2017/01/20 Commentary: ECB & Kool-Aid II
© 2017 ROHR International, Inc. All International rights reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
COMMENTARY: Friday, January 20, 2017
ECB & Kool-Aid II
As extensive as last Saturday’s Commentary: America’s Kool-Aid Crisis was, our add-on comments today are going to be very brief. And we waited until this morning to allow for all of the final US machinations prior to the inauguration of Donald Trump as the 45th President of the United States… even if they appear very much less than united at present. Yet first it is important to review another of the global points of contention: the very low Euro-zone interest rates and continued ECB monetary accommodation that is both designed and likely to keep them there. That is against a backdrop of German inflation rising, and that is also faster than the balance of the Euro-zone. The pressure on Germany’s notoriously successful savers due to the near zero risk-free yields (essentially suffering under negative returns in light of inflation) is continuing to put political pressure on the ECB. While the German politicians are only reflecting these concerns of their conservative constituents, Signore Draghi is right to point out the policy is still right.
He views the problem as a lack of effective explanation of the central bank policies to the German populace rather than any flaw in a policy that must work for a broader Euro-zone. It must not just be oriented toward one country’s economy. This is the downside for a more efficient Germany that is happy to take advantage of the tariff-free European Union. What likely concerns the German politicians and savers is the degree to which this policy is due to continue through 2017 as the balance of the Euro-zone still struggles to come out of its more sluggish growth. Yet those other countries are still dependent on ECB largesse, which Draghi rightfully points out has benefitted the German savers as well through better overall growth than would have otherwise been possible.
There were other interesting points in the press conference as well, yet mostly revisiting previous aspects of ECB policy. Those include the degree to which the recent asset purchase program ‘adjustment’ was NOT a ‘taper’ (i.e. like the Fed’s winding down of the overall program), that there will be plenty of securities to purchase now that shorter maturities are allowed, and that the Quantitative Easing will continue according to plan.
And the Trump inauguration machinations are decidedly more interesting…
Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.
NOTE: Given the likelihood the US economy will now get the structural reform that we (along with Mario Draghi and others) have been loudly complaining was not forthcoming since our dual It’s Lack of Reform, Stupid posts in January 2015, we need to adjust our view that a potential economic and equity market failure is coming. We previously referred you back to our December 8, 2015 post for our major Extended Perspective Commentary. That reviewed a broad array of factors to consider Will 2016 be 2007 Redux? While a continued regime of higher taxes and more regulation (i.e. under Clinton) might have fomented a continued weak or even weaker US economy, the tax and regulation changes proposed by a Trump administration that will likely be approved by the heavily Republican Congress now diminish the similar fears we had to what transpired in 2007-2008.
▪ Consistent with the views in last Saturday’s Commentary: America’s Kool-Aid Crisis, the one source of bonhomie and support for the traditional governmental turnover process in all of it is the overt friendliness of outgoing President Obama and his family and staff toward the Trump family and his staff. Other than that, there are a whole lot of Kool-Aid drinkers out there. And first among those are many US Congressmen and women.
However much many of them absolutely detested Barack Obama by the time of his January 8, 2013 second Inauguration speech, no Republican legislator boycotted that ceremony. At the present very cusp of the inauguration getting underway it appears that over 60 Democratic legislators are skipping the ceremony. While they may have issues with the man (as quite a few in his own party do), this is both disrespecting a process that was unique in the world at its inception and should be respected regardless of the individual in question.
It is futile, self-defeating, cowardly, encourages democracy’s opponents and only gives Donald Trump more standing with his supporters. While we will review each of those briefly below, the latter is glaringly apparent to even some prominent Liberals. On the degree to which it is self-defeating as well, a Tuesday morning editorial in the very liberal Los Angeles Times noted that “Trump’s opponents need to pick their battles better.” There was also a reader comment on that which noted, “The more they engage in the politics of protest and disrespect, the more Trump will be able to marginalize them.” Neither we nor any conservative commentator can likely add anything to that.
The Apolitical View
And once again we remind our readers that this does not represent a political tract so much as it is relating certain aspects to especially our international readers who may not be fully aware of the background America’s Kool-Aid Crisis. While quite a few of those boycotting are inspired by Trump’s recent spat with Representative John Lewis. To give him his due, Lewis is a Civil Rights movement hero. He was there when Martin Luther King, Jr. led marches that brought about the Voting Rights Act of 1965, was arrested more than a few times and even had his head cracked open by an Alabama state trooper on one occasion. He is to be respected and admired for that.
Yet when he recently said that he did not consider Donald Trump the legitimate President of the United States, he leaves himself open to criticism. And then it all became a test of who would stand with him and drink the ‘Trump is not legitimate’ Kool-Aid, even if it ultimately not supportive of the democratic process. Of note, Lewis also boycotted President George W. Bush’s inauguration.
Cowardice
And those who stand with him might well be considered brave for their principled stand. Even if we cannot know what is in a person’s heart, that is not necessarily so. It is very interesting that just about all of the Democratic legislators who have chosen to boycott the Trump inauguration are from ‘safe’ districts, and none are from districts that are at risk of going Republican in the 2018 bi-election. In other words, for the most part only those with little or no political risk have decided to drink the ‘boycott the inauguration’ Kool-Aid. You’ll pardon us if we don’t consider that any sort of bravery, and note once again that out of respect for the process no Republican refused to attend Barack Obama’s ceremony.
