NIRP DERP: A Chart Of What Europe Economy Really Looks Like

Tyler Durden's picture

Curious what Europe's true economic state is? The chart below, showing Europe's annual inflation or lack thereof, and which just dropped from 0.5% to 0.4%, missing estimates of an unchanged print despite the ECB's ongoing and losing war with disinflation, and soon deflation, shows all you need to know.

From Eurostat:

And from Bloomberg:

Euro-area inflation (unexpectedly slowed in July to the weakest in almost five years, underscoring the European Central Bank’s concerns that the economy is too feeble to drive price growth.

 

Inflation was 0.4 percent compared with 0.5 percent in June, the European Union’s statistics office in Luxembourg said today. That is the weakest since October 2009 and below a median forecast of 0.5 percent in a Bloomberg News survey of 42 economists.

 

Having unleashed an unprecedented round of easing measures, the Frankfurt-based European Central Bank is seeking to rekindle price growth and help the 18-country bloc’s battered economy. For the past 10 months the inflation rate has been weaker than 1 percent, less than half the ECB’s goal, while joblessness has remained stubbornly near an all-time high for months. Adding to the risks are the geopolitical tensions between Russia and Ukraine, and conflicts in the Middle East.

Soundbites from 2012:

“This is most likely the trough in inflation, and inflation will move slowly upwards from here,” said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “It seems unlikely the ECB will take fresh measures to ease policy further -- I don’t see this as a trigger for a large-scale quantitative easing program, as long as this proves the trough.”

More:

“What will be key is more of an economic recovery,” said Johannes Gareis, economist at Natixis in Frankfurt. “It’s clear that inflation will stay under 1 percent for this year, because the output gap and the spare capacity in the labor market are so big that they can’t exert much upwards pressure on prices.”

Optimism still galores:

The ECB predicts economic growth of 1 percent this year, rising to 1.8 percent in 2016. It sees inflation at 0.7 percent for 2014, rising to 1.1 percent in 2015 and 1.4 percent in 2016.

For July, the core inflation rate, which excludes volatile items such as energy, food, alcohol and tobacco, clocked in at 0.8 percent, unchanged from the previous month. The cost of services rose 1.3 percent.

But there is really one phrase for all of this: NIRP Derp.

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Cattender's picture

so it's Bad then?

Eirik Magnus Larssen's picture

The biggest problem with deflation (or, in this case, disinflation) is that it makes the overhanging debt of sovereigns increasingly unsustainable.

AdvancingTime's picture

I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large  percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.

 It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it  leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years.  More in the article below.

http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....

Monty Burns's picture

Interesting perspective. One thing seems certain is that the trillions printed by ECB, Fed and Japan have to seep into the real economy at some stage. And then watch inflation take off.

rum_runner's picture

Why do they have to?  It can only get into the economy if you start making loans or you start just giving people cash directly via "cash for clunkers" type tomfoolery.  

No matter how much you push on the string it doesn't have to push back.

Eirik Magnus Larssen's picture

I agree that this tends to be a very non-linear dynamic. As things currently stand, Europe's economy (and its banking sector in particular) might be able to stumble along for quite a bit longer still, but on the other hand they are not well-equipped to withstand a new and sudden financial shock. This in a world where there's an increasing number of potential catalysts (the Middle-East, Ukraine, Russian counter-sanctions, Espirito Santo, Argentina, etc.) that could produce such a shock without much warning.

It's not unlike crossing a patch of thin ice. We may yet make it across safely, but it would definitely have been preferable if we didn't have to make the trip under such conditions in the first place.

Ghordius's picture

in the eurozone, yes. though only for bankers, then NIRP is, so far, only for banks

jarana's picture

I'd like to point that the "velocity" this "trip" is performed at from "promises" of goods/services to the goods/services these promises rely on is a key point.

That "reliance" on the goods/services to really be out there for each "promise" is based upon institutions.

Garbage institutions -> garbage society. It will unfold after any change in money velocity in a Minsky-unstable manner.

Note that this unstability is intrinsecal to garbage institutions (e.g. money management in monopoly regime), not to CAPITAlism.

Good lecture for Money Cuantitative Theory criticism:  (sorry but it's in spanish).

Austrian witch. Let's burn him for telling the truth.

Ghordius's picture

while inflation makes them more affordable? as far as I remember, generally speaking countries with inflation have to pay higher yields, which makes every single base point of inflation cost a multiple in yield

I know one kind of business that loves, loves, loves inflation, though, and even thrives in times of hyperinflation. drum rolls... banks

Sudden Debt's picture

But deflation causes these low interest rates on our saving accounts...

so...

WAITOR!!! JUST PUT A EXTRA 1000 EURO'S ON THAT BILL AS A TIP!!!

WHY SAVE MONEY, RIGH?! I spend more because my saving account doesn't pay interest....

so why have a nestegg for bad times....

