As of 3:24 pm AST, foreign exchange rate movement in a wait and see pandemic relief environment of the US Senate

PairsFederal Reserve as of 23 December 2020OANDA as of 23 December 2020OANDA as of 29 December 2020
Source: OANDA

Legal/Political Events Impacting Foreign Exchange

US Senate ponder Covid relief bill during rare holiday time in Washington

As of this writing, the U.S. Senate is in session debating the COVID-19 pandemic relief bill. One core issue: whether $600 in taxpayer aid should be increased to $2,000. Speaking on the Senate floor, Senator Dick Durbin, Democrat of Illinois, reiterated that the additional aid is needed immediately and that these funds won’t be put away for a rainy day but will be injected immediately into jump starting the economy. As of 3:30 pm AST, the Senate was still making its quorum call and waiting for additional senators to speak. President Donald Trump threw a wrench into the relief discussions when he expressed support for $2,000 per eligible taxpayer.

Two Republicans in the Senate, brought additional attention to themselves by joining the President in support of increasing monetary support. Senator Kelly Loeffler and Senator David Perdue, both of Georgia, are facing tough run-off elections scheduled for 5 January 2021.

Election night saw increase in internet usage

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by IIA

NOVEMBER 11, 2020

On election night, intense interest throughout the country in the results of the 2020 election drove a significant increase in broadband usage. During prime time on November 3 (5pm to 8pm CT), broadband management and analytics company OpenVault estimated a 7% increase in broadband usage compared to previous Tuesdays. Usage was up even more for cord cutters, where OpenVault reported an increase of 16.4% from previous weeks.

Are currency traders willing to pay more for the US dollar in face of US election? ….

Capital abhors a vacuum and even with the U.S. general election three days away, capital will try to cut through the campaign noise and seek out a return. From a political and legal event perspective, traders should assess the strength of legal challenges to voting, especially challenges raised by the Republican Party.

Republicans and Democrats have been building their legal teams for over a year and both will be on the lookout for voting irregularities including evidence of voter suppression or voter fraud. Republicans are expected to challenge authenticity of mail-in ballots and the deadlines for when these ballots are expected to be received. Traders should be particularly mindful of the intensity of Republican challenges given that incumbent president Donald J. Trump is running behind Democratic nominee Joseph R. Biden in national polls.

Real Clear Politics has Mr Biden polling at 51.3% versus Mr Trumps 43.5% during the period 21 October to 30 October 2020. PredictIt is pricing a .65 probability of a Democratic takeover of the White House versus a probability of .40 that the Republican Party maintains control of the Oval Office.

But the foreign exchange markets appear to see the value of the US dollar priced in various currencies increasing as we get closer to the election.

Country/Currency24 October25 October26 October27 October28 October29 October30 October31 October
Mexico (MXN)20.921020.840820.847620.966720.927121.169421.310121.2962
Canada (CAD)1.313611.311911.312201.318291.317761.325551.332211.33172
Japan (Yen)104.72104.66104.67104.87104.61104.30104.44104.49
China (Yuan)6.677336.676806.676806.699166.705156.716726.711576.68746
Eastern Caribbean Dollar2.702.702.702.702.702.702.702.70
Brazil (BRL)5.601805.618405.618185.621155.644745.722425.758215.76506
Price of US Dollar in selected exchange rates 24 October to 31 October 2020

With the exception of Japan and the Eastern Caribbean, the prices in foreign currency offered for a US Dollar have been inching up over the last week. Traders in the above nations reflect a number of major US trading partners and the increase in the amount traders in these countries are willing to offer a seller of the US dollar tells me that at a minimum, they have positive expectation in the potential for growth in the US and that public policies offered by Mr Biden might not deter expected growth or value of the dollar.

Again, traders should be on the lookout for any legal, legislative, or regulatory actions that thwart the ability of Mr Biden to garner enough votes to win the Electoral College.

