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Full Mario Draghi Pro-Inflation Speech To Germany
For all those wondering why next time Mario Draghi will need to pull a "Merkel Lampoons Greek Vacation" next time he comes to Berlin, and is accompanied by 7,000 policemen, here is the Goldmanite's full speech, with the five key lies highlighted for general consumption:
- First, OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments. All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline.
- Second, OMTs will not compromise the independence of the ECB. The ECB will continue to take all decisions related to OMTs in full independence. It will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. The fact that governments have to comply with conditionality will actually protect our independence. The ECB will not be forced to step in for a lack of policy implementation.
- Third, OMTs will not create excessive risks for euro area taxpayers. Such risks would only materialise if a country were to run unsound policies. This is explicitly prevented by the ESM programme. And we have been very clear that each time a programme starts being reviewed, we will routinely suspend operations and resume them only if the review has been concluded positively. This will ensure that the ECB intervenes only in countries where the economy and public finances are on a sustainable path.
- Fourth, OMTs will not lead to inflation. We have designed our operations so that their effect on monetary conditions will be neutral. For every euro we inject, we will withdraw a euro. In our assessment, the greater risk to price stability is currently falling prices in some euro area countries. In this sense, OMTs are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it.
- Moreover, we see no signs that our announcement has affected inflation expectations. They continue to be firmly anchored. This is testament to our track record on price stability over the last decade and our credible commitment to maintaining price stability. The citizens of the euro area can be confident that we will remain permanently alert to risks to price stability. We have all the necessary tools at our disposal to maintain it and to withdraw any excess liquidity in case of upward risks to price stability.
Needless to say, nobody in Germany believes him, but that is not surprising. The scariest part is probably that the Goldman messenger believes himself. The good news is that Goldman will be able to book some serious revenue from selling Germany inflation-linked Special Purpose Vehicles from now until the advent of Weimar 2.0.
Incidentally for those curious why ze Germans like their cash, here is a chart showing just how attached to paper, unlike the US, Germans are.
Full speech from Draghi - link
Speech by Mario Draghi, President of the ECB,
Discussion on ECB policies with Members of Parliament,
Berlin, 24 October 2012
Dear President Lammert,
Honourable Committee Chairs,
Honourable Members of the Bundestag,
I am deeply honoured to be here today.
As President of the European Central Bank (ECB), it is a privilege for me to come to the heart of German democracy to present our policy responses to the challenges facing the euro area economy.
I know that central bank actions are often a topic of debate among politicians, the media and the general public in Germany. So I would like to thank President Lammert and all Committee Chairs most warmly for this kind invitation – and the opportunity it gives me to participate in that discussion.
It is rare for the ECB President to speak in a national parliament. The ECB is accountable to the European Parliament, where we have scheduled hearings every three months and occasional hearings on topical matters. We take these duties of accountability to the citizens of Europe and their elected representatives very seriously.
But I am here today not only to explain the ECB’s policies. I am also here to listen. I am here to listen to your views on the ECB, on the euro area economy and on the longer-term vision for Europe.
To lay the ground for our discussion, I would like to explain our view of the current situation and the rationale for our recent monetary policy decisions. I will focus in particular on the Outright Monetary Transactions (OMTs) that we formally announced in September.
Financial markets and the disruptions of monetary policy transmission
Let me begin with the challenges facing the euro area. We expect the economy to remain weak in the near term, also reflecting the adjustment that many countries are undergoing in order to lay the foundations for sustainable future prosperity. For next year, we expect a very gradual recovery. Euro area unemployment remains deplorably high.
In this environment, the ECB has responded by lowering its key interest rates. In normal times, such reductions would be passed on relatively evenly to firms and households across the euro area. But this is not what we have seen.
In some countries, the reductions were fully passed on. In others, the rates charged on bank loans to the real economy declined only a little, if at all. And in a few countries, some lending rates have actually risen.
Why did this divergence happen? Let me explain this in detail because it is so important for understanding our policies. A fundamental concept in central banking is what is known as ‘monetary policy transmission’. This is the way that changes in a central bank’s main interest rate are passed via the financial system to the real economy.
