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The Ultimate "Easy Money Paradox": How The ECB's Previous Actions Are Assuring The Failure Of Its Current Actions

The problem, as several sources told Reuters last week, is that there simply aren’t a lot of willing sellers. Ironically, the ECB’s own policy maneuvers are ultimately responsible for creating this situation. That is, the fallout from previous forays into ultra accommodative monetary policy is now hampering the implementation of quantitative easing - call it the ultimate easy money paradox.

War And Petroleum Reserves

We would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce. These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening.

Why Does Fiat Money Seemingly Work?

Government mandated fiat currency simply does not work in the long run. We have empirical evidence galore – every fiat currency system in history has failed, except the current one, which has not failed yet. The modern fiat money system is more ingeniously designed than its historical predecessors and has a far greater amount of accumulated real wealth to draw sustenance from, so it seems likely that it will be relatively long-lived as far as fiat money systems go. In a truly free market, fiat money would never come into existence though. Greenspan was wrong – government bureaucrats cannot create something “as good as gold” by decree.

Citigroup: "We Almost Hope Those Forecasts Are Proven Wrong"

"... we almost hope those forecasts are proven wrong. They imply a widening gap between valuations and traditional fundamental relationships. They imply a dearth of yields and spreads that will almost invariably push more and more investors into positions they would ultimately rather not take. But if the old adage that markets move in the direction that causes the most pain to the largest number of people is anything to go by, then we suspect that this is what will happen. Depressingly, our instinct is that those new forecasts are more likely too conservative than too aggressive. Longer-term, sweet dreams really aren't made of this."

Stocks Slide - Give Up "Europe Is Fixed" Gains

With OPEX out of the way, the indices are free to trade on anxiety and reality... and have now given up all the post-"Greek Talks Fail" gains... WTI Crude and Treasury yields are plunging.

Stocks Coiled To Soar On Any Positive Greek News

With the new and revised (until it is re-revised again to some future date), Greek D-Day set for today's third in the past 2 weeks Eurogroup meeting, every favorable headline serves as a springboard for ES-buying algos, while every negative headline is promptly ignored. And since this is Europe's style trial ballooning, there have been many of both with just these two hitting in the last hour:

  • GREECE, EURO ZONE NEAR DEAL ON PACKAGE, REUTERS CITES UNIDENTIFIED GREEK OFFICIAL
  • GREECE DID NOT GO FAR ENOUGH IN THEIR LATEST PROPOSAL: GREEK GVOERNMENT SPOKESMAN

Guess which one pushed ES into the green?

Goldman's Best Single Idea For Hedging "Grexit" Risk

With reports of near mutiny in Syriza's ranks amid the back-bending they have done to try to meet Germany's demands - only to be abjectly denied by a non-ultimatum-setting Schaeuble - it is perhaps time to prepare (ahead of tomorrow's apparent "G" day) for the possibility that Greece creates a systemic event. As Goldman recently warned, there are aspects that leave us more worried than we have been since the start of the Euro area crisis with a tight schedule to avert a disorderly outcome. Risk markets so far have traded in a resilient (well managed) manner but risks of an accident remain and here is how Goldman suggests you hedge that exposure.

Stocks Rebound On Hopes Of Resolution To Greek Impasse

After yesterday's FOMC Minutes, despite a huge dovish reversal by the Fed - one which increasingly puts its "credibility" and reputation at risk - stocks were unable to close green, or even above 2100, for one simple reason: uncertainty with the fate of Greece. Overnight there has not been much more clarity, when as previously reported Greece submitted a 6 month extension request to its master loan agreement but not to its bailout extension, a nuance lost in the annals of diplomacy. But is this the much-awaited Greek capitulation? Or will the Eurogroup reject this too? The answer may be available in a few hours after an emergency Eurogroup meeting due later today. However, as usual stocks are ready to "price in" yet another Greek conflict resolution, and after futures were lower by 7 points overnight, were up 4 points at last check: a rebound which will not correct if the latest Greek "compromise" fails to deliver.

"In The End Capital Controls Will Probably Have To Be Imposed" - Eurogroup Official

One thing is becoming clear: Greece will almost certainly not last until the proverbial D-Day on February 28 before it either i) runs out of money, ii) is forced to sign a "bailout extension" deal with the Eurogroup thus crushing its credibility with the people, or iii) exits the Eurozone. Needless to say, two of the three above options are very unpleasant for Greek savers, assuming any are left. And it is those savers that the Eurozone is directly targeting when it does everything in its power to provoke a bank run with statement such as these: "The situation of the banks is getting more and more difficult every day," said a European official. "In the end, in order to safeguard the banking system, capital controls will probably have to be imposed."

UBS Answers "What Could Go Wrong"

While certainly a revision is pending after today's latest, disastrous Eurogroup meeting after which the two sides are further apart from reaching a deal than a week earlier, here is the latest set of questions asked by UBS clients on the topic of "what could go wrong" with the biggest Swiss bank's mutedly optimistic outlook on the "global recovery" (aided no doubt by the biggest intervention of central banks in history) which is characterizes as "uneven", especially when one considered that even UBS itself admitted last week that a "dislocation" in the market (which is "underestimating Grexit Risks") is necessary in order to overcome the Greek impasses.

Markets Quiet Ahead Of Eurogroup Summit; US On Holiday

It has been a quiet start to the week, with US equity futures and European stocks mostly unchanged with all eyes on what progress (if any) will be made between Greece and the Eurogroup, where the press conference is scheduled for 7:00 pm GMT (expect significant delays) in what is otherwise expected to be a relatively subdued day with the US away from market and a light macroeconomic calendar.

Frontrunning: February 13

  • Greece will do 'whatever it can' to reach deal with EU (Reuters)
  • ECB Urges Greek Political Deal as Emergency Cash Is Tight (BBG)
  • Fighting rages in run-up to Ukraine ceasefire (Reuters)
  • Eurozone GDP Picks Up, Thanks to Germany (WSJ)
  • Two J. P. Morgan Executives Connected to Asia Hiring Probe Pushed Out (WSJ)
  • Putin's High Tolerance for Pain and Europe's Reluctance to Inflict It (BBG)
  • Indigestion Hits Top U.S. Food Firms (WSJ)
  • Alibaba's Jack Ma seeks to reassure employees over U.S. lawsuits (Reuters)