bloomberg.

Shekel USD 05.13.2013

Central banks for one-quarter of the world’s GDP have cut rates in the last month since Japan announced the start of Printapalooza.  Since Draghi’s pledge and Bernanke’s QEternity announcement, the shekel has gradually strengthened save for a brief respite during the lead up to U.S. presidential elections.  The move surprised markets, and the shekel weakened as a result.  As long as inflation remains low, the world central banks will continue easy money policies.

Bond Sales to Fall 1st Time Since 2010 as U.S. Revenue Soars – Bloomberg.

Are Bond Vigilantes Taking On the Fed?.

US Budget Deficits

The Fed continues printing money to purchase $85bn in U.S. government and mortgage bonds ever month.  The steady improvement in the government’s finances over the past few years is shrinking the supply of eligible debt for the Fed’s program.  Within a few months, the Fed will be buying all of the Treasury’s new issues.  Furthermore, some of Kuroda’s newly printed yen will find a home in the U.S. treasury market.  As low as yields have gone, they still have further to fall.

Euro Recession Seen Longest in Single Currency Era – Bloomberg.

Eurozone GDP Performance 05.13.2013

How long can the Eurozone recession continue? As long as the continent uses the euro, it will be doomed to contraction.  The only large country exhibiting economic growth is Germany, and it is barely mustering a 1% rate.  With looming slowdowns in the U.S. and China, Germany may join France, Italy and Spain in recession as export orders fail to materialize.

Insight: Housing improvement may herald return of U.S. workforce mobility | Reuters.

Negative Equity

Lots of negative equity and few good jobs across the country will keep people from moving.  Those facts do not dissuade the authors from attempting to be the first to spot a trend.  If they are correct, they will puff their chests proudly and boast of their insight.  If they’re wrong, they’ll just keep writing articles until they are right.  That’s pretty good racket.

Is the Canadian Housing Market Falling Apart?.

Canada vs US Housing Prices

Canada did not figure out a magical formula for economic growth.  Rather, a natural resources boom fueled the economy resulting in a housing bubble that is putting the American version to shame.  Eventually, Canada will have its own version of the American housing crisis complete with its own recession, but it will have to wait until oil prices drop.

Weaker Yen Raises Hope and Fear –

Nikkei hits new 5-1/2-year high on weak yen; financials, exporters lead | Reuters.

YENUSD Exchange Rate to 05.13.13

The Yen briefly crested above 102 Monday morning in Tokyo.  While the cheap currency will continue to fuel stock markets throughout the world, it will not revive the Japanese economy.  All those factories moved out of Japan years ago.  70% of the cars for the U.S. market are made in the U.S.  Furthermore, while the yen may make Sony products cheaper, Sony has nothing to sell you.  All of the cool electronics are now made in China or South Korea, and they are designed in Silicon Valley.

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