Additional source:

High points from Federal Reserve vice-chair Richard Clarida show how Biden will play economy in 2023 …

News and Analysis

Yesterday, vice-chairman of the Board of Governors of the Federal Reserve, Richard Clarida, reiterated the Federal Reserve’s call for continued stimulus spending to reboot an American economy severely slowed down by a government-ordered commercial lockdown resulting from efforts to stem the virality of Covid-19. In describing combined fiscal and monetary efforts to reboot the economy, Mr Clarida shared the following:

“Although spending on many services continues to lag, the rebound in the GDP data has been broad based across indicators of goods consumption, housing, and investment. These components of aggregate demand have benefited from robust fiscal support—including the Paycheck Protection Program and expanded unemployment benefits—as well as low interest rates and efforts by the Federal Reserve to sustain the flow of credit to households and firms. In the labor market, about half of the 22 million jobs that were lost in the spring have been restored, and the unemployment rate has fallen since April by nearly 7 percentage points to 7.9 percent as of September.”

Mr Clarida challenged naysayers who had argued that interest rate cuts, asset purchases, and loan programs would not facilitate growth in gross domestic product by reminding them that the unemployment rate has fallen almost seven percentage points since April and that the labor market has replaced almost half of the 22 million jobs lost last spring. But even at this rate of progress, Mr Clarida made it clear that it may take another year before the American economy gets back to its previous 2019 peak.

The Federal Reserve’s decision to modify its inflation target policy, where inflation may be allowed to run moderately over two percent and federal funds rates remaining relatively unchanged (0 to .25%) over the next three years, is expected to result in an unemployment rate of four percent and inflation returning to two percent.

Assuming the polls hold and Joe Biden is able to take over the Oval Office on 20 January 2021, a first glance expectation is that Mr Biden will pursue spending bills that, in addition to increases in transfer payments, will increase pools of public capital available for access by private firms or private-public partnerships. Mr Biden’s “Build Back Better” initiative appears, in theory, to call for creating these opportunities.

One potential area for increasing pools of public capital is the financing of energy infrastructure projects. According to language from his campaign platform:

“Biden will immediately invest in engines of sustainable job creation – new industries and re-invigorated regional economies spurred by innovation from our national labs and universities; commercialized into new and better products that can be manufactured and built by American workers; and put together using feedstocks, materials, and parts supplied by small businesses, family farms, and job creators all across our country.”

Mr Biden may not have much re-creating the wheel to do. The United States Department of Energy has a number of financing programs in place that can be used to finance these endeavors. For example, the federal government offers what it calls a “Small Business Toolbox” that helps small businesses, no matter their experience level with government contracting, navigate the requirements for financing.

Mr Biden will have to finance these procurement programs so that these programs can turn around and finance the private companies ready to carry out the federal government’s energy infrastructure agenda. If the Federal Reserve remains on its modified inflation glide path, Mr Biden will have three fiscal years of low interest rates to borrow the funds necessary for his energy infrastructure plans and create the collateral employment of labor that may come along with it.

Mr Biden is likely praying that the “blue wave” narrative, where the Democratic Party sweeps the White House and the Congress, comes to fruition in November. With both chambers of Congress under Democratic control, there may be greater ease at delivering the necessary government financing for his initiatives. If he learned anything from the Obama administration’s first term in office, it is the need to move fast during his first two years to secure the necessary spending bills.

If Mr Biden does not get the “blue wave” then he will have to apply his ‘across the aisle” skills to get Republican senators to buy into his infrastructure plan.

Meanwhile, America is going through a structural employment shift, one that many wage earners will not recover from. Shrinking tax bases due to lower labor force participation and increased tax bills for those who are still working but making less money doth not make a certain second term.

Joe Biden could take his “Stay in the Bunker” campaign style to the White House with a little help from Democratic senate candidates.

Joe Biden may not have to worry about “working across the aisle” with Republicans in order to push through his “Build Back Better” plan for the American economy. PredictIt is pricing the probability of the Democratic Party winning both the U.S. Senate and the U.S. House at $.62. A Biden win is being priced at $.65.

Mr Biden has been chided by President Trump for his “stay in the bunker” approach to campaigning. Since winning the Democratic Party nomination, Mr Biden has been opting for relatively fewer public campaign appearances when compared to those of Mr Trump. With three weeks left until the election, Mr Biden’s public campaign focus has been on larger battleground states such as Pennsylvania and Ohio. His public appearances are known for social distancing and answering few questions.

