European Central Bank

Frankfurter Allgemeine Zeitung Reports EU, IMF Prepare To Bail Out Spain; Europe Denies

A potentially destabilizing report appeared earlier today in the Frankfurter Allgemeine Zeitung (FAZ), according to which countries in the EU are preparing to bail out Spain, which has immediately prompted denials out of both the EU Commission, which claimed that the "report on aid for Spain is completely untrue." Of course, in January Joaquin Almunia almost ate that Bloomberg reporter who, for the first time ever, suggested that the EU would need to bail out Greece. Four months later Greece was bankrupt and the EU was on hook for a cool trillion. And in adding to the ongoing contradictions, Spain's Treasury Secretary has said Spain has no problem financing its debt, even as it was reported that Spanish banks have raised a record €85.6 billion in ECB funding, and Spain's Ocana understated that the "liquidity freeze in Spain in foreign markets is a problem." On the other hand, of course Spain has no problem in "financing" its debt - the ECB is gladly monetizing it all. Lastly, the fact that Spanish unions have called for a general strike is likely going to shift the balance of power to the truth instead of the baseless propaganda, and within a week or so, Spain will be another raging Greece.

Morning Gold Fix: June 11, 2010

As a consequence of globalization, our economies are more tied together than ever. One of the factors that brought about the great depression was a nationalistic backlash against trade. The end result was countries pulling in the reigns, drying up liquidity, and consequently deflating asset prices even more. Global credit risk is causing institutions to decrease international loan exposure, and banks are beginning to repatriate their money and lend more locally. This is an economic nationalism, and can have the same effect as the political ones did in the 1930’s. Governments have little choice but to engage in competitive devaluations in an attempt to stave off the effects of these (localized) lending practices.

Trichet Q&A From ECB Press Conference: "Appropriate To Continue To Buy Bonds"

Let Europe's monetization continue indefinitely! Surely this will do miracles for the EUR once Goldman is done buying all its clients are selling to it today. Other soundbites from his conference earlier below: pick the odd lie(s) out:

  • Decision on 3 Month operations was unanimous
  • EUR is a very credible currency and has an exception track record [no comment here]
  • Q1 growth was "not buoyant, Q2 to be more so"
  • Bond programme is designed to ensure effective monetary transmission mechanism
  • Says non-standard measures are temporary in nature
  • Welcomes recent decision to set up stability facility
  • Welcomes steps by governments to do extra fiscal consolidation
Reggie Middleton's picture

Simply copying the US style of Central Bank Crisis mitigation is a bad idea, particularly since I believe the US has not mitigated the problem at all, but simply kicked a soda can down the road until it gained the unstoppable momentum of a dumpster. Now, the ECB is actually trying to kick that dumpster, and appears to be stubbing its toe!

EURUSD Plunging On News European Aid Package In Jeopardy

By now everyone is aware that the G20 meeting failed to come to a consensus vis-a-vis strategic rescue approaches on the global bailout, with Tim Geithner pushing for uber-Keynesianism, while a far more prudent Europe saying enough to record deficits, and in essence potentially putting the end to the avalanche of endless bailouts and the Bernanke Uber-Put. At least such is the case until tomorrow when Europe's bureaucrats wake up and see a EURUSD at a level that rounds down to 1.10. The reason: Der Spiegel reports that Germany's high court is considering blocking Germany's participation in the European rescue package, a development which if it were to come to pass, would send the euro plunging to parity not with the dollar but with zero.

Econophile's picture

This article is a look at the US's recovery, Europe's recovery, Asia's (China) recovery, and how they all tie together. While US manufacturing has been improving, mainly because of exports, it is also flattening out. Ditto almost everywhere else. This is a sign of what's coming.

Morning Gold Fix: June 1, 2010

On Monday, the ECB made a statement that was not shocking to us, but apparently was relevant to the 3 or so people left with long positions in the Euro and the E-zone banks. Reuters reported, "The European Central Bank warned on Monday that euro zone banks faced up to 195 billion Euros in a "second wave" of potential loan losses over the next 18 months due to the financial crisis, and said it had increased purchases of euro zone government bonds." The result of that statement and it implications left the Euro down 1.3 % as of this writing, with equities down across the board, and the barbaric relic Gold up 10 dollars.

