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Euro Tumbles After ECB Hints At QE

Tyler Durden's picture




 

Despite the ECB's recent "stunning" rate cut, which sent the EUR modestly lower by a few hundred pips, the resultant resurge in the European currency has left the European Central Bank even more stunned: just what does it have to do to force its currency lower and boost Europe's peripheral economies, especially in a world in which every other major central banks is printing boatloads of money each and every month?

We hinted at precisely what the next steps will be two days ago when in "Next From The ECB: Here Comes QE, According To BNP" we said "BNP is ultimately correct as the European experiment will require every weapon in the ECB's arsenal, and sooner or later the ECB, too, will succumb to the same monetary lunacy that has gripped the rest of the developed world in the ongoing "all in" bet to reflate or bust. All logical arguments that outright monetization of bonds are prohibited by various European charters will be ignored: after all, there is "political capital" at stake, and as Mario Draghi has made it clear there is no "Plan B." Which means the only question is when will Europe join the lunaprint asylum: for the sake of the systemic reset we hope the answer is sooner rather than later."

Two days later the answer just appeared when moments ago the WSJ reported that the ECB's Praet hinted more QE is, just as we predicted, on the table.

From the WSJ:

The European Central Bank could adopt negative interest rates or purchase assets from banks if needed to lift inflation closer to its target, a top ECB official said, rebutting concerns that the central bank is running out of tools or is unwilling to use them.

 

"If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal," ECB executive board member Peter Praet said in an interview Tuesday with The Wall Street Journal. Annual inflation in the euro zone slowed to 0.7% in October, far below the central bank's target of just below 2% over the medium term.

 

He didn't rule out what some analysts see as the strongest, and most controversial, option: purchases of assets from banks to reduce borrowing costs in the private sector. "The balance-sheet capacity of the central bank can also be used," said Mr. Praet, whose views carry added weight as he also heads the ECB's powerful economics division. "This includes outright purchases that any central bank can do."

 

The ECB could do more if necessary, Mr. Praet said. "On standard measures, interest rates, we still have room and that would also include the deposit facility," he said. The central bank's deposit rate has been set at zero for several months. Making it negative would effectively levy a fee on commercial banks that park funds at the ECB.

 

The ECB purchased safe bank bonds and government bonds at the height of the global financial crisis and the euro debt crisis, but in small amounts compared with other major central banks.

Of course, there are some legal hurdles:

The ECB's charter forbids it from financing governments.

But, wily as always, the ECB appears to have found a loophole:

The ECB must respect its legal constraints, Mr. Praet said, however its rules "do not exclude that you intervene in the markets outright."

And sure enough, the Euro tumbles just as mandated by the ECB's talking head: let's see if it actually stays lower this time.

And now check to the Germans, who will be positively giddy that first Europe accused it of unfair export-led growth, and now the ECB is openly contemplating tearing off the Weimar scab.

Looks like things in Europe are about to get exciting all over again.

 

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Wed, 11/13/2013 - 10:52 | 4149704 Headbanger
Headbanger's picture

And the race is on to be first at the scene of the crash!

Wed, 11/13/2013 - 10:54 | 4149716 GetZeeGold
GetZeeGold's picture

 

 

The key to success is everyone has to print at the same time.

Wed, 11/13/2013 - 11:08 | 4149777 wallstreetapost...
wallstreetaposteriori's picture

Doesn't the ECB steralize purchases?  Really no benefit if they cant expand the monetary base and the market seems to think that soveriegn periphery debt is "risk-free" again judging by the yields.  

 

It really doesn't matter how low the ECB pushes rates and the euro down, because the rising number of unemployed people defaulting on all their debt wont be able to re-finance that debt, unless the european banks go NINJA style.  

Wed, 11/13/2013 - 11:19 | 4149818 LetThemEatRand
LetThemEatRand's picture

The guys who run the central banks don't quite get and certainly don't care about the whole "demand side" part of the equation.  More wealth to the top is all that matters.  The point is to funnel wealth to the top.  They don't care if we all starve.  The beauty of it is that they have convinced the masses that they are trying to "save the broader economy" even as the act quite blatantly to the contrary.

Wed, 11/13/2013 - 12:48 | 4150254 RockyRacoon
RockyRacoon's picture

So much for the "tumble" in the EUR....

http://finviz.com/fut_chart.ashx?t=6E&cot=099741&p=m5

Wed, 11/13/2013 - 11:28 | 4149885 CrashisOptimistic
CrashisOptimistic's picture

Useful to recall that Draghi's "whatever it takes" has been nothing.