A sweep of the Oval Office and the Congress would be necessary just to push trillions of dollars in economic recovery including his $150 billion opportunity package for minority-owned small businesses. But first he will need help from Democrats challenging incumbent Republican senators for their seats.

By my estimation, six Republican senators are in danger of losing their seats with another four threading water. Based on polling data from FiveThirtyEight, the six senators likely to lose their seats are:

Susan Collins (Maine);

Joni Ernst (Iowa);

Cory Gardner (Colorado);

David Purdue (Georgia);

Kelly Loefler (Georgia); and

Thom Tillis (North Carolina).

With Mr Trump either tied in Iowa or trailing in Colorado and North Carolina, neither Ms Ernst, Mr Gardner, or Mr Tillis have much of a Trump coattail to hang on to. Ms Collins’ tendency to appear ready to buck the President may cost her the ability to ride the President’s coattails as woven by his eight point lead over Joe Biden in Maine.

Lindsey Graham (South Carolina); Martha McSally (Arizona); Steve Daines (Montana); and James Risch (Idaho), due to Trump leads in their states, may have a chance to pull a rabbit out of their respective hats, but time is ticking.

What should not be overlooked is the level of support Mr Biden should expect from the six Democratic candidates in a position to unseat the above Republican candidates. Even if the Democrats sweep the Oval Office and the Congress, the White House will have to persuade key senators to get on board with trillions in spending and new bond issuances likely at higher rates of interest.

I expect, at least in the early part of her Senate tenure, that Sara Gideon, the Democratic senate challenger in Maine, will be an ally to Mr Biden. Ms Gideon endorsed Mr Biden during the primaries. In return, Mr Biden extended his support to Ms Gideon in the form of an endorsement, while Dr Jill Biden, wife of the nominee, and Senator Elizabeth Warren, Democrat of Massachusetts, expressed their support for Ms Gideon during campaign stops in Maine.

Theresa Greenfield, the Democratic senate challenger in Iowa, seems to be holding her cards close to her chest. She has not endorsed Mr Biden although she is reportedly open to parts of his vision on American labor policy. My review has also found no campaign trips to Iowa on the part of Mr Biden or his surrogates in support of Ms Greenfield. Should Ms Greenfield win her senate race against Ms Ernst without Mr Biden’s support, she may have sufficient political capital to maintain her independence of the White House.

John Hickenlooper, the Democratic senate candidate trying to unseat Cory Gardner in Colorado, may have established his independence from Joe Biden early as well. Although Mr Hickenlooper expressed his support for Mr Biden during the former vice-president’s primary campaign, Mr Hickenlooper also expressed his support for Tara Reade, a woman alleging that Mr Biden had sexually assaulted her. My review has found no expression of support by the Biden campaign for Mr Hickenlooper. Given Mr Hickenlooper’s ability to raise campaign finances on his own and his ten point lead in the polls without Mr Biden’s assistance, Mr Hickenlooper may, should he and Mr Biden win their respective races, be able to express a lot of political independence in the Senate.

Raphael Warnock is challenging Kelly Loeffler for one of Georgia’s seats in the U.S. Senate. Georgia is a toss-up state and Mr Biden has not come out and endorsed the former pastor. Mr Warnock has racked up support from various political action committees and received endorsements from at least 25 Democratic senators, U.S. Representative James Clyburn, Democrat of South Carolina, and Stacey Abrams, a former Georgia Senate minority leader and gubernatorial candidate. Mr Warnock is running ahead of Ms Loeffler and looks like a shoe-in for a run-off with the other Republican challenger, U.S. Representative Doug Collins. All three are in a special race to fill the unexpired term and fill the seat in the 117th Congress of retired U.S. Senator Johnny Isakson.

Jon Ossoff is challenging for Georgia’s other U.S. Senate seat currently held by David Perdue. Our review also found no expressed support or endorsement of Ossoff on the part of the Biden campaign. The Ossoff-Perdue face-off like the Trump-Biden face-off is a toss-up. If Ossoff holds his slim lead over Perdue, it will not be due to any help from the Biden campaign.

