Tuesday, January 28, 2020

Some News Notes as we Move into 2020

Right now there are just a few news items to follow as best I can tell. As we have stated repeatedly, it is obvious that the political battle in the US will pretty much suck all the oxygen out of the room this year at least until the elections are over in November. Who knows if even that will end the seemingly never ending intense political warfare of a nation that is clearly deeply divided on many issues including the economic ones we try to follow here. Below I am noting a few things to continue to follow since it is possible they could impact markets and even systemic stability.

1- Continued All Out Political Warfare 

It is now completely clear that a deeply politically divided nation will not find many issues to agree on and the old days of meeting somewhere in the middle seem to be gone. This environment creates a situation where no matter who wins elections, the other side wages never ending war to prevent anything from being done if possible. While this has led to gridlock for some time, if either side gains enough power to move an agenda, the system could be disrupted since the opposing policy proposals tend to be radically different from each other. It's just something to continue to monitor.

Added note 1-31-2020: Although it appears the US Senate will soon vote for acquittal in the current impeachment trial, we can expect that this will not change the political atmosphere in any significant way. Several Democrats have stated they will just continue to restart new impeachment proceedings so long as President Trump is in office. This suggests the all out political warfare likely will not decrease in intensity. Beyond that, we can now expect that in the future any elected President who faces a House of Representatives controlled by the opposing political party will probably be impeached at some point in their term. In our view here, all this is because the general public is completely divided and not likely to unite any time soon. So, no matter who wins any particular election, the opposition (or "the resistance" if you prefer that term) will now use any means available to them to try to block the agenda of their political opponents. We can't change the reality of how the world is and the enormous lust for power that obviously exists. So we need to correctly understand it in order to make the best personal financial decisions as these events can and do impact markets.

2- Dr. Judy Shelton nomination to the Federal Reserve

Dr. Shelton is widely viewed as someone who has "unconventional" views and who might challenge what some view as "groupthink" at the Fed. It is really unknown whether this would be a major factor impacting the system or not, but we should keep an eye on things at the Fed when she joins the Board of Governors.

3- Ongoing Repo Market Operations by the Fed

We have followed this since last year and it seems to still be a potentially significant issue to keep an eye on. The Fed says these unusual market operations are not an indication of any serious problems in the system. Skeptics and critics are raising many questions about that. All we can do is just monitor events and see what happens. But obviously, if there is some kind of major systemic problem inside the system that the Fed prefers not to disclose, the potential to disrupt the stability of the system would exist. Certainly it should be watched carefully.

4- What Happens with Project Libra - Facebook payment system

This project is meeting a lot of resistance from politicians and other interested parties as we expected here. We will do an update on this with some recent news on this Facebook project.

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