In a well-functioning financial system, there is a stable relationship between changes to central bank rates and the cost of bank loans to firms and households. This allows central banks to influence overall economic conditions and maintain price stability.
But the euro area financial system has become increasingly disturbed. There has been a severe fragmentation in the single financial market. Bank funding costs have diverged significantly across countries. The euro area interbank market has been effectively closed to a large number of banks and some countries’ entire banking systems. Interest rates on government bonds in some countries have risen steeply, hurting the funding costs of domestic banks and limiting their access to funding markets.
This has been a key factor why banks have passed on interest rates very differently to firms and households across the euro area. Interest rates do not have to be identical across the euro area, but it is unacceptable if major differences arise from broken capital markets or the perception of a euro area break-up. The fragmentation of the single financial market has led to a fragmentation of the single monetary policy. And in an economy like the euro area where about three quarters of firms’ financing comes from banks, this has very severe consequences for the real economy, investment and employment.
It meant that countries in economic difficulties could not benefit from our low interest rates and return to health. Instead, they were experiencing a vicious circle.
Economic growth was falling. Public finances were deteriorating. Banks and governments were being forced to pay even higher interest rates. And credit and economic growth were falling further, leading to rising unemployment and reduced consumption and investment. A number of economies could have seen risks of deflation.
All of this meant that the outlook for the euro area economy as a whole was increasingly fragile. There were potentially negative consequences for Europe’s single market, as access to finance was increasingly influenced by location rather than creditworthiness and the quality of the project.
The disruption of the monetary policy transmission is something deeply profound. It threatens the single monetary policy and the ECB’s ability to ensure price stability. This was why the ECB decided that action was essential.
Restoring the proper transmission of monetary policy
So let me now turn directly to our recent policy announcements. To decide what type of action was appropriate, we had to make two key assessments. First, we had to diagnose precisely why the transmission was disrupted. And second, we had to identify the most effective policy tool to repair those disruptions, while remaining within our mandate to preserve price stability.
In our analysis, a main cause of disruptions in the transmission was unfounded fears about the future of the euro area. Some investors had become excessively influenced by imagined scenarios of disaster. They were therefore charging interest rates to countries they perceived to be most vulnerable that went beyond levels warranted by economic fundamentals and justifiable risk premia.
Clearly, it was not by chance that some countries found themselves in a more difficult situation than others. It was mainly those countries that had implemented inappropriate economic policies in the past. This is also why the first responsibility in this situation is for countries to make determined reforms and convince markets that they are credible.
But many were already doing this, only for interest rates to rise even higher. There was an element of fear in markets’ assessments that governments, acting alone, could not remove. Markets were not prepared to wait for the positive effects of reforms to emerge.
In our view, to restore the proper transmission of monetary policy, those unfounded fears about the future of the euro area had to be removed. And the only way to do so was to establish a fully credible backstop against disaster scenarios.
We designed the OMTs exactly to fulfil this role and restore monetary policy transmission in two key ways.
First, it provides for ex ante unlimited interventions in government bond markets, focusing on bonds with a remaining maturity of up to three years. A lot of comments have been made about this commitment. But we have to understand how markets work. Interventions are designed to send a clear signal to investors that their fears about the euro area are baseless.
Second, as a pre-requisite for OMTs, countries must have negotiated with the other euro area governments a European Stability Mechanism (ESM) programme with strict and effective conditionality. This ensures that governments continue to correct economic weaknesses while the ECB is active. The involvement of the IMF, with its unparalleled track record in monitoring adjustment programmes would be an additional safeguard.
The consequences of the ECB’s actions
So what are the likely consequences of the ECB’s actions? Before announcing the OMT programme, we considered very carefully the possible risks – and we designed our operations to minimise them. But I am aware that some observers in this country remain concerned about the potential impact of this policy. I would therefore like to use this opportunity to go through those concerns – one by one – and explain our views.
First, OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments. All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline.
