Luca Bindi, LL.M.

Kevin Warsh says he still bears the scars from “the darkest days” of the 2008 financial crisis.  Then a newly appointed Federal Reserve governor, Warsh acted as a vital conduit between the central bank and Wall Street as the financial system and the US economy confronted their gravest threat since the Great Depression.   “He brought a lot of real experience, he knew these people on Wall Street — he knew the difference between when they were arguing their book and when they were bringing us good information — and that was very, very valuable,” said Don Kohn, the former Fed vice-chair who had an office next door to Warsh.  It is a view echoed by Lloyd Blankfein, who led Goldman Sachs during the crisis. “Kevin was unflappable at chaotic moments,” he recalled, pointing to an even temperament and willingness to engage. Kevin Warsh, the Fed chair nominee forged by the 2008 financial crisis

Donald Trump’s threat to annex Greenland raised the once unthinkable prospect that the US could use its military to seize territory from Denmark — a Nato ally. Several European nations responded by dispatching troops to the island — ostensibly as part of an exercise to bolster Arctic security. Trump’s counter reaction was to accuse the European nations involved — which include France, Germany and the UK — of playing a “very dangerous game”.  The US president has said that all these countries will be hit with tariffs of 10 per cent at the beginning of February, rising to 25 per cent in June. So what happens now? A wide range of outcomes is conceivable. At the more benign end, it is possible that Trump’s tariff threats will disappear into the mist. The US president has made empty tariff threats before — including a promise to impose 100 per cent levies on films made outside America and a 200 per cent tariff on champagne. Just last week, he was threatening to impose a 25 per cent tar...

Mercantilism dominated European thinking on international economic policy in the 17th and 18th centuries. Mercantilists’ underlying belief was that international economic policy is primarily a tool of state power. Since power, unlike prosperity, is relative, mercantilists think of international economic engagement as “zero sum”: you win, I lose. Mercantilists also treasure domestic production and love trade surpluses and protection against imports. Adam Smith, wrote The Wealth of Nations in the 18th century as an argument in favour of free trade, against just such mercantilism.   Thus, one could imagine an effort (albeit not under Trump) to design a new multilateral economic treaty. In the process, one could even include something John Maynard Keynes wanted to achieve at Bretton Woods, namely, a way to combat huge structural trade surpluses. These, he believed, imposed ruinous constraints upon others. In the 1940s he could not persuade the US, then a huge surplus country. Today, ...

What changed on October 29? There was a Federal Reserve meeting that day, and the US central bank cut interest rates as expected, but signalled a cut at the next meeting was unlikely, which took some of the air out of rate-sensitive tech stocks’ sails. Third-quarter corporate earnings reports that were rolling in around that time were generally strong and anticipation of economic expansion in 2026 was taking hold — supporting economically sensitive cyclical value stocks.  Most importantly, though, October 29 was when investor enthusiasm for heavy investment in AI peaked and began to fall. Meta reported earnings that day, and announced a big increase in spending. Investors hated it and the stock tumbled. In the six weeks since, Nvidia, Microsoft, Oracle and Broadcom have fallen significantly. The loss of speculative appetite has extended beyond AI. High-flyers such as Coinbase and Robinhood have been hit hard too. This is a very different world than the one we were in just a few mon...

In other words: because central banks protected markets from the consequences of reckless government spending and correspondingly high leverage in the financial system, government spending and financial leverage have increased further. The system is now so precarious, and the consequences of a collapse so great, that the Fed has no choice but to intervene whenever the markets start to twitch. The moral hazard only gets worse; that’s the trap.  This view is most relevant in the context of overnight borrowing markets (as Unhedged discussed here and here). The “ample reserves” regime referred to above is the amount of financial system liquidity that allows the Fed to control overnight rates despite the upward pressure on those rates from the massive amount of leverage in the system. But it is sometimes hard to distinguish controlling short-term interest rates, which is monetary policy, from suppressing volatility by cramming cash into the system because otherwise the whole overleverag...

Donald Trump’s “unpredictable” policies have prompted bond giant Pimco to diversify away from US assets, as Wall Street frets over the long-term consequences of the president’s attacks on the Federal Reserve. “It’s important to appreciate that this is an administration that’s quite unpredictable,” Ivascyn said. “What are we doing about that? We’re diversifying . . . We do think we’re in a multiyear period of some diversification away from US assets.” “Although on the surface it may be tempting to influence the Fed to bring rates lower . . . aggressive cutting in the face of strong growth and elevated inflation will likely lead to higher long-term rates.”   Donald Trump’s ‘unpredictable’ policies to fuel multiyear shift from US, Pimco says

    Can Europe still afford its generous state pensions?