He said he'd buy sovereign bonds, but he hasn't done it.  His threat was enough to lower the yields so he never actually has done it.

This looks a lot like a repeat.  There has always been speculation that the Germans allowed him the ability to threaten doing it, and would complain bitterly about the threat, but will not allow his actually doing it.

Wed, 11/13/2013 - 11:33 | 4149903 XAU XAG
XAU XAG's picture

Wheeeeeeeeeeeeeeeeey for the Geramans just got an internal export order for many German printing presses!

INCLUDING MAITENANCE CONTRACTS!

Wed, 11/13/2013 - 11:04 | 4149744 Sudden Debt
Sudden Debt's picture

DON'T WORRY!!!

IF WE ONLY PRINT 1 TRILLION AT A TIME, WE ARE PRETTY SURE WE CAN CONTROL THE INFLATION EFFECTS!!

 

in other news....

THE McRIB IS AVAILABLE AT McDONALDS AGAIN!!

Wed, 11/13/2013 - 11:20 | 4149841 The Limerick King
The Limerick King's picture

 

 

The Euro is ruling the roost

From stuff that the Germans produced

But times are insane

And strength leads to pain

So printing will be introduced

Wed, 11/13/2013 - 11:13 | 4149794 Nothing but the...
Nothing but the truth.'s picture

The race to the bottom is gathering speed . These central bankers are fucking clueless - all this fiat currency printing is leading to a global economic armageddon. This is 2008 all over again.

Wed, 11/13/2013 - 11:17 | 4149816 Sudden Debt
Sudden Debt's picture

you tell it like it's a bad thing...

Wed, 11/13/2013 - 11:23 | 4149864 The Limerick King
The Limerick King's picture

 

 

The race to the bottom is on

The Dollar, Yen, Euro and Yuan

But I do not care

I'm a smart perma-bear

I'll have gold when all fiat is gone!

Wed, 11/13/2013 - 11:58 | 4149986 Rip van Wrinkle
Rip van Wrinkle's picture

2008.....on steroids.

Wed, 11/13/2013 - 12:24 | 4150121 TBT or not TBT
TBT or not TBT's picture

2008...times 1929

Wed, 11/13/2013 - 10:51 | 4149706 Max Damage
Max Damage's picture

It can't do anything as US banks and the FED control it and they have MOAR toilet paper than the ECB for now.

Wed, 11/13/2013 - 11:21 | 4149849 RaceToTheBottom
RaceToTheBottom's picture

The person who dies with the most toilet paper wins.

Wed, 11/13/2013 - 10:52 | 4149707 101 years and c...
101 years and counting's picture

of course, the best way to weaken the euro is admitting there is no growth.  and spain/italy/portugal/france are insolvent.  spark some fear and then print.

Wed, 11/13/2013 - 10:55 | 4149717 ChaosEquilibrium
ChaosEquilibrium's picture

The Wealthy MUST NOT TAKE LOSSES......it is the STATUS QUO!

 

Wed, 11/13/2013 - 10:56 | 4149725 Cassandra Syndrome
Cassandra Syndrome's picture

The ECB has been doing QE. The LTROs are a form of QE.

Wed, 11/13/2013 - 10:57 | 4149728 ...out of space
...out of space's picture

my friend print euros and now he is in prison. hmm

Wed, 11/13/2013 - 11:04 | 4149762 No Euros please...
No Euros please we're British's picture

I sometimes wonder if pensioners would be better off in prison? Free heating, free food, free healthcare and probably too old to be picking up soap in the showers.

Wed, 11/13/2013 - 10:57 | 4149729 Super Broccoli
Super Broccoli's picture

negative interest rates would "help banks" ???? well it would help me as well dumbass, even Stevy Wonders could see that

Wed, 11/13/2013 - 11:16 | 4149812 Sudden Debt
Sudden Debt's picture

YOU THINK THE BANKS HAVE IT EASY WITH ALL THAT FREE MONEY???!!??

NO MY FRIEND!!

NO THEY DON'T!!!!

ONCE THEY RECEIVE IT, ONE MORON HAS TO OPEN EXCEL

PUT IN ALL THE PROFITS FROM THAT FREE MONEY.... and a little more...

AND DEVIDED IT!! DEVIDED THAT SUM OF MONEY INTO THE AMOUNT OF MANAGERS THAT WORK AT THE BANK!!!