Finally, a sex scandal involving the Democratic candidate for North Carolina’s U.S. Senate seat, Cal Cunningham and a positive Covid-19 test for incumbent Republican senator Tom Tillis might not completely evaporate Mr Cunningham’s lead over Mr Tillis. Mr Biden has not endorsed Mr Cunningham. Like the other candidates discussed, if Mr Cunningham holds on to his lead, he would have done so without the help of Mr Biden and could exercise independence from the White House while in the Senate.

While a Democratic sweep is increasingly likely, though not a surety, Mr Biden’s approach to bunker campaigning will not carry over to governing. A president’s most important power is his ability to persuade and with the possibility of six senators, where five of them win tight races, optimizing their independence, Democratic voters should expect the occasional bumpy ride as Mr Biden tries to convince his own party to pass his initiatives.

What Biden could learn from the movie Wall Street

I suspect that for many fans of the movie, Wall Street (1987), Gordon Gekko’s statement that “Greed, for the lack of a better word, is good. Greed is right. Greed works.” is as anticipated as Sigourney Weaver’s line in Aliens (1986) (“Get away from her you bitch!”) or Jack Nicholson’s “You can’t handle the truth!” line from a Few Good Men (1992). While lacking the build-up of the lines uttered by Weaver and Nicholson, Michael Douglas’ delivery of the line had a come out of nowhere effect that gripped me with its crassness and truth.  Arguably the “greed is good” line would be great fodder for populists such as U.S. Senator Elizabeth Warren, Democrat of Massachusetts or her fellow adopted New Englander and senator Bernie Sanders, the Democratic Socialist of Vermont.

It was another line, however, more metaphysical in its tone and cerebral that caught my attention: “Money is transferred from one perception to another.” The line took me out of the more solid quantitative world of stock prices, mergers, and profit and placed me in the abstract.  While the Gekko character, played very well by Mr Douglas, was a realist, he took me behind the veneer of hard currency and added more insight to my developing view on what money and banking really is. 

Money is more than a unit of account, a medium of exchange, or a mechanism for storing wealth.  Money serves as a proxy of an individual’s captured energy.  The more energy an individual generates, whether via labor or thought, and can be extracted by an employer or tax collector, the greater the value of the individual and the compensation the individual is owed in the market. 

Banking is not just about collecting deposits and making loans.  Banking is an information search process.  Banking facilitates the transfer of captured energy from one perception of economic reality to another perception of economic reality.  The information that the “banker” searches for is information that can increase the value of his money; increasing his money’s ability to be transferred to multiple perceived realities.  The more realties that money can take you to, the greater your wealth.  And the greater the amount of information, the optimal your returns on money.  As Gekko shared with his protégé Bud Fox, “The most valuable commodity I know of is information.”

The banker’s search for information is what built America.  He was aided by merchants and traders who sought out new markets and in exchange for the banker’s financing shared with the banker information about the opportunities that could increase the value of the banker’s coin.  This is where Mr Biden’s narrative is wrong about who built America.  Mr Biden, likely as part of his campaign to sway Mr Sanders, Mrs Warren, and their populist supporters, states that America was built by an American middle class versus Wall Street bankers and hedge fund managers.  History does not support his assertion.  The middle class is, historically, a recent creation, taking root during post World War II.  America was the result of the metaphysical where monarchs, merchant traders, and bankers closed their eyes and envisioned how best to exploit a vast land.  To paraphrase Gordon Gekko, these men created nothing; they owned. 

I doubt if Mr Biden takes this metaphysical view toward the American political economy.  Even if he did, he would not share these thoughts with voters who would have to process the thought that their contributions to America’s economic growth was more that of tool than conceiver.  Given Mr Biden’s close relationship with the banking industry, however, he should have a pretty good grasp on the reality of the banker’s role in the capitalistic system: that his greed for life and ability to move money from perception to perception, much like Gordon Gekko’s ability, is responsible for America’s growth.    

