ECB's Juergen Stark Warns Of "Clear Risk Of Sovereign Debt Crisis," Cautions Recovery Largely Due To Massive Support By Governments And Central Banks

Tyler Durden's picture

The ECB's executive board member Juergen Stark had a rare admission (and even rarer for a central banker demonstration of rationality) that not only are most advanced economies about to enter a "third wave, a sovereign debt crisis in most advanced economies", not only is a "timely exit of extraordinary fiscal measures crucial in order to ensure a continued recovery",  but that the mentioned recovery and economic improvements are largely as a result of "massive support measures taken by governments and central banks." In other words, the whole episode of the past year has been a one-time item which most analysts would exclude from "recurring operations" yet due to the magic of the Keynesian magic wand, the new normal is expected to persists as the magical "consumer" at some point takes over the recovery from the government effort. Alas, while the economy has indeed stabilized (effect), the cause continues to be purely based on governmental actions, as the consumer, and the private sector in general, continues retrenching. Too bad the US Federal Reserve has no aerobic critters than can formulate the same critical thoughts as Mr. Stark, or else they would realize that the path they are leading the US on is pure disaster, and furthermore, with the lessons from the last bubble fresh in everyone's mind, doing all they can to be branded mad, at least according to the Einsteinian definition of insanity: let's just keep flooding the system with money and keep hoping that something will change. In retrospect, pleading insanity in a decade when the entire western world is in ruins, before a tribunal of the people may not have quite the desired effect.

From Market News:

Speaking at a debate in Brussels, the central bank's chief
economist said that though it was right to take extraordinary fiscal
policy measures to avoid a depression, a timely exit is now crucial in
order to ensure a continued recovery.

The crisis began as a financial crisis and evolved into an economic
one, Stark observed. Now, there is a "clear risk that we will enter a
third wave, a sovereign debt crisis in most advanced economies."

Many Eurozone countries "are faced with large budget deficits and
sharply rising public debt levels," he added.

Taking from the future of the middle class and giving to the present of the kleptocratic class has never felt so good.

Such improvements are "largely" a result of "massive support
measures taken by governments and central banks
," he said. "Likewise, we
have recently seen further improvements in the outlook for the global

But, "uncertainty is still high, as both fiscal stimuli and the
inventory cycle, which are currently supporting growth in many
countries, are transitory and as there remain risks to the financial
sector," he warned.

Could Stark be the ECB's equivalent to Hoenig: the only partially sane voices in the lunatic asylum?

On the subject of ECB monetary policy, Stark reaffirmed that "the
Governing Council views the current low level of its key interest rates
as appropriate." The bank's non-standard liquidity-providing measures
"have helped to improve financing conditions, especially in the money
market, thus contributing to a better flow of credit to households and
firms than would otherwise have been the case," he said.

But it is important to ensure that these measures do not stay in
place longer than necessary, the ECB's chief economist argued, outlining
that the bank will continue to implement a gradual exit from these

Alas, the answer is no:

Yet, he promised that the ECB "will avoid too early an exit from
its non-standard measures, as this would risk hurting the normalization
of financial markets and the recovery."

Same old song and dance, just a different cast of characters. Pander to the people, yet do all that the true overlords, the bankers, demand.

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junkyard dog's picture

One of the problems with the methods used to stimulate purchases by the general public is that the Fed does not understand the general public. Bernanke thinks like it is 1975, not like it is 2010; he does not recognize the difference between a saver in 1975, my parents, and a saver in 2010, me.


My parents would never dream of spending a dime of interest made from savings during a crisis like we have now. They budgeted the interest made off of their savings towards luxuries we now consider staples of existence; tires, a dishwasher, curtains, television, a trip to Daytona Beach for the day. However, those things went out the window when dark clouds appeared on the horizon. They saved the interest; added it to principle, made more interest.


