Goldman Says European QE Will Come In 2015 At The Earliest, If At All

Tyler Durden's picture

It appears someone finally read what none other than Mario Draghi said about the prospect of Eurozone QE back in December 2011. To wit:

Question: Why is it so impossible for the ECB to act like the other central banks, like the Federal Reserve System or the Bank of England? Why do you not act more directly to help European countries by buying up the debt on a massive scale?


Draghi: As I said before, we have a Treaty and the Treaty states what our primary mandate is, namely to maintain price stability. Also, the Treaty prohibits monetary financing. I am old enough to remember that, when this Treaty was written in the early 1990s, some of the countries around that table were actually doing what you suggest doing now, namely some of the central banks of these countries were financing the government expenditure of their governments through money creation, and the consequences were there for all of us to see. That is why, in a sense, this Treaty embodies the best tradition of the Deutsche Bundesbank, whereby monetary financing has always been prohibited. 


Question: Mr Draghi, speaking in Parliament you also emphasized that the ECB would ensure price stability in both directions. Does that mean that there is a fear of deflation? My second question is, from a purely legal point of view, do you think there is any limitation on the ECB regarding the amount of government bonds that can be bought, as long as it can be justified on the basis of monetary policy considerations.


Draghi: At the present time we do not see a high probability of deflation. That is one point to keep in mind. The second point is, as I have said many times, that the purpose of the SMP is to reactivate the transmission channels of monetary policy. As I said in the statement to the European Parliament, the SMP is neither eternal nor infinite. We must keep this in mind and we do not want to circumvent Article 123 of the Treaty, which prohibits the monetary financing of governments.


And secondly, you have mentioned Article 123 in the Treaty. Would you consider active buying at around the time certain instruments are issued to be something that would be state financing, and would you regard that as being against ECB law?


Draghi: On the first issue, we are aware of the technical complexities that would arise with the SMP having an infinite size, but we will think about this. As for the other question, one can construct many different cases. But, as I said before, the key thing is that we should not try to circumvent the spirit of the Treaty. No matter what the legal trick is, I think what matters for the people and what matters for the confidence and credibility of the institution is the spirit of this provision of the Treaty.

Funny how three years later Draghi couldn't care less about the "credibility of the institution." However, the issue with Article 123 still remains. Which is why we were not at all surprised to find out that none other than the bank that spawned Mario Draghi said not to expect a European QE until 2015 at the earliest... if at all.

From Bloomberg:

  • Goldman’s Andrew Wilson Says QE in Europe a 2015 Story If at All
  • European economy would have to weaken significantly before QE comes into play, said Andrew Wilson, co-head of Global Fixed Income and Liquidy management team at Goldman Sachs Asset Management.
  • Says Draghi has foreshadowed policy easing at next meeting, expects ECB to cut rates 1-2 times before they look to other methods such as an LTRO
  • Says if other methods don’t work it would “ultimately have to be QE”
  • Wilson was speaking at media roundtable in London

Of course, the biggest irony here is that should the algos and few residual non-manipulated FX traders left continue to push the EURUSD lower, then the ECB will have zero incentive at all to act, which of course will send the EURUSD soaring right back up to 1.40. Which, further as Deutsche warned, would "shatter" the ECB's credibility... but who really thinks any central bank has any credibility left?

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pods's picture

I think this is why they have the term "day late and a Euro short."


knukles's picture

Who in their right mind gives a fuck anymore about whether they do or don't, as it's already become so screwed up by the ones and same central banks and crony capitalists that it doesn't matter.
It's already broke and nobody's doing anything to fix it.

All Kabuki Theater


Bill of Rights's picture

Like the Greek on and off switch of to "Bailout and not bailout" a few years back,  this Euro QE trickery will be the new prrophganda to swing the markets up and down, Goldman is just giving you the heads up to train our thoughts. Everything these people do has a reason behind it.

TBT or not TBT's picture

It's worse in Europe than just, 'the system is so screwed up that x'. They have dead meat, buh-bye demographics in Europe that no debt jubilee or sudden adoption of say AynRandOnomics could fix. The legitimacy of the governments there is tied to same governments supplying welfare, welfare, free stuff, short working hours, long vacations, job security, but these services cannot be supplied except with declining quality and scarcity. It's all going to hell. Because they have not been making more Europeans. They have been importing third world peoples who reject western values while feeding on and multiplying within europe's walking dead body.

Super Marco's picture

Goldman: And if not, we'll just lobby for it to come in 2016.

FieldingMellish's picture

I am certain I saw GS tell the muppets to short EURUSD recently.

elwind45's picture

When the trillions from those nice Americans at the FEDERAL RESERVE run out I guess Europe would require a stiffer upper lip and to do something for themselves? AFTER HOLIDAY we will be in the same pickle as before holiday and.......

WhyDoesItHurtWhen iPee's picture

Article 123, it's as easy as A B C.  Grammer rock baby.  Did MJ write this treaty ?

alphamentalist's picture

nein! nein! nein! das ist verboten!

Schmuck Raker's picture

There used to be an expression when I was much younger: "Bank on it." Don't hear it much anymore.

SheepDog-One's picture

The new expression is 'Bend over'.

JailBanksters's picture

Assume I've been in a Coma for the past 10 years....

But when was the last time QE acually worked, and I mean for any country and could actually function without it for more than 12 months ?

