Here we go again…Trump Reopens GFC Floodgates

For a President ‘for the people’ and who was going to ‘drain the swamp’ it is nothing short of hypocracy that Trump has commenced unwinding the Dodd-Frank Act, originally enacted to protect consumers from the sorts of unconscionable acts by banks and financial institutions in the lead up to, and ultimately causing, the GFC.  Maybe we shouldn’t be surprised given he has ex Goldman Sachs execs in key financial roles in his administration.  From Bloomberg:

“Chief executives including Goldman Sachs Group Inc.’s Lloyd Blankfein and JPMorgan Chase & Co.’s Jamie Dimon have been pushing for changes for years, arguing that the industry has been too constrained by the system put in place by the 2010 Dodd-Frank Act. After Trump focused on limiting trade and immigration during his first two weeks in office — policies opposed by many in the financial industry — the president’s stroke of a pen unleashes a process to undo many of the rules they find most irksome.

 “We’re going to attack all aspects of Dodd-Frank,” Gary Cohn, director of the White House National Economic Council, said Friday”

Great for the Lloyd’s and Jamie’s of the world but not for the common person we’d suggest.  It seems the head of the European Central Bank (ECB), Mario Draghi agrees and last night unleashed the strongest rebuke from Europe yet (from Reuters):

"The last thing we need at this point in time is the relaxation of regulation," Draghi told the European Parliament's committee on economic affairs in Brussels. "The idea of repeating the conditions that were in place before the crisis is something that is very worrisome."

Draghi also took aim at the accusations of Euro currency manipulation by Trump’s team’s we discussed in last week’s Weekly Wrap.  Draghi strongly denied it and maintained the Euro is weak simply because of the weak Eurozone economy and that the current ‘spike’ in inflation (1.8% in January) is transitory and not supported by underlying inflation figures which remain weak.  The ECB have to date printed Eur3.72 trillion buying sovereign and corporate bonds and equites in a desperate attempt to reflate Europe and of course in the process have ‘inadvertantly’ suppressed the Euro…

This global cocktail of economic stress is seeing gold continue to shine this year amid the aforementioned, Trump’s threats of a trade war (and general irrationality), Euro bond risk surging on upcoming election risks,  this weeks news of China being forced to tighten, and now concerns about the US debt ceiling fast approaching.

That Trump is looking to loosen regulations amongst banks desperate to keep this overleveraged system from imploding is huuugely irresponsible.