We baby boomers do not see interest as a nest egg expanding function. We see interest as a reward for saving; a reward to be spent on frivolous tangible personal property to feed our egos and desires to be different like everyone else. Dark clouds on the horizon means a little rain will fall. Add it to principle? You can’t take it with you.


I know what your thinking, ok flea bag, what is the point. My point is that Bernanke has provided funds to banks to be loaned out to people to make purchases they cannot afford, when, what he should be doing is loaning money to banks to pay a high interest rate to people who have savings.


The banks have off balance sheet debts that prevent them from loaning money because the loan would increase their reserve requirement that they cannot cover in the near future. But, if you pay 6% interest to people who have certificates of deposit, then you put money into the hands of people who will spend the interest, and it will not cause the banks to increase reserves.


I have always spent the interest I earned from CD’s on BS. 25% of it went to pay income taxes, 70% went to beer and women, the rest I just wasted (not my joke).  


Bernanke is trying to get me to borrow money to buy things to help pull the economy out of this depression. It will not work. I do not need to borrow money to buy things. I refuse to spend any principle I have in deposits. I have converted principle to gold and silver but, I have not consumed any principle- and I will not. And I am not alone on this position. There are millions of us with cash on deposit making 1.95%. It is an insult to those who save. I am putting off buying anything until I start making some money in interest. For example, that standard French poodle next door is ragging me about only wanting sex and not providing her with gifts. She saw this rhinestone collar on her collie friend and wants one. She also wants me to take her to some new dog park at South Beach. I keep telling her I have no cash flow. Interest rates are none existent. She does not want to hear about Bernanke. I am telling you guys, stick with beagles. They do not have bad hair days and they can always find their way home no matter where you throw them out. If I had more interest, then I would spend it on this poodle and the economy would be stimulated.


If Bernanke wants to increase spending, he needs provide funds to banks to pay high interest on savings, and forget the fool who has to finance a sofa so he does not have to sleep on the floor.

SteveNYC's picture

Good post Dog, I agree with you in full on the interest. I have not touched a red cent of principal since this crisis started. The "poodle" however has been bugging me for new this, new that, new shit etc. Has no fuckin clue of the depression we are in and not coming out of, just thinks like it's 2005/6.

So, because Ben refuses to pay, the cash is in the safe and offshore. Fuck Ben. I'd encourage everyone to do the same: hard cash and offshore. Punish these guys for paying zero percent on your savings. Run them dry for all I care.

Good on you.

MsCreant's picture

junkyard dog,

You do doggie very effectively. I am probably one of those beagles you speak of. It's funny, I have my house and small car paid for, the only thing I spend money on is good food (organic bones and kibble, you know). I could go buy many different things right now with my savings. They all look silly. There is no point. The only thing I get excited about is maybe buying some land (you know, to frolic on and bury bones). But I think I need to wait on that one. If I set that as a goal, this is going to be like surfing, catch this wave just right. Hard for an ordinary pooch, but it can be done.

Nice post doggie.

poydras's picture

Staying ahead of the game in the '70s was nearly impossible as the purchasing power dropped in half.

Debtors are unable to afford the low, subsidized interest rates.

ZIRP is a huge, negative impact on savers including future pensioners.  Most fail to see it for what it is - Theft from the savers.  They are borrowing money to subsidize rates.  Savers take a dual hit.

Which is worse, the act or failing to notice the act and/or doing something about it?

RSDallas's picture

Wouldn't you like some green eggs and ham?

doublethink's picture


An "F" For Greece


March 17 (Bloomberg) -- Harvard University Professor Martin Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis.


Miles Kendig's picture

Stark warns that giving drugs to a drug addict will advance addiction, a dangerous course to chart. Unless his primary concern as both addict and pusher is the short term need.  Entrusting folks who serve both as addict and pusher to assess themselves as too frail to feel the pain of withdrawal without possibly taking the very heart of the financial system with them when they collapse seems to be the great folly of the age.  Get the addict strong enough first then leach away the drugs Stark suggests.....  Classic addiction therapy.  Perhaps the profession of central bankers is gaining confidence in more fully appreciating their true role.

