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Why European QE Will Not Help (In 2 Simple Charts)
With the world (or mostly the Japanese) front-running Draghi's ever-increasing threat of QE in Europe, Spanish and Italian government bond yields have reached levels commensurate with insanity compared to their risk (event and macro). Lower rates are great news right? They encourage growth... as the cost of borrowing drops across the nation's capital assets and the phoenix rises from the flames. Well - as the following 2 charts show - no! The lower rates are not 'trickling down' to real loans and loan creation continues to contract. So, aside from direct lending to SMEs, what exactly will Draghi's direct monetization of peripheral European bonds do aside from provide the leveraged speculators with their willing buyer to take profits (just as it did the last time he decided the time was right to buy bonds).
Chart 1 - Despite record low government yields (black), real borrowers (red) are not seeing rates falling -in fact risk premia for non-government borrowers looks like it is at a record high!!
(h/t @M_McDonough)
Chart 2 - Demand is not there...
the balance sheet recession has left people and companies minimizing debt as opposed to maximising profit and a deleveraging banking system (stoking its balance sheet with 'riskless' sovereign debt as it collapses any form of risky - and therefore haircut - lending) mean loan creation continues to contract - despite record low costs of funding...
So what exactly is the point of European QE? Why now? Who for?
As we noted before...
Draghi continues to be in a no way out, since credit destruction is not bad enough to prompt much more easing, or certainly QE, and is not nearly good enough to stimulate any economic growth except net of GDP definition revisions.
Here is the breakdown by country on a three year basis:
And the Y/Y change in outstanding levels:
Given the anticipation that is now built-in for this week's ECB meeting, we hope that Draghi has a little more up his sleeve than reviving the Treaty-testing, bondholder-subordinating SMP. Presented with little comment is the market's reaction during the last two periods of buying as it seems that Italian and Spanish bondholders are more than happy to know that there will always be a buyer no matter how much they keep selling their exposure down.
Lower pane is the weekly purchases of bonds by the ECB and the upper pane is the now all-important spread between Italian and Spanish bonds and the German Bund - higher being more risky.
Well that plan didn't work so well eh? It would appear that during the 2010 period spreads doubled from 100bps to 200bps and once again during the 2011 period, spreads almost doubled from 260bps to over 500bps in Spain.
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Some day, Alice, to the moon!!!
Because they have the orange leather-face Lagarde, and not the stunning looker Yellen?
Off topic survey:
Who gives a shit what Lewinsky has to say about the Clintons?
Who is sick and tired of hearing about the Clintons.
We do! We all wanna hear her talk about that famous cum stain.
Most people will. Celebrities, 15 minutes of fame, Royals, slow-motion eagles and flags, people love this stuff.
https://www.youtube.com/watch?v=woLQI8X2R6Y
Two words - Diminishing returns.
...and diminishing credibility.
"Sorry folks, the E.Z. is closed, the moose out front should have told you".
now i watched Gold and Silver trade all day like i do most days...
they traded in the silly sideways narrow range ALL fucking day on widespread negative economic data - AGAIN....
and then guess what happened goin into the last hour of trade on Fraud Street heading into the Globex where aint nobody but the MoneyChangers trading????
http://www.kitco.com/charts/livesilver.html
its a bad fucking bullshit cocksucker bithc ass banker JOKE.
For your sanity you should turn off the ticker and go take a jog. Watching a manipulated chart all day seems like a waste of time. Get on with your life; you'll have your insurance when the time comes.
thanks (i think) for the concern, but "get on with ur life" is pretty presumptuous...
thanks anyway Guru.
Don’t be depressed, there’s a reason it’s suppressed.
Somebody out there wants a deal even if they have to steal. ( ha.. I are a poet).
Get away from the computer, get some fresh air and go out and buy some more Ag.
http://goldsilverworlds.com/physical-market/jp-morgan-holds-highest-amount-of-physical-silver-in-history/
Today I bought some Ag.
Then I took my dog for a walk in the countryside. The sun was out. The dog was a'huntin' fieldmice.
Life is gooood !:O)
Silver got big support on 20,24
and he make inverse SHS
and first under triangel broke on upside ( jun, jul, 2013) was first shoulder, Head was sideway ( dec, jan ) and now it make a right shoulder. just broke upside of rung and now is in small triangel on 4h chart.
looks like a bottom to me
The point of QE isn't to lower private borrowing costs, it's to lower the value of the Euro.
... and why they will do it anyway:
http://brianedwardsmedia.co.nz/wp-content/uploads/2012/01/397087_1015051...
It would be fabulous if this QE attempt just blows the wheels off this stupid 1-world economic hoopdie.
Something will anyway, sooner or later.
The "system" is broken! Day of reckoning is coming!
Message from Jim to the shit-throwing monkeys: http://temporary-burning-platform.tumblr.com/
Thinker
world need structual changes and not QE. that is what EU is doing. all i can hear from MSM in my country is what kine of direction ( law)we get from EU, and EMU will get one supervision on banks.. so no cuntry in EU dont make a there own fiscal politics ( coz everyone own germans so the germans make the rule), no cuntry will not have a domestic bank control and no country dont have a domestic army. and that QE didnt help not in the US not in the japan, GB, or chinese...
and thats why they will not do it in EMU
when the ship go down EMU got 10700 T of gold. they will be in a good position.
If things get rough across the globe expect eyes return to Europe, where they continue to talk. I have not written much about the Euro-zone economy or banking system as of late because nothing is really happening.
The Euro-zone is engaged in a talkathon, with fear of an immediate collapse off the table the members of the Euro-zone much like their political counterparts in America just talk about solutions without any action. Below is an article updating what is not happening in Europe.
http://brucewilds.blogspot.com/2014/04/euro-zone-update.html