Respect for the Process
Regardless of their feelings toward the man, and Trump is uniquely disdained by many in both major political parties for various outrageous comments during the campaign, the United States originated and has maintained a unique process for peaceful change ever since its inception. And it must be allowed that the Civil War being the most bloody and brutal single nation family feud in history is a blemish on that record. Yet that was not folks who seemed to remain within the system while disparaging it at the same time… the Confederacy and Civil War were much more of an open schism.
It is striking by comparison what is currently transpiring in Africa, where new Gambian President Adams Barrow needed to be sworn in at the Gambian embassy in Dakar Senegal because current Gambian President Yahya Jammeh (former military officer who took power in a 1994 coup) refuses to step down. That is in spite of his clear defeat in the recent election. While it is encouraging that the head of the armed forces has now acknowledged Mr. Barrow as the official head of state, that it came to this at all is a reminder of the unique peaceful process that is a hallmark of real modern democracy.
As the Trump inauguration boycott gained momentum, it makes one wonder whether these folks realize how they impugn that excellent essential of peaceful transition. Their boycott is an encouragement for all of the opponents of democracy. It is especially poignant that these same folks are likely among those who condemn Russia for ostensibly assisting Donald Trump’s election victory (more below on why that is not necessarily so.) Yet their abstention from participation in the inauguration as part of the process which respects one of democracy's most important aspects is a victory for the antagonists of the democratic free election.
Moscow Misfire?
There has been so much antagonism and open vitriol from each side’s Kool-Aid Drinkers on the involvement of the Russians and Vladimir Putin himself in the US election process we decided to save this until all of the evidence (such as it may be) was in. That includes the now well-knows assessments of the US security services.
We are not necessarily expert on the evidence, nor are most other commentators who have not actually seen the raw indications on the digital footprints on which the US CIA, DIA and others have based their conclusions. Yet one thing strikes us as strange in their almost iron-clad conclusion not just that Russia was behind the Hillary Clinton and John Podesta email hacks, but also that the leaks were designed to assist Trump in defeating Clinton versus another very different view…
Why in the world would Vladimir Putin want to defeat Hillary Clinton? There is the indication that she was personally antagonistic toward Putin in the wake of the infamously inept US ‘reset’ effort. Possibly. Yet as a very adept (nobody can doubt that the man who went on to lead Russia is not adept) KGB officer, it strikes us as odd that Mr. Putin would at any point put his personal animus toward another individual ahead of Russia’s international goals. Its success has been better revenge than any personal victory.
While Trump was complementary toward Putin as a ‘leader’, it did not necessarily mean he was in agreement with anything in particular Russia had done. Trump made that amply clear, and only his most vocal critics continued to try and make the case that he was entranced by Putin. In fact, Barack Obama and Hillary Clinton have made Trump’s international job much harder by having been taken advantage of by Putin and Russia.
In fact, to put it in ‘street’ terms, Hillary Clinton and especially Barack Obama got mugged by Putin. Incredible as it may seem, a leader of a second-rate economy with deepening problems managed to out-finesse the outgoing US President on almost every front. Just as a reminder, Barack Obama was the one who invited Russia back into the Middle East due to his inability to act in Syria after Richard Nixon and Henry Kissinger had managed to force it out back in 1971. (On the ole cliché of someone spinning in their grave, we presume Nixon is redlining.)
Given that Putin had no problem outmaneuvering Clinton and Obama at every turn (most recently totally crushing the US-backed Syrian opposition in Aleppo and then convening a ‘peace conference’ which excluded the US), was the real goal of the email leaks the defeat of the manageable Clinton in deference to the ‘wild card’ Donald Trump?
We doubt it, and so do a select number of other well-informed observers who question the US security services’ ostensibly strong conclusion on that. Note the December 9, 2016 New York Times article (one of their less slanted pieces) that was partly authored by the highly astute Scott Shane. As noted further down after the coverage of the US security services’ opinions, “It is also far from clear that Russia’s original intent was to support Mr. Trump, and many intelligence officials…”
(Believe that) “Had Mrs. Clinton won, they believe, emails stolen from the Democratic committee and from senior members of her campaign could have been used to undercut her legitimacy.” Exactly as we also have inferred for a while. A leader as obviously corrupt in his involvement with so much of Russia’s commercial life and politically so ruthless would have benefitted from someone as similarly corrupt as Mrs. Clinton being the leader of the Free World. Imagine how the stories of the political machinations of the Democratic Party against her opponents, and especially the foreign and business contributions to the Clinton Global Initiative (CGI) could have been used to impugn her standing. As a final note, now that she has been defeated, almost all of the contributions to CGI from foreign and domestic entities have evaporated. Just saying.
The Bottom Line
This all only further expands the view and reinforces all of the most perniciously partisan aspects of America’s Kool-Aid Crisis explored in last Saturday’s post. The question now is whether Donald Trump can indeed reach out to all Americans and provide the solutions for the working class and especially the underclass that were so lacking in the Obama administration (in fact even more so divisive in a way that cost Hillary Clinton the election), who also ran as a man who could bring the country together. We shall see.
▪ We are deferring the full Evolutionary Trend View update into the Market Observations that will be updated after today’s US Close in preparation for any further immediate psychological influence from the finalization of Donald Trump ascending to the Presidency of the United States. Any changes remain much the same as in the note we emailed to all subscribers on Thursday.
Extended Trend Assessment is available below.
The post 2017/01/20 Commentary: ECB & Kool-Aid II appeared first on ROHR INTERNATIONAL'S BLOG ...EVOLVED CAPITAL MARKETS INSIGHTS.