Second, OMTs will not compromise the independence of the ECB. The ECB will continue to take all decisions related to OMTs in full independence. It will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. The fact that governments have to comply with conditionality will actually protect our independence. The ECB will not be forced to step in for a lack of policy implementation.
Third, OMTs will not create excessive risks for euro area taxpayers. Such risks would only materialise if a country were to run unsound policies. This is explicitly prevented by the ESM programme. And we have been very clear that each time a programme starts being reviewed, we will routinely suspend operations and resume them only if the review has been concluded positively. This will ensure that the ECB intervenes only in countries where the economy and public finances are on a sustainable path.
Fourth, OMTs will not lead to inflation. We have designed our operations so that their effect on monetary conditions will be neutral. For every euro we inject, we will withdraw a euro. In our assessment, the greater risk to price stability is currently falling prices in some euro area countries. In this sense, OMTs are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it.
Moreover, we see no signs that our announcement has affected inflation expectations. They continue to be firmly anchored. This is testament to our track record on price stability over the last decade and our credible commitment to maintaining price stability. The citizens of the euro area can be confident that we will remain permanently alert to risks to price stability. We have all the necessary tools at our disposal to maintain it and to withdraw any excess liquidity in case of upward risks to price stability.
Conclusion
Let me conclude these opening remarks.
Three elements are essential for understanding the policies of the ECB: immutable focus on price stability; acting within our mandate; and being fully independent.
The ECB’s new measures help to ensure price stability across the euro area. They also contribute to improving the economic environment. But completing that task of economic renewal demands continuing action by the governments of the euro area.
It is governments that must set right their public finances. It is governments that must reform their economies. And it is governments that must work together effectively to establish an institutional architecture for the euro area that best serves its citizens.
We are already moving in the right direction. Across the euro area, deficits are being cut. Competitiveness is being improved. Imbalances are closing. And governments are working seriously to complete economic and monetary union.
It is important that Europe’s leaders stay on course. In doing so, they will be able to unlock fully the enormous potential of the euro to improve living standards and carry forward the project of European integration.
Thank you for your attention – and I look forward to our discussion
»
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re: Graph: Really? They don't have German credit card data for 2008? Too far back in the dark ages to quantify? Were they still running them on the carbon paper imprinter and calling in the transactions?
Forgive me...not trying to "Thread Jack" but this is the most important story of the day. Tyler, hope you will post this. Emails show that Obama knew Libya was a "Terror Attack" and then lied about it. Why?
http://www.reuters.com/article/2012/10/24/us-usa-benghazi-emails-idUSBRE...
What, Choomboi told a fib? No way.
Even after it was known that they were watching it real time via drone? No no way.
Yeah, why would a politician lie?
Germans essentially didn't use credit cards in 2008. They have their EC cards, which are a curious hybrid debit-card-with-a-line-of-credit. These are accepted in every cafe and shop. The teaser intro rate of 5bp for acceptance led to it's wholesale adoption as the first and only form of plastic payment accepted in non-tourist destination Germany. After a few years the issuers tried to (dramatically) raise the discount - to bring it close to par with V/MC somewhere above 100bp, the regulators didn't allow them to. Thus, merchants are mostly unwilling to accept any plastic but the EC card (who'd pay Amex 2.5% when "everyone" has an EC card and it only costs 0.05% to accept?). I think the discount rate for the EC is now something like 35bp. The landscape has changed a little as more Starbucks, etc come in, but only somewhat. Still, Germans carry a lot of cash. Not as much as the Japanese, but a lot.
Has not helped Stocks or commodities catch much of a bid this time, looked like it might for a short while but faded fast.
Try harder Mario
Wasn't Draghi the lynchpin of Spectre in the old James Bond series?
The "proper transmission of monetary policy" for this stupid cunt is an icepick through the eye, or other similar Bond-like termination.
How about laser beam to the scrotum?
They're in a bit of a cleft stick here, in my opinion. They want money velocity to increase... but they want to moderate inflation fears to keep the germans from getting too antsy.
