Draghi Reveals More: Will Do Targeted LTRO, Suspends Sterilization, Prepares ABS Purchases; No QE RevealedSubmitted by Tyler Durden on 06/05/2014 08:39 -0400
The much anticipated additional measures have been revealed:
- DRAGHI UNVEILS PACKAGE OF TARGETED LTROS, WORK TO PREPARE QE
- DRAGHI SAYS INITIAL SIZE OF TARGETED LTRO PLAN IS 400BLN EUROS
- ECB EXTENDS FIXED RATE FULL ALLOTMENT, SUSPENDS SMP STERILIZING
- DRAGHI SAYS PACKAGE INCLUDES PREPARATIONS FOR ABS PURCHASES
In other words, even more actions along what was expected: keep in mind the last time the ECB did €1 trillion in LTROs it did exactly nothing to boost inflation or the "real economy." Furthermore, the ABS purchases aren't activated: just being "prepared." However, what was not revealed was the biggest wildcard: European QE, which as we said repeatedly, won't happen until Europe's deflation is far worse, if ever.
There should be no 'flexible currency' and no central planning of money. They are at the root of the boom-bust cycle, the very reason for the various crises that have beset Western economies in recent decades. Switzerland would be far better off if no-one had the power to meddle with its money supply. As it is, there has been plenty of meddling already, and quite a bit of suspension of disbelief would be necessary to conclude that there will be no price to pay. As always in monetary matters, the bill will be presented at an unknown future date, but it could be a very big bill in this case... but Switzerland's Keynesian dunderhesds are well on their way to that coming due as they blast any gold repatriation plans as "reducing the credibility of the SNB’s policy."
"All the Trumans – the economists, fund managers, traders, market pundits –know at some level that the environment in which they operate is not what it seems on the surface…. But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end."
Klarman is here referring to the waning days of this third and greatest financial bubble of this century. But David Stockman's take is that the crack-up boom now nearing its dénouement marks not merely the season finale of still another Fed-induced cycle of financial asset inflation, but, in fact, portends the demise of an entire era of bubble finance.
December 23rd, 1913 is a date which will live in infamy. That was the day when the Federal Reserve Act was pushed through Congress. Many members of Congress were absent that day, and the general public was distracted with holiday preparations. Now we have reached the 100th anniversary of the Federal Reserve, and most Americans still don't know what it actually is or how it functions. But understanding the Federal Reserve is absolutely critical, because the Fed is at the very heart of our economic problems. Since the Federal Reserve was created, there have been 18 recessions or depressions, the value of the U.S. dollar has declined by 98 percent, and the U.S. national debt has gotten more than 5000 times larger. This insidious debt-based financial system has literally made debt slaves out of all of us, and it is systematically destroying the bright future that our children and our grandchildren were supposed to have. The truth is that we do not have to have a Federal Reserve. The greatest period of economic growth in U.S. history was when we did not have a central bank. If we are ever going to turn this nation around economically, we are going to have to get rid of this debt-based financial system that is centered around the Federal Reserve. On the path that we are on now, there is no hope.
It is perhaps ironic that the creator of the AK-47 assault rifle, also known as the Kalashnikov named for its creator Mikhail Kalashnikov, and of which there are between 70 and 100 million in circulation making it the world's most popular weapon, has just passed away from what is essentially old age, at 94. "It is difficult and sad to realize that Mikhail Kalashnikov is no longer with us. We have lost one of the most talented, memorable and committed patriots of Russia, who served his country throughout his life,” said the statement from the press secretary of the Udmurtia administration Viktor Chulkov.
The unelected central planners at the Federal Reserve have decided that the time has come to slightly taper the amount of quantitative easing that it has been doing. When this news came out, it sent shockwaves through financial markets all over the planet. But the truth is that not that much has really changed. The Federal Reserve will still be recklessly creating gigantic mountains of new money out of thin air and massively intervening in the financial marketplace. It will just be slightly less than before. However, this very well could represent a very important psychological turning point for investors. It is a signal that "the party is starting to end" and that the great bull market of the past four years is drawing to a close. So what is all of this going to mean for average Americans? The following are 8 ways that "the taper" is going to affect you and your family...
The rate on the 10-year Treasury bond has risen dramatically. Is it priced in to stocks? Does it mean recovery, at last?
At this point it is incredible that there are any Americans that still trust anything that comes out of the administration's collective mouth. And of course it is not just Obama that has been lying to us. Corruption and deception are rampant throughout the entire federal government, and this has been the case for years. Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust. Aside from the now "fake" employment data, the following are five massive economic lies that the government has been telling you... Our financial system is far more vulnerable than we are being told. We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster. Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.
Yesterday the US Senate held hearings on "virtual currencies" (meaning Bitcoin). Meanwhile the "virtual currency" ran up above $800/USD and it was reported it got above $900. It pulled back but as of now, is hovering above $700.
In his parting act, Federal Reserve Chairman Ben Bernanke has decided to continue printing some $85 billion per month (6% of GDP per year) and spend those dollars on government bonds and, in the process, keep interest rates low, stimulate investment, and reduce unemployment. Trouble is, interest rates have generally been rising, investment remains very low, and unemployment remains very high. As Lawrence Kotlikoff points out, echoing our perhaps more vociferous discussions, Bernanke’s dangerous policy hasn’t worked and should be ended. Since 2007 the Fed has increased the economy's basic supply of money (the monetary base) by a factor of four! That's enough to sustain, over a relatively short period of time, a four-fold increase in prices. Having prices rise that much over even three years would spell hyperinflation.
The Fed will have to increase QE (not taper it) because systemic debt is compounding faster than production and interest rates are already zero-bound. Lee Quaintance noted many years ago that the Fed was holding a burning match. This remains true today (only it is a bomb with a short fuse). Thirteen years after the over-levered US equity market collapsed, eleven years following Bernanke’s speech, five years after the over-levered housing bubble burst, and four years into the necessary onset of global Zero Interest Rate Policies and Long-Term Refinancing Operations, global monetary authorities seem to have run out of new outlets for credit. In real economic terms, central bank policies have become ineffective. In other words, the US is now producing as much new debt as goods and services.
As frequent readers will recall, one of our favorite series of posts describing the "Walking Dead" monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe's credit creation machinery, operated by none other than the Bank of Italy's, Goldman's ECB's Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that "Mario Draghi's Nightmare Gets Worse" because "European Loans Declined At Record Rate." To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed... no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can't control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.
The rise of Tomahawk force began in 1983 during the Reagan buildup, but the demise of the Evil Empire did not slow down its development one bit. By the end of the century the United States had about 150 surface ships and attack submarines that could launch these deadly cruise missiles and an inventory of nearly 5,000 missiles. Tomahawks have a range of seven hundred miles. This means that from their offshore platforms they can reach three-fourths of the world’s population. And during the last two decades they have been used in just this “stand-off” manner against targets in Iraq, Bosnia, Afghanistan, Sudan, Libya, and others—teaching presidents that they could meddle freely without getting bloodied.
$51, 323, 233, 866, 518. That’s the current global public debt that exists all countries together. Next year it will rise to$54, 020, 847, 580, 179.