THE CORNER | Negotiations over a Senate plan to reopen the U.S. government and extend the debt ceiling were placed on hold, then renewed on Tuesday evening. Rhetoric and accusations between republicans and democrats are intensifying, as the fateful day approaches. Will the U.S. default on its obligations?
Markets have started the week in a relatively directionless fashion amid slow-moving progress in Washington, Barclays analysts point out. That lack of decision could make the Fed delay the tapering until 2014, keeping downward pressure on the USD.
SHANGHAI | By Andy Xie via Caixin | A minority enraged at another expansion of the U.S. government will eventually cause a default, ending the dollar’s dominance and making gold dearer.
SAO PAULO | By Marcus Nunes | The fact that Ms Yellen is a dove today does not imply that she would tolerate rising inflation tomorrow. She will need to persuade the markets, and the public, of that in the coming weeks.
WASHINGTON | By Mike Konczal via The Next New Deal | There was a fantastic piece in The Atlantic back in 2000 about psychiatrists dealing with people who wanted to have their limbs cut off because it would make them feel more like themselves to be amputees. The doctors’ big dilemma was whether or not to treat “apotemnophilia” as a diagnosable mental illness. If they engaged with it as a mental illness that existed and was recognized by the medical community, they ran the risk of encouraging more patients to identify with it.
NEW YORK | By Ana Fuentes | The U.S. shutdown drama has set off alarm bells in Asia. Beijing and Tokyo, which together hold more than $2.4 trillion in American Treasuries, are putting pressure on its creditor to end its political rough house. If Washington is unable to honor its debt obligations it would damage the dollar’s status as the world’s reserve currency and bring chaos to global markets. America’s status in Asia seems also to be losing steam -and boosting China’s influence-.
[NOTE: This illustration from Liu Rui appeared on Oct 10 at the official Chinese newspaper Global Times English edition]
SAO PAULO | By Marcus Nunes | We know that over the next 10 years things only got worse and only got better when Volcker decided that to “live with inflation” was not a good deal. And things really improved when the Fed managed to keep the economy tracking a stable nominal trend level path.
THE CORNER | As expected, U.S. President Barack Obama appointed Janet Yellen as the Federal Reserve’s next leader, the first woman in the 100-year-history of the central bank. Among her first words: “More needs to be done to strengthen the recovery,” even though progress has been made, and: “too many Americans still cannot find a job and worry how they will pay their bills and provide for their families.” Were those hints about how she will deal with QE? Although she is considered a dove, some analysts believe that is a bit overstated. Anyway Obama called her “tough”, joking that it was not just because she was born in Brooklyn.
NEW YORK | By Ana Fuentes | If the Senate agrees and everything goes by the script, President Obama will pick Janet Yellen as the Federal Reserve’s next leader on Wednesday, the White House said. Ms. Yellen, 67, has been the Fed’s vice chairwoman since 2010 and would be the first woman to run the central bank. Among her first tasks is how quickly to wind down the U.S. expansionary monetary policy. Will she take even more aggressive measures to boost growth? If so, how will markets react?
SAO PAULO | By Marcus Nunes | ‘Uncertainty’ is getting more and more attention. John Taylor is a great supporter, so much so that a while back I did a post with the title “Taylor´s Uncertainty Principle”, and argued that what was really keeping the recovery back was the “on and off” decisions by the Fed.