At the end of the day, though, their primary objective is to keep propping up their masters, the commercial banks' owners and bondholders. The effect this has on the rest of us comes a distant second in their considerations.
"OMTs will not lead to disguised financing of governments." I do not understand how this is not, at least in some form, "financing" governments. Buying bonds to push down yields qualifies as "financing" (at least indirectly) in my book.
Shit, Draghi is on about 'Outright Moonbat Transactions' again?
* YAWN *
Dude needs a new speechwriter ...
You fool. The bank bought the bonds from the government 10 minutes ago, and had NO IDEA it was going to flip them to the ECB!
And the band plays on.
<sigh>
the Titanic is on its maiden voyage and its "all aboard" now..vestal virgins will be much appreciated when the Gods want a sacrifice.
Until further notice all Bands to be replaced with Police in riot gear
Times are changing, gotta love this 'democracy' BS and how Govt is making the world such a nicer place to be in ....riiiight
Stop Paying Tax ...thugs in riot gear need wages, don't pay 'em
Let me sum it up for you:
Zaund manei iz e zing ov ze past. Ei, Mario Draghi, em going tu distroi jur sawings.
...But I am here today not only to explain the ECB’s policies. I am also here to listen. I am here to listen to your views on the ECB, on the euro area economy and on the longer-term vision for Europe...
Two edged sword and warning of dire outcome...if they don't play ball.Basically what he is saying is : we are in this together and if you dont want our sauna bath to bubble hot steam and cauldron trouble support me up to the hilt of my gilt edged roman dagger; my gladius of fiat.
What a bunch of BS, the only thing the so called leaders are about to unlock is more pain and misery for anyone who is not part of the elite.
It's only legitimate inflation if theres consensual monetization.
There's sure as hell been enough fore play.
7,000 policemen? What if he really needed 7,001?
The internet has a lot to answer for, and has a lot for us to be thankfull for. Thanks to places and sites like ZH, we can see that not all of us are money hungry shitbags, trying to get one up on our fellow man.
And we can also see the deprivations that the ruling class are willing to go to, to make us all even more subserviante to their downright criminal, and at times insane agenda's. At least places like the hedge can let folk from around the world see and experience that we all are not greedy bastards looking for the edge in a world where your wealth is created from thin air, on a promise from a corrupt rentier class that dictates to the world what a days labour is worth.
And more and more folk are awakening day by day. Thank you ZH, and thank each and everyone of you bitchez on here for allowing something that has never been either allowed, or even thought of before. Letting dumb fucks like me see I am not alone. The internet really has changed the world.
And before the PTB turn it off, let me raise a toast to all that believe that mankind really is better than this. We really are.
Supplement this lovely invocation with some peyote buttons, and we've got the makings of a new (and tax-exempt!) religion.
Ayn Rand died for our sins.
I mean it machineh.
4 years ago I knew fuck all. And now I do. Its all thanks to fuckers like you. I wish you all the best, whoever you are......
;-)
Hear here!
>we all are not greedy bastards looking for the edge in a world where your wealth is created from thin air
Speak for yourself.
But seriously, you are correct. ZH is important journalism.
+
g
stay liquid my friends
The ECB’s new measures help to ensure price stability across the euro area. - Draghi
Fuck you, piece of Goldman shit liar.
My thoughts to the letter
who voted him in to provide "price stability"
prices go up and down, of everything on the planet, who the fuck gave this un-elected Goldmanshite a-hole any mandate to do otherwise?
I like Greek debt at 21%
With Credit Card use like that (See Graph A), Germany is far behind the rest of the world in debt... I recommend germans getting a Visa and Master Card asap... otherwise the world will collapse... -- LOLS!
Credit card use has always been low in Germany and The Netherlands as they introduced debit cards a long time ago, and it's easy to have cheap overdraft - in The Netherlands standard €2500 with very low interest.
Only for renting a car or buying something online you need a credit card, but also there you can pay with alternatives, like electronic bank transfers etc, again much cheaper than craedit cards.
Within the EU electronic banking is highly evolved and cheap, can't compare it with the USA where banking is a nightmare.