AND IT'S PIRATE STYLE!!! 50% GOES TO THE CAPTAIN, 40% TO THOSE MEAN DRUNK BASTARDS AND 10% TO THE SLAVES WHO DO THE KILLING!!!

 

SO NEXT TIME YOU SEE A BANKER, YOU WISH HIM ALL THE BEST BECAUSE HE'LL PROBABLY BE SPENDING HIS HARD EARNED MONEY!

Wed, 11/13/2013 - 10:58 | 4149730 Mister Ponzi
Mister Ponzi's picture

The good news is that gold is still available at bargain prices.

Wed, 11/13/2013 - 11:03 | 4149757 Max Damage
Max Damage's picture

Even better bargains when they slam it with a flood of short sales again.

Wed, 11/13/2013 - 11:14 | 4149805 gjp
gjp's picture

Yep, here we go again, gold fading fast, silver down, and minor US equity losses just abour reversed already.  SSED

Wed, 11/13/2013 - 11:16 | 4149815 Max Damage
Max Damage's picture

Even the VIX doesn't trade with any sense or normality anymore. It's just another number to manipulate

Wed, 11/13/2013 - 10:58 | 4149731 Ness.
Ness.'s picture

Let's see...  negative depo rates combined with asset purchases and moar free money sure seems like quite the bubblicious brew.

Why don't they just come out and say, 'Just buy the fucking stock market guys, it's all we have left.'

 

 

 

Wed, 11/13/2013 - 10:58 | 4149735 Dr. Engali
Dr. Engali's picture

What a freaking circle jerk. As soon as Yellen is sworn in it will be the U.S.S.of A's turn to devalue in the great race to the bottom.

Wed, 11/13/2013 - 11:19 | 4149830 101 years and c...
101 years and counting's picture

preetty simple if you ask me.  $85b from bennie and the inkjets is no longer enough.  but the economy is "improving" (cough, cough, laugh), so the Fed/Bennie/Fat Cow Yellen will taper.  and the ECB will go on a print-a-thon to get us back to $85B plus some.  probably a total of $125B/month by Feb/Mar. 

Wed, 11/13/2013 - 10:58 | 4149736 Seasmoke
Seasmoke's picture

GOLDEN. 

Wed, 11/13/2013 - 10:59 | 4149738 kliguy38
kliguy38's picture

There's no reason to jump to conclusions here...I'm sure they have it all under control as we enter a sustained growth phase and they just want to insure our "recovery" is "healthy"...........hehehehehehe

Wed, 11/13/2013 - 11:00 | 4149742 tocointhephrase
tocointhephrase's picture

The guy is a Praet, what do you expect!

 

Wed, 11/13/2013 - 11:01 | 4149747 spanish inquisition
spanish inquisition's picture

Who is going to believe the SDR will solve all problems after a "system reset", when the same money masters are in control? They are going to have to try to implement a SDR before collapse or after a collapse and war to buries the bodies to push blame away from the central banks.

Wed, 11/13/2013 - 11:01 | 4149750 buzzsaw99
buzzsaw99's picture

:shocked expression: [/sarc.]

Wed, 11/13/2013 - 11:04 | 4149765 pragmatic hobo
pragmatic hobo's picture

yup, i'm sure this will work just as intended ...

Wed, 11/13/2013 - 11:07 | 4149774 Sudden Debt
Sudden Debt's picture

AND IF IT DOESN'T WE'LL CALL THE NEXT ONE QE2 AND DO THAT SHIT ALL OVER AGAIN!!!

Wed, 11/13/2013 - 11:05 | 4149769 John McCloy
John McCloy's picture

  But we are still tapering one day in May...right?? That's what I heard..YEAH RIGHT...All Dear Leader has left to fake people out is the stock market..only a inept clown like him would sign off on ALL IT TAKES policy to get and keep the markets up. Eventually they will no longer have control..when they announce the ban on short selling after the first 10% off the market that is when we know it is over.

Wed, 11/13/2013 - 11:06 | 4149772 Sudden Debt
Sudden Debt's picture

TAKE THAT BERNANKE!!!

YOU CAN TAKE IT TO THE BANK!!!.... well.... it's just digital money... it's not real paper...  money not backed by paper so to speak....

BUT IT'S AS GOOD AS!!! AS GOOD AS!!!

Wed, 11/13/2013 - 11:08 | 4149776 Bearwagon
Bearwagon's picture

"Here's to stinkin' rich! Yea, stinkin' rich! Here's to ECB! Yea, stinkin' ECB!"

