A CHANGE OF PLANS

Mexico was going to be the subject for today but given the current situation I was asked not to write about the travails of our neighbor to the south. I shall abide by the request.

Way back when, when President Nixon nixed gold, one of the really funny results that came out of the termoil in the currency markets was the emergence of the Swiss Franc as the people's choice as to what to hold. The flow into Swissy was something to behold (tho tiny by today's standards) and the Swiss, in order to staunch it began a policy of negative interest on foreign holders...that's right, they charged you interest for investing in their currency. We are not quite there yet but last week Thailand imposed a 15% withholding tax on interest to foreigners. Imagine, Thailand which has a political riot twice a month can't keep the money out. Maybe I'm stuck in a time warp but when investors choose Thailand over the U.S., something crazy is afoot. Sure, there is always a place for emerging market investors but when Thailand is considered a flight to safety it's time to start thinking about a new career. Yet, this is precisely what The Gang thant Can't Shoot--AT ALL has created with the fiscal and monetary policies we see coming out of Washington. How does it end?

You say on November 2? Perhaps, but I'm listening hard and I haven't heard a voice as of yet on the GOP side who seems willing to address this issue. Indeed, there appear to be precious few who sound as though they are aware that there is an issue. Statements coming out of the G-20 indicate that "the currency problem" as it is being called, will be addressed but only in the briefest of terms I suspect. We are not in an all-out currency war yet but depending on what comes out of the next Fed meting in a couple of weeks we may be there sooner than one thinks. Keep in mind QE II seem a foregone conclusion; the only issue that remains is how much and given that the political left (read, Paulie Krugman) has probably figured out that additional liquidity is not going to spring from the loins of Congress the cry for a massive amount coming from the Fed will be deafening. Mr. Bernanke seems to be enjoying his self-annointment as Savior of the World so Paulie just might get what he wants. If so, look out below, here comes the dollar.

One guy who might enjoy that is Brother Pandit, CEO of Citigroup. Think about it: the most powerful nation on earth and the United States has but one financial institution that can be called truly global: Citibank. I don't know what kind of rubbish they still have locked up domesticly but they are everyplace you want to be these days and have been for donkeys years. India, Brazil, Thailand, Mexico...The United States of America. Which is an "emerging market?" Ya gotta wonder.