Friday, April 15, 2016

Why Was Federal Reserve Chair Janet Yellen
Summoned To The White House?
"The most ostensible reason is PROBABLY to get the Fed’s view on the economic impact of Trump and Bernie Sanders. Is the anger in the land a result of stagnant wages and is there any policy impact the White House could pursue without distorting the economy? Is fiscal stimulus a possible positive response and would the Fed be receptive without immediately raising rates? There are no certain answers to why Yellen went,.. only conjecture. But one thing that caught my attention was the headline in today’s Financial Times: 'Lew Urges IMF to Get Tough on Exchange Rate Manipulators.' The article said: 'The comments amount to a call for the IMF to be less diplomatic with its members and more active in naming those who engage in currency manipulation to gain trade advantages and other dubious economic policies.' Lew was adamant that the IMF had to '… intensify scrutiny of critical issues like exchange rates, current account imbalances and shortfalls in global aggregate demand.' The DOLLAR, of course, is the responsibility of the Treasury and not the FED but if the U.S. president was going to be more assertive about the need for correcting imbalances, Obama may have wanted to discuss the ramifications of any potential fallout from an aggressive position towards Germany and China–the two major sources of global imbalances–with Chair Yellen. The Japanese have already seen a 6% appreciation in the YEN since the G-20 meeting of Finance Ministers and Central Bankers in Shanghai at the end of February. The threat of the rise of Trump and Sanders may be worrying the White House regarding the success of the Trans Pacific Partnership (TPP) and they may be willing to muscle the G-20 to put up a strong front in an effort to save the major trade deal.This is something to watch as the G-20 meets in Washington, D.C. this week."
- Yra Harris
link here to the commentary

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