Wed, 11/13/2013 - 11:09 | 4149781 Sufiy
Sufiy's picture

Currency Wars at its prime:


China, India, Turkey and Thailand Buying Record Amount of Gold - What Do They Know The Others Don't?


These two charts present the big picture in Gold Supply and Demand the best. When Central Banks are distorting the markets by suppressing the Gold price the increased Demand is overwhelming the diminishing Supply. The Game of Musical Chairs in Fractional Reserve Gold System continues, but it is very close to its logical conclusion with COMEX deliverable Gold being leveraged of 59 times at least. http://sufiy.blogspot.co.uk/2013/11/china-india-turkey-and-thailand-buyi...

Wed, 11/13/2013 - 11:11 | 4149786 q99x2
q99x2's picture

Banks are doomed. Start using BitCoin.

Wed, 11/13/2013 - 11:14 | 4149803 nakki
nakki's picture

There is only ONE CENTRAL BANK. Pretending that the ECB or FED or BOJ or BOE are separate entities is like saying the dems and repubs are different parties, just more of the same from the people that own said central banks.

Wed, 11/13/2013 - 11:14 | 4149806 Smuckers
Smuckers's picture

QEuro?

Wed, 11/13/2013 - 11:18 | 4149817 WOAR
WOAR's picture

"Everything I do I do for thee, if you want a war I'll give you World WOAR 3..."

-Angela "Gotta Love That German Engineering" Merkel.

Wed, 11/13/2013 - 11:19 | 4149829 RaceToTheBottom
RaceToTheBottom's picture

Every country should print to their heart's content.  We have computers that can sort all this sort of stuff out.

In fact, I would also propose that taxes be outlawed since they are not needed when you can print all you need. 

That way you can even have a balanced budget requirement.

Giving every country a currency printer solves so many problems.

Just buy gold first...

Wed, 11/13/2013 - 11:24 | 4149868 Hughing
Hughing's picture

The idiot CB's will be forced to monetaize evry single fucking thing the banks ever created. The middle class revolving debt will be last; wouldn't want to send the wrong signal to the markets.

Wed, 11/13/2013 - 11:34 | 4149910 eddiebe
eddiebe's picture

Un fucking believable! It just keeps going on and on and on and on.

Wed, 11/13/2013 - 11:51 | 4149957 tocointhephrase
tocointhephrase's picture

Untill it doesn't.

Wed, 11/13/2013 - 12:07 | 4150025 orangegeek
orangegeek's picture

who dat?

Wed, 11/13/2013 - 13:41 | 4150523 Crazed Smoker
Crazed Smoker's picture

Meh.  More of a blip than a tumble.  It went from $1.34 and change to $1.34 and change.  A "tumble" is a kind of headfirst perilous fall.  I have no doubt that it will one day become perilous, but not based on this less than 1% move.   

Wed, 11/13/2013 - 14:00 | 4150619 Nobody For President
Nobody For President's picture

Tyler's 'lunaprint asylum' kind of sez it all...

Wed, 11/13/2013 - 18:32 | 4151804 Youri Carma
Youri Carma's picture

You can say many things about Draghi but the guy is cunningly good at this QE game. And since we all know this will bring us closer to Haides, why not in style with someone of the Ponzi nationality ;)

Hades (Ancient Greek, also Haides, Ploutoon, Plouteus or Pluto, Orcus, Dis Pater (Latin) is a figure from Greek mythology. He is the god of the underworld of Hades and ruler of the dead.

He is also the god of wealth and precious metals. http://img.photobucket.com/albums/v393/youricarma/Miscellaneous/Gold-Dra...

Hades is a son of Kronos and Rhea and husband of Persephone.

ECB Caught Using Fictional Rating System for Italian Bonds Used as Collateral for Loans
9 November 2013, by Mike Shedlock (MISH'S Global Economic Trend Analysis)
http://globaleconomicanalysis.blogspot.com/2013/11/ecb-caught-using-fictional-rating.html

Wed, 11/13/2013 - 20:10 | 4152315 supermaxedout
supermaxedout's picture

purchases of assets from banks to reduce borrowing costs in the private sector.

 

And what should this be good for ? Euroland is not the US nor UK. Credit for consumers is already cheap. Mortgage rates at all time low.  The author does not understand, that in the Eurozone consumption is not going to increase only because credit becomes cheaper. Consumption is going up when the people have more money in their pocket, which means when the salaries and pensions are rising.


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