Europe: A Continent Of Lies And Broken Promises; How The EU Elite Got It Wrong On The Euro has put together a paper of the most blatant half-truths, propaganda, and outright lies, abused by Europe not only over the past month, but also over the past 10 years, for the entire duration of the now rapidly collapsing eurozone experiment. As the paper notes: "More than ten years since the euro was launched, and with the single currency facing its greatest ever crisis, the parameters have radically changed. Amid all the uncertainty, one thing has become painfully clear: the EU elite simply got it wrong on the euro." The authors demand for "a call for greater honesty about the future of European cooperation and a reminder of the urgent need to find a new model that is both politically and economically sustainable" is just as valid in Europe as it is in the US: any system based on lies and opacity is doomed to failure. Europe found this out the hard way. We will too unless somehow we restore the basic truths like transparency, honesty and integrity, instead of merely campaign promises and teleprompter soundbites.

Eric Sprott: A Busted Formula

There’s nothing wrong with throwing a little money at a problem to make it go away. There’s equally nothing wrong with throwing a little borrowed money at a problem to make it disappear, as long as you have the means to pay that borrowed money back. But what happens if you throw a lot of borrowed money at a problem, and the problem doesn’t go away? If you’ve ever experienced a situation like that you can probably understand how Europe feels right now. It just unleashed a magnificent $1 trillion euro bailout and the market responded with a selloff by the end of the week! So what happened? That money was supposed to make the problem go away, after all. And it was a lot of money. Why did the market respond to it with such disdain? We believe the market’s reaction is confirming what we have long suspected: that these bailouts provide next to no long-term value. They don’t produce real jobs. They don’t improve productivity. They just prolong the precarious leverage game played by the financial sector, and do so at tremendous cost to taxpayers. "Bailout and Stimulate" has been the rallying call for governments and central banks since the beginning of this financial crisis – and it has certainly had its impact over the last two years, but not the type of impact we need to propel real, sustainable growth. - Eric Sprott

World Gold Council Sees Ever Greater Demand For Gold, As "Consumers Become Accustomed To Higher Prices"

Full report

"The World Gold Council believes that with ongoing uncertainties surrounding the US dollar and the Euro, the search for alternative international asset choices within the central bank sector should clearly involve consideration of gold.Q1 net sales of 15 tonnes were very modest in comparison with historical averages. The IMF was the main contributor, with sales of 24.1 tonnes during the course of the quarter falling well within the limits of the Central Bank Gold Agreement (CBGA). The Fund remains committed to its aim of ensuring that its sales are not disruptive to the gold market. Sales among other CBGA signatories were nonexistent, while outside of the agreement, net purchases were concentrated in Russia, where the central bank continued its programme of steady accumulation." - World Gold Council

Is The Fed Preparing To Lower The Rate On Dollar-Euro Swaps?

Yesterday we reported a rumor that the Fed and the ECB were set to announce "new liquidity measures." Today, the WSJ's Jon Hilsenrath reports that this development would likely materialize in the form of a lowering of the rate at which the Fed offers Euro-Dollar swaps, currently priced at 100 bps over OIS. This has not gone unnoticed by the market: even with 3M Libor flat from yesterday, the front month Eurodollar has surged from yesterday, on this most recent confirmation that the central banks will drown the world in free liquidity before another session of liquidations has to take place.

Warning: Do Not Taunt Happy Fun Schweizerische Nationalbank

Zero Hedge's own Bruce Krasting has an excellent piece ("The Swiss Did It?") from last week commenting on the interventionist bent the Schweizerische Nationalbank or Swiss National Bank (hereinafter the central bank of Switzerland or the "SNB") has been demonstrating in the face of the recent crisis. Of course, this particular behavior is not at all new on the part of the SNB, but it bears examining in a bit more depth why and how Switzerland's monetary authority acts in the face of global crisis.

Meet The Latest Member Of The Plunge Protection Team: The European Central Bank

The long-debated topic of whether the ECB intervenes on behalf of the euro can now be put to rest. 120 pip move in a minute is not a short cover. It is, and always has been, forced central bank intervention. Bernanke is so happy Trichet is doing his work for him for the time being. Be very wary of buying stocks on this intervention, as Central Bank involvement now at best leads to a 12 hour temporary "fix" to the market that Bernanke et al want to sustain.