10th April 2017
US Launches Missiles and the FED Assesses Balance Sheet
This week geopolitics comes to the fore, with a potentially momentous meeting between Donald Trump and China’s President Xi Jinping being overlaid with the US missile attack on Syria.
This was a response to Assad’s outrageous chemical attack earlier in the week. It’s difficult to know what the ramifications of this might be. Vladimir Putin is presumably regretting rigging the election but additionally China is also likely to be displeased. China has previously vetoed any UN intervention in Syria, although they may be willing look the other way as a concession to the new US administration however. The bigger issues of North Korea and Trade are already difficult enough.
Elsewhere there is an interesting conundrum developing at the US Federal Reserve as they ponder how to sell all the US government bonds they accumulated through QE. The policy implications are quite simple, sell the bonds back into the market, pushing the price down and thus raising yields assisting the Fed’s tightening cycle. However, the fall in bond prices will mean the Fed is technically going to be reporting billions of dollars of paper losses. This will be a gift to those looking to undermine the central banks independence.
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