It’s time for the dollar to pull back, but there's no hint anywhere

Outlook:

Today is going to be so quiet you can hear the church mice. Everyone in the US is going shopping, or cleaning their desk, or reading a novel. If we detect a note of weariness, it's because the world is fairly depressing these days. Pictures of wildfires and starving kangaroos vie with any news about Trump and horrible weather flooding half of the UK and the Pearl River in Mississippi about to drown most of the state, not to mention the Japanese economy seriously suffering on its last nerve about whether the coronavirus hits it shores.

Reuters reports "Knife-wielding robbers in Hong Kong stole 50 packs of toilet paper rolls from a supermarket delivery man, police said on Monday, in a sign of the times for a city worried sick by the coronavirus outbreak across the causeway in mainland China.Police caught two of the gang of three and recovered all of the toilet paper, worth about HK$1,700 (nearly $220). They were still hunting for a third thief. No other details were given. Panic in Hong Kong over the coronavirus has emptied supermarket shelves, with people stockpiling toilet paper, cleaning products and basic foodstuffs."

At least in Hong Kong and China, people know the house is on fire. We seem not to know that in the US, although there is plenty of evidence. Example: the Trump government says Nafta 2.0 will create 600,000 jobs. The independent Budget Office says it might add 0.25-0.35% to GDP and that's not anywhere close to over half a million jobs.

See the calendar—there's a fair amount of data this week but at a guess, existing home sales on Friday will be the important item. The odd fact about home sales is that lower mortgage rates and easy terms are not promoting sales, which are being held back in large part because the labor market is a whole lot less mobile—willing to move to where the jobs are—than the historic norm. And Baby Boomers are not willing to sell their too-big empty-next houses to the young whippersnappers at cheap prices, and the whippersnappers prefer to rent, anyway—houses are too much responsibility. Financial market participants neglect social and cultural changes at their peril.

We'd suggest it's time, cyclically speaking, for the dollar to pull back, but we have no hint anywhere that the market is thinking along those lines.

Tidbit: The Fed released a study last week on managing the yield curve, something sought back in the 1940's. Curious people want to know if this is a trial balloon for curve control, as the Bank of Japan has embraced. We reached out to a Fed official who says, cautiously, yes, this may well be policy direction the Fed might decide to choose.

Tidbit 2: The G20 is holding a preliminary "governors meeting" of finance ministers and central bank govs—in Riyadh, Saudi Arabia. Lagarde will be there but we have no information about Powell or Carney. This is in preparation for the big event in November. Saudi Arabia took the leadership of G20 for the first time on Dec 1 and the G20 main conference will be held November 21-22.

Tidbit 3: The euronews newsletter has a juicy report on money: China has quarantined used bank notes to contain coronavirus. The notes will be disinfected with X-rays or high temperatures before being stashed in a safe for 7-14 days. The process will be managed by each province and there will no exchange of banknotes among provinces until the emergency is over. Ahead of the Lunar New Year holiday, the PBOC had issued ¥4 billion in emergency cash (€530 million) in the Hubei province alone. Boy, there's nothing like a virus scare to promote electronic money. And how are they ever going to collect all the banknotes—people do hoard—and do they really have the capability to disinfect and safes big enough for all that cash? The idea is certainly right idea, but can it be applied fully?

Tidbit 4: The intrepid Gittler at BDSwiss has a wonderful piece on the weird reversal of UK trade data from deep deficit to a one-time surplus for the first time since 1998. Turns out it's one of those oddball data management things. Here's what happened: a bank changed its gold holding designation from "unallocated" to "allocated." This changed the nationality from UK to US so it's an "export," despite the gold sitting in the same vault. "Meanwhile, the Office of National Statistics is trying to develop a trade series that strips out gold to avoid such issues." We worked on gold lending deals at Citibank many moons ago without ever once considering it would affect trade data!

US Politics: Thursday is going to be a fun day. It's the day the judge is scheduled to sentence Roger Stone, the Trump advisor whose sentence the president and his attorney general want reduced, a blatant case of political inference in the justice system. Actually, Tuesday might be good, too, the judge having called for a phone conference ahead of the unsealing of the Stone request for a new trial.

Last evening, more than 1,100 former federal prosecutors and Justice Department officials called for Attorney General Barr to resign for his craven interference with the wheels of justice. They also denounced Trump, for what that's worth. The letter also calls on Justice Dept employees to be on watch for such abuses—political interference—and to report them to inspector general, the Office of Professional Responsibility, and Congress." And they should refuse to obey orders that violate the Constitution, and as a last resort, resign as well as to publicize the cases.

Last week Trump said he has the "absolute" legal right to issue orders to the Justice Dept. Well, maybe, but the Constitution, to which he swore an oath, calls for the president to "take care that the laws be faithfully executed." It doesn't say the laws can be jiggered for the benefit of his cronies. As the NYT puts it, "Since Mr. Trump has described that document as ‘like a foreign language,' we'll take this opportunity to inform him that this clause does not give him the authority to run the Justice Department like a goon squad at one of his failed casinos."

We're a little curious why interfering in a court case doesn't rise to "objection of justice," an impeachable offense. We know that if Trump wins the election, he will be impeached again, but might he be impeached a second time in his first term?

It's down to the courts. Trump has already made captives of the Senate and the top people at the Justice Dept. But what about those judges? Now it's all on one set of white lady shoulders—Judge Amy Berman Jackson. And then the Flynn case judge, Emmett Sullivan, a black guy. The irony is seen and enjoyed by all, if in silence, except the misogynistic and racist Trump.

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