Come on just one, there has to be at least ine ? otherwise they wouldn't keep trying the same thing over and over and expecting different results would they ?




Dr. Engali's picture

Your assumptions are faulty. You believe that QE is supposed to help the economy, which it is not. QE is supposed to prop up the status quo and to continue the wealth transfer from the middle class up to the 1%. When you consider these facts, QE is a roaring success.

Dr. Engali's picture

This writing is for muppet consumption. The Squid doesn't give a damn about laws or treaties. QE will come if and when the Squid wants it to come.

Spitzer's picture

No QE is coming, euro haters

Shad_ow's picture

Yes it is, and yes it has.  QE is now just code for "screw you."

Spitzer's picture

Everything has been sterilized. Plus the ECB sheet has only grown 11% since 2008. Fed is 36%

yogibear's picture

Bernanke and the Fed had trillions in swaps? The US Federal Reserve was bailing out the banks in Europe as well.

They will all try and massively inflate down the debt.

SheepDog-One's picture

Sure, a lot of the Fed QE was FOR European banks....this is all just a big shit show.

elwind45's picture

I did notice the GP in Spain had ALOT of empty seats amougst the ultra-expensive boxes! However it was still very well received and attendees must go directly back to the gutter after the event due to international coverage! We would suffer if they find out its not as bad as we tell them it is over here?

Ghostdog's picture

"Says if other methods don’t work it would “ultimately have to be QE” Sounds like he has a lot of confidence in it.

NDXTrader's picture

Surely he's mistaken...because big Euro QE is being priced in as we speak and the market is never wrong

TheMonetaryRed's picture

I also remember that three years ago this blog was filled with perfectly confident predictions of hyperinflation and currency collapse. 

SheepDog-One's picture

I never hyped hyperinflation, because broke people can't afford it. As far as reserve currency goes, they all have a limited lifespan.

Quinvarius's picture

I still confidently predict hyperinflation and currency collapse.  The continued rising prices in the face of offical lies seem to have left you confused.  I don't need the TV.  I can do math.  Monetizing infinite bad credit means printing infinite money.  They are not going to stop because they never can.  They are just going to lie.

malek's picture

I am actually much more confident than 3 years ago that we will get hyperinflation at some point in the not too distant future.

As there is no permanent Goldilocks, the second option would be massive deflation, which in effect would mean the weak and corrupt hands would fail and the more competent managed survive. Look around you what rule or law the political deciders have not bent or broken to keep their buddies economically alive - do you believe they're going to stop some day?
And even the staunchest deflationist bloggers have now softened their tone a lot.

There is actually a third option, that the US manages to collapse all other currencies before our own, leaving the US Dollar standing as the cleanest dirty shirt.
While I am not underestimating the manipulative abilities of the US and closely allied, I don't believe they can pull that one off.

Ghordius's picture

what is actually the credibility of a national or central bank? that they will do what they say? or that they will do what they feel it has to be done? or that they will follow the laws/treaties governing them? that they are properly audited?

when Draghi said "whatever it takes", fact is that the markets took his warning as very credible, i.e. believed him

which is just a testimony to the understanding that many bond buyers and sellers have of how the 18 members of the ECB "tick", as well as what "BuBa Tradition" means. and of course the fact that many bonds have repatriated, i.e. they came back to their countries of origin. and the "firewalls" instead of the "wall of money" that Obama was asking for. and many other things

eurozone national banks have a long history of treating certain financial manouvers as attacks, and respond to them. that was where the whole bloody idea of having one currency came from, for criminy, then size is key, in finance

meanwhile, most of the "deflation" in the eurozone is still about lower energy prices. not the kind of deflation I'd fight tooth and nail

TBT or not TBT's picture

How confident are Europeans? So confident they stopped having kids decades ago.

evernewecon's picture



One great way of selling

debt is saying hey y'all, 

QE's coming.  


India accelerated bank

loss taking, raised interest

rates modestly, and the rupee



The game monopoly has the 

toy maker's logo on it, 

ours has a pyramid, which

seems apt, and someday

someone (Iceland?) will have

a currency with a big

D on it for democracy.


SheepDog-One's picture

So if Golden Slacks is right and EuroQE is far off, or never....then the Central Plansters are just buying a few days of market pumping with their lies. Are things really THAT bad behind the curtain? Sheesh let's hope not.

SheepDog-One's picture

Then again, when have any of these Central Planster ass hats actually stuck to anything they said previously? Draghi said something in 2011? Hell, you may as well be talking about the Mesozoic Era.

John Law Lives's picture

Insiders need someone to purchase their shares in order to profit from the market rally.  I imagine TPTB would say just about anything to keep the lemmings drinking the Kool-Aid (i.e. buying shares).  Wealth transfer continues.


CPL's picture

I wouldn't count on it. Plant a garden.

Quinvarius's picture

They have been doing it since 2009.  I don't even undersatnd this conversation.  Look at a chart of the ECB balance sheet.

Jack Sheet's picture

If you believe this, then you also believe that QE in the US is currently only $45B per month.

Bernoulli's picture

Oh yeah? Some Goldman twat is telling us what another Goldman twat will do or not do?


gapcrap's picture

Draghi has indicated that he is ready to print by June. I translate: Germany has informed Draghi that if Europe has to impose further economic sanctions against Russia, Germany will be hit and therefore is willing to soften the blow to its economy by authorizing Euro bonds. The deadline is June.