Joe Biden can’t do anything about racism. He has to know what it is first.

With all the attempts by the far left and the far right to resurrect the year 1968, racism is again at the forefront of the national political discussion. Joe Biden is campaigning in part on a platform asserting that he rather than Donald Trump is capable of stitching up America’s social fabric. Can Joe Biden do anything about racism in America? Having offered nothing of policy substance on the issue to the liking of American Blacks after 47 years in national politics, it is unlikely that he can. Beyond his apparently ineffective Washington tenure, I offer three reasons why Mr Biden can’t do anything about racism.

First, Mr Biden cannot even define racism. Mr Biden has not provided a clear, cogent definition of what racism is. Mr Biden hopes that people view racism the way U.S. Supreme Court Justice Potter Stewart described pornography: “I know it when I see it.” Unfortunately, the definition of racism has gone from the use of political, legal, and economic systems to keep a certain group oppressed due primarily to their phenotype and lineage to an individual not liking another individual because of bias against their looks, language, and culture.

It is easier in the 21st century to call any individual a racist. This ease of identity attack, where racism has been dumbed down to name calling on steroids, makes it easier for candidates to push the emotional button and extract the black vote. Mr Biden has shown that he will not hesitate to push the button to get blacks in line.

Second, Mr Biden doesn’t understand the philosophy of America’s creation. Mr Biden is listening to his vote aggregators who have been using the narrative that America was built on slavery and racism. This narrative is false. America was built on a world view of manifest destiny, a world view that was refined over a four century period of western civilization’s expansion. Western man’s pursuit of global economic and political domination used non-western European human resources i.e. enslaved Africans as tools, but his reason for expanding was to spread his value system, ensuring that his philosophy flowed through the world via trade in goods, services, and ideology.

Given this world view, the only role the African played was that of chattel property. The African was so different that the western European could see no other use for him but to use his physicality as a tool for helping bring the vision into reality. Again, America was built on a philosophy. Slavery was just a tool.

Third, blacks were not and will never be fully incorporated as Americans because they contribute no value to the western European world view. Mr Biden hopes to govern over a social-political-economic construct that only incorporates groups that, at a minimum, have a lineage that traces its history to Europe; to the characteristics that make the lineage European. The lineage of blacks do not include original European characteristics. Any European characteristics exhibited by blacks today are merely imitation.

When the American black was freed from chattel slavery, he lost any value that the American social-political-economic system sought to extract. No executive action on Mr Biden’s part or legislation proposed by Mr Biden and sponsored by a fellow Democrat in the Congress can legislate a fabricated value that blacks can claim to then provide. In other words, legislation cannot create “whiteness” in blacks.

The closest blacks come to wrapping themselves in whiteness is through consumerism. I won’t expound here, but American blacks have overextended themselves on credit merely to keep up with white America much to the economic detriment of blacks.

So, how will Mr Biden use the narrative of racism to buy the American black vote? Fortunately for Mr Biden, blacks have not done the critical thinking necessary to deconstruct the definition of racism. The current state of mind of blacks finds it difficult to fathom their status as black in America as merely the result of a trade transaction that merged distinct African tribes into an economic asset. In telecommunications we call this multiplexing, where multiple signals are combined onto a single frame, making communications more efficient to manage.

It is not in Mr Biden’s interest to share this reality about being black in America. As long as Mr Biden proposes legislative packages that address basic needs i.e. healthcare, food stamps, affordable housing, etc., or, in the case of American black elites, more affirmative action set aside programs and government hiring, Mr Biden won’t have to do much.

Otherwise, for those hoping for a solution to the problem of racism, they are in for another multi-generational wait.

It’s time for the silly season of campaigning …

Article II, Section I of the US Constitution as amended by Amendment XII of the Constitution describes the design and function of the Electoral College. With the exception of Maine and Nebraska, the popular vote in each state determines the number of electors awarded to a presidential candidate. Given all the hub bub over election interference and voter fraud, why not get rid of the Electoral College and consequently the popular vote and return the selection of president and vice-president to the Senate and the House of Representatives where the ticket winning the majority of the quorum becomes the next president and vice-president? Americans feigning concern about their non-participation in the presidential election would find solace in voting out any senator or congressman who voted for the ticket not of their liking.

