First, to all of those in the NOTES community who celebrate the Jewish New Year, I wish you a year of health, peace and prosperity. To those who celebrate other spiritual endeavors I offer you a wish for health, peace and prosperity. Now, to the markets. In the past month I have spent time putting issues we’ve been discussing for the last nine years into perspective. Lately, the airwaves are filled with the accolades laid upon the policy makers who SAVED CAPITALISM. Listening  to Paulson, Geithner and Bernanke pontificate on how they acted to save the system is enough to send me into fits of rage as the culprits who failed to act to halt the housing bubble praise themselves for the “Courage To Act.”

Sorry, but this is nonsense.The bloviating Geithner systematically punished Main Street to save Wall Street. That is not opinion but fact. Somebody had to suffer and the choice was made to bail out Wall Street, bond holders and large financial entities while forcing overleveraged homeowners into bankruptcy and foreclosure. As Austin Goolsby once told me, “The Secretary of Treasury lobbies for Wall Street in the way that the Secretary of Agriculture lobbies for farmers.” The FED‘s zero interest rate policy, which was used to bail out the overleveraged financial institutions, further punished Main Street.

I agree that QE ONE was necessary to prevent the liquidation of massive amounts of assets. A massive selloff would’ve caused the entire financial system to seize up and result in unemployment data similar to that of Spain, Greece, Italy and other debt-ridden economies. The United States couldn’t politically tolerate 20% unemployment. Think about the present divide in our politics and that is with FULL EMPLOYMENT. The Bernanke/Geithner plan was for the financial repression of savers and foreclosing on homes of people with ridiculous adjustable rate mortgages. But as Holden said over and over, I digress.

***Larry Kudlow continues to note how well the U.S. economy is doing while citing the recent travails of the Chinese equity markets (thus a reflection on the weakness of the Chinese economy). It plays to Kudlow’s sophomoric view that the U.S. will most certainly be able to withstand a trade war better than the Xi Government. While Kudlow and his cronies cite the weak Chinese economy they criticize the weak Chinese yuan. In a global financial system of unencumbered capital flows, a weak economy saddled with high debt and excess productive capacity is certainly going to experience capital outflows, which will result in a weakened currency. On Wednesday, Kudlow allegedly said, “Trump is doing the Lord’s work on trade.”

Well Larry, I repeat what I wrote in this blog when Lloyd Blankfein made a similar comment: Noah’s flood was also the Lord’s work so be careful with your biblical references. The bottom line for investors is that markets are feeling distress as emerging markets are suffering under the plagues of too much debt denominated in another currency. The stronger the dollar the more expensive the debt servicing costs .If the Chinese Yuan continues to lose value, the global effect will be disinflation as China and others will dump excess capacity upon world markets. A new fear of deflation will cause central banks to panic as they rush to the barricades to stem the effect of falling prices on global record debt which will lead to a new rally in the precious metals. The Lord’s work indeed. Where’s the jubilation and forbearance?

***On Thursday we get interest rate announcements from the Bank of England and the European Central Bank. The BOE is expected to remain at 0.75% as the British Parliament works through the uncertainties of Brexit. Als  ,Governor Carney was given an extension to his term so as not to change quarterbacks at a crucial time in British history. Forty-five minutes later we hear from the ECB’s President Draghi about interest rate policy. NO CHANGE to present policy is expected and the central bank should remain on course to start shrinking its QE purchases to 15 billion euros in October. The Draghi press conference, which begins at 7:30 CDT, will reveal some of the ECB’s thoughts about the recent weakening in the European economy.

Draghi will acknowledge that some economic indicators have softened but I would expect the ECB president to invoke the Bernanke/Yellen language of transitory headwinds from global trade conflicts. Draghi will also be asked about his successor and whether he has a preference. This will be a stupid question not worthy of a response. The successor question is far more important for German Chancellor Merkel. In my opinion, Merkel made a categorical error in 2011 by not promoting Bundesbank President Axel Weber to the ECB’s top job. Germans may have been far more receptive to aggressive QE programs with a German hard money advocate standing at the printing press.

There are rumors flying that Chancellor Merkel is willing to have a non-German as the ECB President if Germany were to receive the Presidency of the European Commission. In my opinion, the ECB will be a far more important place for the German’s to be in command of the money printing authority under the guise of Bundesbank President Jens Weidmann.

My rationale is in direct opposition to a Financial Times editorial from Aug. 30, titled, “Next ECB Chief Should be In The Draghi Mould.” The FT lauds Draghi for his doing whatever it takes to save the euro and thus advises the European grandees to choose a new president “that needs to be prepared to be flexible and activist, and to meet existential challenges with overwhelming firepower.” The problem is that the FT fails to acknowledge the negative political ramifications from the Draghi years. The financial repression of the Bavarian Burghers has aided the changing political landscape across Northern Europe. Overwhelming financial firepower will bring political shock and awe. Listen to the Draghi press conference. Be patient as I expect no fireworks.