Interesting is that The Netherlands embraced debit card use, and germany did not.
Or you could try the backwoods UK where it takes 4 days to clear a cheque and there are only five banks........but then again try and settle a share deal........bankers still travel in stage coaches
"First, OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments."
He got this line of shit from Ben. Have you ever heard of front running, Mario, you liar?
Did his lips move? If so, he lied!
Personally, they have the acronym all wrong...
Its always been and always will be OPM!...
Other Peoples Money
Omnipresent Pauperized Muppets
This is just another pre planned stepping stone to total monetary/ societal control.
Take your pick from the following menu.
1. Direct monetization.
2. Capital controls
3. Price controls
4. Banning cash and other currencies
The list goes on and on.....
"OMTs will not create excessive risks for euro area taxpayers. Such risks would only materialise if a country were to run unsound policies"
Can anybody point me to a western country running sound policies? Anywhere? They've all gone full retard insane.
who cares... when we have
YouTube - CDC Asks President Obama's Help in Stopping Romnesia: a viral Plague Sweeping across America!
Did he say this shit with a straight face?
Socialism! Yeayyyyyyyyyyy!
The IMF will save us all. They have a plan (scientific paper) to get rid of fractional reserve :-)
Isn't Madame Lagarde great?
There is a reason for 1000 Euro and 500 Euro banknotes - the same reason they are banned in the UK
If the banks buy the bonds from the governments, and then turn around and sell them to the ECB - then there is no monetizing going on...since all the ECB purchases would be done in the secondary market.
How corrupt does a person need to be in order to make that assertion with a straight face?
Stunning...
Now which other western entity does that I wonder?
Your Fed jealousy is showing euro- peons...
"If interventions take place, they will involve buying government debt from investors, not from governments." - and the crony banks will get involved in buying government bonds selling them immediately to ECB.
"The ECB will not be forced to step in for a lack of policy implementation." - and perhaps also not to step out; in case of not meeting criteria of conditionality or agreed policy implementation ECB can independently and fluently continue supporting debtors behind the scenes.
"OMTs will not create excessive risks for euro area taxpayers. Such risks would only materialise if a country were to run unsound policies. This is explicitly prevented by the ESM programme." - this, of course, can't happen... perhaps, except for Greece, Portugal, Spain, Ireland, Cyprus, Italy and France. But implicitly only.
"OMTs will not lead to inflation. For every euro we inject, we will withdraw a euro." - right, but some clarification to this point in a simplified form; for every euro we inject to banks the euro will either park on deposits and will never reach the market place, or we will eventually withdraw the euro from personal savings.
"We see no signs that our announcement has affected inflation expectations" - ok, then wait for tommorrow.
No, Mario obviously doesn't believe a single word he pronounced either. He is basically not a believer but a pragmatist doing what he has been doing all the time, what Goldman is always the best at, and what politicians are so keen on listening to - to keep the reliably-looking scam going.
"OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments. All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline." - Ministry of Truth
I feel, I don't know. I feel like I am the one insane. Confusion. Doublethink, Always at War with Oceania. I can't put together a coherent response. Truth is a lie. 2+2=5, and it is true freedom. The alternative is rats eating my face.
These dumbfucks are delusional.....
Boy.....
Lucky that deflation didn't get us......
Fuck Off banker.
This all, in my humble opinion, is a proof of existence effective supernatural forces. In spite of all, the economy is still running, people are relatively happy with the system, supporting and voting the same puppets and accepting the propaganda or being identified with the carefully fabricated life style. The Ashkenazi Khazars are simply geniuses who know how to manage society with a carefully prepared mixture of truth, lies, subtle social manipulation or magic but still respecting the needs of ordinary people to keep them satisfied or at least to trick them into believing it. It's a sort of well-balanced social alchemy, which when viewed from the artistic point of view, should be considered an admirable artwork. The fact that such an organized society can be running for so long without respecting basic ethical, social or even natural laws is stunning. We have definitely missed some crucial point to grasp the essence...