MsCreant's picture


Good points. I feel that way about many folks posting here. Addicts with insight who still do not realize that they are the ones holding this thing together by agreeing to keep playing.

I say this and hope not to get on too high a horse myself. As long as I participate in the mainstream culture, I too promulgate the drug.

Miles Kendig's picture

The spice is in everything....  However, two or more looking to make similar decisions has always been the genesis of trend formation.  Perhaps there will be enough momentum generated outside of the tweaker economy to drive the vision forward.  Keep at it pal and remember that you are loved, admired, respected by many, including me.  I am sure that if you find yourself drifting your natural proclivity to explore endlessly, combined with your acid wit would burn through the fluff of pride soon enough.  Peace

knukles's picture

Additional substance abuse is Neither Acceptable nor Traditional addiction therapy.  Detox under supervision followed by a rigorous adherence to a strong 12 Step program is the Only way out.

Means Furope should not be enabling nor co-dependent with Greece in any way shape or form, otherwise, the elephant remains in the living room forever, aka Denial. 

They's gotta have the drug, boundless central bank money, regardless of the source, withdrawn.  Pure, clean and simple.

Miles Kendig's picture

Many substance abuse treatment programs will make a determination as to the level of addiction and the best course to follow in detoxifying the patient. I suspect that Europe has been is a steady state of co-dependency within the family so to speak for some time as well as forming mutually supportive relationships with others to provide the patina of normalcy during the explosive stage of drug usage.

malusDiaz's picture

At later stages of alcoholism, complete withdrawal can kill the patient. 

mtomato2's picture

Nicely stated.  Thank  you.



Problem Is's picture

"US Federal Reserve has no aerobic critters than can formulate the same critical thoughts..."

Not to worry!

Yellen is on her way from the SF Fed... That intellectual giant breath of fresh air...

Oh wait Yellen is a clap trap puppet spewer of party lines... A female Steve Lies-man as it were...

If the woman was bald you would think you were listening to Bernank-ster

Fritz's picture

The banksters are addicted to free unlimited money to ramp any and all asset classes.

The FED just keeps blowing bubbles.

doublethink's picture


CHART OF THE DAY:  How The Fed Backed Itself Into A Corner, And Is Doomed To Pumping Cheap Money Forever


Matto's picture

if you're a believer in a coming crash, at what point would you load up on debt, switch it out for gold and hard assets in a partners/family members name(discretely of course), and get ready to file for bankruptcy? how 'firm' of a believer would you need to be??


just curious...

abalone's picture

Isn't this already happening?

malusDiaz's picture

I've very curious myself, I've already got the credit lines opened to buy gold & silver.

Going to take a loan out on the 401k as well,


I think it will be in the 30 year bond market, keep all eyes on that.


Other then that not a f*ing clue.

Thisson's picture

What do you mean put it in someone's name?  You put it in your safe.  If it's in a safety deposit box, you're putting it right where the powers that be can loot it easily.

Matto's picture

i was meaning that you dont provide a trace back to the asset then tell them to stuff their loan repayments. "ive got a gambling problem but uhhmm yeah my wife is a gold horder"

BlackBeard's picture

Nice.  Captain Obvious stopped by today.

Racer's picture

And the futures trundle ever higher, totally ignoring this and all other economic and fundamentals facts

Samsonov's picture

Third wave crisis, you say?  So what?  As you see by the stock market's straight line advance upwards, no one is concerned.  The troubles described may be years away, too distant to worry about.  The market's advance is meeting no resistance; push forward!

Headbanger's picture

What time will they air him being tarred and feathered for such blasphemy??

MarketTruth's picture

Got gold? Because in the end these banksters will slowly yet surely confiscate your wealth over time. Of this you can count on.

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

--- Alan Greenspan, 'Gold and Economic Freedom' (1966).

Thisson's picture

Yet another reason not to accept checks.  Thanks.

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