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Mario Draghi's Worst Monetary Zombie-Infested Nightmare Just Got Worse... In Two Charts

Tyler Durden's picture




 

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.

But here's the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB's balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.

SocGen agrees:

The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.

 

Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.

The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the  July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.

 

On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.

 

Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.

Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe's credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe's unemployed) people.

In the meantime, we now fully expect a very unclear Draghi, plagued by monetary zombie dreams, to do everything in his power, even though as SocGen notes he really has no power in this case, to show he has not lost control and start with a rate cut in the November ECB meeting (eventually proceeding to a full-blown QE) in order to boost loan creation. He will fail.

 

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Fri, 10/25/2013 - 08:18 | 4089569 GetZeeGold
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Time for another press conference!

Fri, 10/25/2013 - 08:56 | 4089654 Sudden Debt
Sudden Debt's picture

A HEIDEL Press conference!

Fri, 10/25/2013 - 09:03 | 4089667 Manthong
Manthong's picture

I like the Halloween season.

It’s when the nature modern politics, economics and society at large all resonate with the spirit of the time.

Fri, 10/25/2013 - 08:20 | 4089570 gatorengineer
gatorengineer's picture

US is giving him clear cover to simply print more....  Race to debase....

Fri, 10/25/2013 - 08:19 | 4089572 firstdivision
firstdivision's picture

I'm waiting for the day that in order for people to get a mortgage/car/sudent loan that they have to walk into a regional Fed Office and post body parts for collateral.

Fri, 10/25/2013 - 08:27 | 4089584 GMadScientist
GMadScientist's picture

Whose parts?

Fri, 10/25/2013 - 14:38 | 4090894 Oracle 911
Oracle 911's picture

Preferably politicians and/or banksters.

Fri, 10/25/2013 - 08:22 | 4089577 DeadFred
DeadFred's picture

Maybe Portugal and Euro RHS switched on chart?

Fri, 10/25/2013 - 08:25 | 4089580 Devotional
Devotional's picture

Just wait for the Euro fanatics (on Zerohedge) to come out and cry that "the Euro is worth Gold" <----- true quote from a few weeks ago. Denial.

Fri, 10/25/2013 - 08:33 | 4089592 GetZeeGold
GetZeeGold's picture

 

 

Thank goodness the US has Fort Knox gold to back up the dollar! If you're ever around the area, I'd advise you stop in for a tour of the place.

Fri, 10/25/2013 - 08:51 | 4089638 therevolutionwas
therevolutionwas's picture

Yes, just there this fall.  There were a bunch of boot camp grunts touching up bars with spray paint as they were loaded into crates with some asian lettering prlnted on the sides.

Fri, 10/25/2013 - 11:17 | 4090121 SpanishGoop
SpanishGoop's picture

Sure it wasn't German printing on the sides ?

 

Fri, 10/25/2013 - 08:41 | 4089616 thecoloredsky
thecoloredsky's picture

[CITATION NEEDED]

Fri, 10/25/2013 - 08:26 | 4089581 GMadScientist
GMadScientist's picture

Mmmmm....the on-set of rigor mortis.

Fri, 10/25/2013 - 08:29 | 4089585 Non Passaran
Non Passaran's picture

I am concerned. Things are not getting worse fast enough.
Will those Monte Paschi fuckers fail already?
We need a major crap out to happen yesterday.

Fri, 10/25/2013 - 08:33 | 4089594 lolmao500
lolmao500's picture

While in the 12th century...

http://www.aljazeera.com/news/middleeast/2013/10/saudi-warns-online-back...

Saudis warned of backing women drivers online

Officials say cyber-laws banning political dissent could apply to anyone supporting women driving campaign.

Saudi officials have warned online activists from backing protests planned by women challenging the male-only driving rules in the kingdom. 

Friday's edition of the pan-Arab newspaper Al-Hayat quoted Saudi Interior Ministry spokesman Turki al-Faisal as saying cyber-laws banning political dissent could apply to anyone supporting the women driving campaign.

Conviction can bring up to five-year prison sentences.

The warning widens the possible fallout from the expected campaign by Saudi women with foreign driving licenses to get behind the wheel on Saturday in defiance of Saudi traditions.

Good thing this third world dictatorship holds the USA petrodollar by the balls... Right?

Fri, 10/25/2013 - 08:37 | 4089607 Non Passaran
Non Passaran's picture

And let's not forget Sharia in Brunei

Fri, 10/25/2013 - 08:38 | 4089609 lolmao500
lolmao500's picture

Good thing Murica is supporting their local economy and dictatorship through their base of operations there... uh?

Fri, 10/25/2013 - 08:37 | 4089608 GMadScientist
GMadScientist's picture

Have you see her drive? Maybe there's something you don't know. Just sayin. Could be one of those "Halle Berry" type situations.

Fri, 10/25/2013 - 09:42 | 4089780 Urban Redneck
Urban Redneck's picture

Both friends of the environment and consumers of oil should be FULLY SUPPORTIVE of KSA's efforts to keep women from driving automobiles.

Allowing women to drive will negatively impact the average number of occupants per vehicle on Kingdom roads, directly leading to MOAR cars on the road and MOAR pollution in the air, which their giant fans will exhaust out to neighbors airspace.

Currently, worldwide oil consumers need only concern themselves with demand competition from Saudi men (and air conditioners) for each gallon/litre of the precious they wish to consume... However, if Saudi women are allowed to drive the worldwide oil consumer will be forced to try to outbid a huge army of hijabbed terrorisissssssts (armed with their husbands' black cards) for the incremental gallon/litre to feed their starving "children" (and drive the fictitious fiat GDP growth), all while the non-Allah fearing fools are armed against black cards with only with a McJob paycheck or a paltry handout from Uncle Sam. And BTW- those additional dollars you pay don't go to ExxonMobile, they go to pay the Saudi husband's credit card bills which facilitates their virtuous and ingenuous cycle of INFIDEL IMPOVERISHMENT.