“Anything chips away at that is probably not a great idea,” Dimon told reporters on a call for JPMorgan Chase’s fourth-quarter results. “And in my view, it will have the reverse consequence. It will raise inflation expectations and probably increase rates over time.”   Jamie Dimon warns Trump administration’s attacks on Fed could boost inflation

China blamed the US for growing global trade imbalances as the world’s second-biggest economy reported a record full-year trade surplus of $1.2tn for 2025 despite President Donald Trump’s trade war.  The huge surplus will inflame global trading tensions, particularly with the EU and large developing countries that are already anxious their industries could be overwhelmed by Chinese imports.     China blames US for trade imbalances as surplus hits record $1.2tn

Sharp interest rate cuts when inflation is already running significantly above its 2 per cent target would fuel inflation, demoralise investors and ignite a rush out of dollar assets. Trump would presumably welcome a modestly weaker dollar, on the grounds that this would boost US exports. But the exchange-rate effect of this justice department initiative, if it succeeds, would be anything but modest. It would be a dollar crash. It is not a coincidence that every leading international and reserve currency of the past 800 years or so has been the currency of a political democracy or republic, where investors had a voice and where currency issuance was at least partially insulated from the whims of the executive. What has been true of the dollar was true of Britain and sterling in the 19th century, the Dutch Republic and the guilder in the 17th and 18th centuries, Venice and the ducat in the 16th century, and Florence and the florin in the 14th and 15th centuries. The consequen...

  History rhymes. As Rana Foroohar points out in her latest column, over the past week, we’ve seen many analogies drawn between the Monroe Doctrine and US President Donald Trump’s new imperialism. But she says what’s happening in Venezuela today, and what may yet happen in Greenland, or in Ukraine or Taiwan (where Russia and China could well take counter-action as a response to what the White House is doing), isn’t only about the protection of America’s backyard, as in the Monroe Doctrine. “It is about a messier and much more global conflict. For this reason, the historical comparison I’ve been thinking about lately is the “great game” between Russia and Britain in the 19th century,” Rana writes.    

    Have we reached a tipping point on public debt?  

This coincidence must alert readers that a tempest is brewing on subjects noted: lurking inflation, increasing debt, suppressed interest rates and the shifting of hegemonic power.  There are only two important questions in investing that also apply to subjects impacting the future stability of the world — tell me why and tell me when.  Plender gives us the “why”, the ever-increasing “intolerable burden” of government debt and suppressed rates leveraging the global financial system. He gives us the tipping point.  What we await is “the when”, as in when do we know we have “tipped”.  Paul Hackett Madison,  NJ, US    Letter: Why the geopolitics of international currency choice matters

  Don’t be fooled — everything has changed for the global economy — Gita Gopinath Venezuela and the trouble with the Donroe doctrine — Gideon Rachman Threatening to strip someone of their citizenship is no joke — Stephen Bush Trump really wants Greenland — Edward Luce Economists are facing a recession — Soumaya Keynes

Darren Woods, chief executive of the biggest US oil major, struck a sceptical tone at a televised White House gathering of energy bosses on Friday — even as some other companies expressed optimism about the potential to tap the world’s biggest oil reserves.   “If we look at the legal and commercial constructs, frameworks in place today in Venezuela, today it’s uninvestable,” Woods told Trump in a meeting that included many of America’s most prominent energy executives and some of the president’s top lieutenants.   “Significant changes have to be made to those commercial frameworks, the legal system, there has to be durable investment protections, and there has to be change to the hydrocarbon laws in the country.”   Woods said the company’s assets in Venezuela had been seized twice since Exxon first entered the country in the 1940s.   US oil giant ExxonMobil tells Donald Trump Venezuela is ‘uninvestable’      

. . . each bank will be asked to identify the most relevant geopolitical risk events that could lead to at least a 300-basis point depletion in its Common Equity Tier 1 (CET1) capital. In addition to reporting on how the geopolitical risk scenario would affect their solvency positions, banks will also be asked to provide information about how it may affect their liquidity and funding conditions.   The ECB gets speculative  

ECB to assess 110 directly supervised banks on the management of geopolitical risk Banks to define scenario that would lead to pre-determined outcome of at least 300 basis point depletion in CET1 Aggregate results to be communicated in summer 2026 ECB to assess banks’ stress testing capabilities to capture geopolitical risk