There are advantages to this approach. First, the transparency of the vote eliminates charges of voter fraud. A public vote by each senator and congressman puts him or her on the hook. Second, the ‘silly season” of election campaigning is reduced since candidates will not need to invest much time or money trying to persuade 535 senators and congressmen versus 150 million potential voters.Third, the citizen has to spend some time learning about their incumbent congressmen’s philosophy and policy stances as their views will help determine who they select for president and vice-president. Congressmen and senators will have to be transparent with citizens as their seats become increasingly vulnerable with their added responsibility of voting for president and vice-president.

Citizens will see an increase in their electoral power because every two years depending on who their congressmen and senators choose for president and vice-president citizens are in a position to clean out incumbents.

Question is, are citizens prepared for that kind of increase in electoral power or would they rather the comedy and status quo of the silly season?

Rather than clearly promoting telehealth, Trump’s messaging yesterday was aimed at elderly voter fear.

President Donald Trump yesterday held a press briefing on the status of the United States’ efforts to control spread of COVID-19.  What gave me pause was the President’s cloudy description of advanced communications and the lost opportunity to promote broadband.  The President said this about technology and connecting people:

“Nursing homes in higher-risk areas will be receiving more funding.  This money can be used to address critical needs, including the hiring of additional staff, increasing testing, and providing technology support so residents can connect their families and they can connect to their families.  They are having a tremendous time.  They want to be with their loved ones.  They can’t do it, so what we’re doing is we’re working it so that we can connect — have them connect with their families if they’re not able to visit.”

According to the President, $5 billion would be allocated to nursing homes from the Department of Heath and Human Services provider relief fund.  Mr Trump’s statement implied that some of this funding would go toward connecting nursing home patients and their families.  But a review of HHS allocation targets did not identify any amounts going toward nursing homes for additional communications facilities.  The Administration’s signaling of this intent does not appear to be included in the actual allocation program.

Mr Trump may have had an eye on applying political messaging to secure votes from the elder population in general and the nursing home population in particular given controversy around a directive by Governor Andrew Cuomo, Democrat of New York, to not prohibit the placement of patients in nursing homes based solely on the possibility of having COVID-19.  Critics of the Governor’s actions have been quick to point out the risk to elderly non-infected nursing home residents.  Hours after Mr Trump’s remarks on the elderly and COVID-19, Senator Rand Paul, Republican of Kentucky, referred to Governor Cuomo’s decision to locate infected patients in nursing homes as a “disastrous decision” that amounted to an impeachable offense.

That an opportunity for promoting public policy, in this case broadband for telehealth, may have been lost due to prioritizing political messaging is unfortunate.  The loss could have been mitigated by using specific terminology and definitions in one or two sentences rather than using a broad term such as technology. It is another lesson to readers of and listeners to political messaging to remain aware of as much of the existing political environment when assessing the value of political statements.


Georgia’s Fifth Congressional District Needs New Blood…

Government is a big fat private equity/venture capital firm backed up by guns with cash to spend. Georgia’s Fifth District needs a congressional rep that can not only divert as much cash to the district in the form of grants, business loans, subsidized health, but spends every waking minute creating new pools of capital via legislation and sending that money home.

This representative should also be aggressive in recruiting or assisting in the creation of Afro-owned enterprises that can provide value in a 21st century digital economy. Many, particularly those living in the 30310 zip code, would like the opportunity to live and work in their portion of the district versus having to commute across town for work. Other taxpayers in the more affluent sections of the Fifth District are enjoying this privilege.

Democracy as a concept is being laughed at around the globe and rightfully so because it is accompanied by a disparity in the allocation of capital. Capital must be the first word spilling off the lips of any congressman representing poor people. There is now an opportunity for the Fifth District to seek out a candidate that can shake things up.

Politics is a blood sport. There is no time for weeping for fallen warriors and the tired horses they rode on….

Georgia’s Fifth Congressional District needs new blood …