You see, it's actually quite progressive and forward thinking to keep women from driving...

and if you have ever been married to a woman driver from South America you would understand why the above is only half-joking.

Fri, 10/25/2013 - 08:35 | 4089604 timbo_em
timbo_em's picture

...but stocks are up and spreads are down, so all is well! Besides who cares about loans to the private sector when one massively benefits from the wealth transfer?!

Fri, 10/25/2013 - 08:40 | 4089615 GMadScientist
GMadScientist's picture

Perhaps they believe they can retire into the sunset like Ronnie Raygun in Santa Barbara, baking their reptilian selves in the sun; but they'll need protection, and at what price, loyalty?

One by one, not knowing the time or place; a stuck ski-lift becomes a 'gallery' sans "Ducks", a private charter flight has engine troubles, and so and so.

Fri, 10/25/2013 - 08:38 | 4089611 ebworthen
ebworthen's picture

"Winning!"

Fri, 10/25/2013 - 08:39 | 4089613 Doom and Dust
Doom and Dust's picture

I'm confused. Would you rather Mario reflate and monetize like Ben?

At least in Europe, there is a semblance of creative destruction.

Fri, 10/25/2013 - 08:41 | 4089617 GMadScientist
GMadScientist's picture

Not very creative (the derivative works of arsonists).

Fri, 10/25/2013 - 08:53 | 4089643 ebworthen
ebworthen's picture

Draghi and his bankster and central banking cabal of creative destructionist's are like arms dealers who foment civil war then sell weapons to both sides.

Make bad loans to uncreditworthy borrowers, bundle the loans into CDS's and MBS's, sell them to pension funds and governments, crash economies, get bailed out via the taxpayer, increase debt by getting free taxpayer money from central banks - lather, rinse, repeat.

Draghi and his ilk ARE the flesh eating Zombies.

Fri, 10/25/2013 - 08:39 | 4089614 1835jackson
1835jackson's picture

Music is about to stop in the game of musical chairs. But they will never let it happen. Bring in another keg of your finest beer innkeeper...err.ECB.

Fri, 10/25/2013 - 08:46 | 4089625 kaiten
kaiten's picture

I dont understand why in the aftermath of debt-fuelled "growth" is falling credit a bad news. It´s precisely what should happen, no?

Fri, 10/25/2013 - 08:47 | 4089627 eddiebe
eddiebe's picture

What the world needs is a good 5cent cigar!

Fri, 10/25/2013 - 08:47 | 4089629 Bogdog
Bogdog's picture

Cue the Nigel Farage spot-on harangue of Mario in 5, 4, 3, 2, 1........

Fri, 10/25/2013 - 08:52 | 4089639 sudzee
sudzee's picture

The undergroungd economy,free of taxes and regulation, is doing just fine and growing every day in Spain, Greece and Italy.

Fri, 10/25/2013 - 09:10 | 4089675 lamare
lamare's picture

 

Looks like our friend is going to issue another "stess test", whereby he expects that a number of banks will fail the test and thus will need some funds.  So, he "asks" European leaders to make sure they have plans ready in order to support their weak banks with public money:


http://elpais.com/elpais/2013/10/22/inenglish/1382441521_865349.html 

 

European Commission irritated by Draghi’s banking stress test maneuvers

 

The European Commission is upset about a letter sent by European Central Bank President Mario Draghi in the summer, to which EL PAÍS has had access, suggesting that rules on state aid for banks be eased if they put at risk the stability of the European financial sector.

One of the conditions Spain's European partners imposed as part of a loan to recapitalize the country's banks was that holders of preferred shares and subordinated bonds issued by nationalized banks such as Bankia were required to accept a haircut on the value of their investments. Draghi fears the imposition of further haircuts could spark an investment flight.

 

 

The letter has been leaked to El Pais and can be found here:

http://ep00.epimg.net/descargables/2013/10/21/e4c63829a1ef61f17a50533be5...

 

 

 

 

Fri, 10/25/2013 - 09:25 | 4089719 all-priced-in
all-priced-in's picture

Maybe the Baltimore Ravens could do a promotional campaign for Europe.  

Fri, 10/25/2013 - 09:39 | 4089760 NEOSERF
NEOSERF's picture

Doesn't some ridiculous amount of Fed purchasing end up benefiting Euro banks?  Thus per Marc Faber, expect INCREASED Fed purchases vs. the alternative as Europe may make it through the holidays but Feb, March after spending eases will be ugly.

Fri, 10/25/2013 - 09:51 | 4089809 PFO
PFO's picture

Hey Dawgs,

Perusing my morning 'zero' at the guest computers in the foyer of the Hesburgh Library at Not-a-Damn University in South Bend, Indiana.

In the past few minutes ONLY foreign students have walked by - well it is only 9:50 on a Friday morning after all.

The two Chinese chickadees who just strolled by with coffees in hand chattering away were the most precious - the Italianos were second.

The campus seems almost 1/3 foreign students who also seem to spend most of their non-class waking hours here in the Hesburgh.

I'm told upwards of 40% of the student-body is on psychotropic medications and I doubt they are foreign students.

THIS is the real zombie apocalypse, not the macinations of some Eurocrat in Brussels.

Fri, 10/25/2013 - 10:50 | 4090040 Element
Element's picture

Ok, I'll do it.

 

BULLISH!

Fri, 10/25/2013 - 12:37 | 4090389 Notarocketscientist
Notarocketscientist's picture

Fuck it  I am tired of this shit 

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