Ghordius's picture

this is, as our German friends say, SCHEISSE, yes. down below we see our ZH collegue, Dork of Cork, mouthing against the rentiers

that's us, savers

but WTF should we do? the FED drives the global rates. whenever we had too much difference, HOT MONEY flooded the eurozone

and eurozone banks are still, generally speaking, repairing their balance sheets. all in all it's a "save the bloody banks" extra-tax. remember to say thank you, to our bankers but particularly to our dear FED

now excuse me, I have to throw up

THE DORK OF CORK's picture

There are some deductions of major importance which can be made from these premises.
The first is that money is nothing but an effect- (131) tive demand. It is not wealth, it is
not production, and it has no inherent and indissoluble connection with anything
whatever except effective demand. That is the first point, and it would be difficult to
overrate the importance of a clear grasp of it. It lies at the root of the question as to the
true ownership of credit-purchasing-power. The second point is that, so far as we can
conceive, the co-operative industrial system cannot exist without a satisfactory form of
effective-demand system, and the result of an unsatisfactory money system (that is to say,
a money system which fails to function as effective demand to the general satisfaction) is
that mankind will be driven back to the distinguishing characteristic of barbarism, which
is individual production. And the third point, and the point which is perhaps of most
immediate importance at the present time, is that the control of the money system means
the control of civilised humanity. In other words, so far from money, or its equivalent,
being a minor feature of modern economics, it is the very keystone of the structure”

CH Douglas.

Talk about savings till the cows comes home but you are saving in a physical system of production distribution and consumption which is breaking down.

Ghordius's picture

I understand your (political) demand for (political & "people's") money. Question: has this ever been attempted? With success?

THE DORK OF CORK's picture

Not strictly speaking  but I guess  the Plantagenets got closest to the ideal when they kicked out the money lenders.

falak pema's picture

Lol, funny that. They kicked them out because they couldn't repay them like Lady Kirchner today.

Edward III drove those Tuscan banks bankrupt with his borrowing for his 100 year forays into France. Black death and war broke the backs of some banks in Sienna and Florence; only to be reborn, as money is an aphrodisiac (dixit Dear Henry of Pax Americana --not a Plantagenet !).

THE DORK OF CORK's picture

@Falak

Never said they were nice guys ..........

But its pretty much a proven fact that the real rot in the British Isles happened during the Tudor period where yield from debt overpowered the land based  wool for wine trade.

Yield from debt means you must turn a cooperative system into a ranch based system of surplus production as happened during the clearances and the Cromwellian conquest of ireland.

falak pema's picture

Anne Boleyn's father was part of that scam when Henry VIII's armies invaded and sacked Ireland. And the Merchant Adventurer's corporation collared the wool trade to the Low countries who made all the wool cloth, at the expense of the peasant class who raised the lambs. 

The birth of English wool oligarchy corporation.

Winston Churchill's picture

No wage inflation to make them more affordable.

THE DORK OF CORK's picture

Winston my boy - don't get caught up into these false CB inflation deflation debates.

Its much more simple then that.

It a simple question of purchasing power  i.e. can the production distribution  and consumption system form a unbroken loop

When Ireland left the dastardly UK banking union in 1979 for the demonic Euro banking union (much like the 19th century UK union) there was a immediate loss of local purchasing power casuing a mini depression in the Ireland of the 80s.

This was real latent energy extracted from Ireland.

This latent energy was used to increase the external industrial capacity eleswhere.

The real costs of this new supply chain is now with us.

The loop is broken.

all-priced-in's picture

Which will dry up additional credit -

 

I think of it like what happens when someone addicted to meth - runs out of money and can't buy more.

It either forces them into treatment - where they learn to live without meth

or

They go fucking crazy and do anything and everything they can to get the money they need to buy more meth. Including selling themselves - armed robbery - murder.

 

This is a guy hooked on drugs - this is a government hooked on debt.

I fear that our government will not go into debt rehab - but will instead start to sell itself - commit armed robbery against its people - and eventually start trying to kill us off.

 

Course I could be wrong -

The really sad thing is - we are at the point in America where 45-50% of the people will CHEER when the government starts to confiscate other peoples property - all they care about is getting their free shit.

 

 

GetZeeGold's picture

 

 

Press conference in 3..2.....

Smegley Wanxalot's picture

I really feel sorry for those europeons .. having to suffer the indignity of paying less for shit. 

Won't somebody PLEASE think of the children!

Took Red Pill's picture

OT but I didn’t see this story here. WikiLeaks publishes 'unprecedented' secret Australian court suppression order --The suppression order is itself suppressed. 30 July 2014 WikiLeaks has struck again, releasing the text of a secret court order that cannot be published in Australia. The anti-secrecy group has this morning published a Victorian Supreme Court suppression order that WikiLeaks publisher Julian Assange describes as "unprecedented" in scope. The suppression order is itself suppressed. No Australian media organization can legally publish the document or its contents. http://www.smh.com.au/national/wikileaks-publishes-unprecedented-secret-...

What could be so big and does it have anything to do with Malaysian planes?

dontgoforit's picture

I'm so confused.  I took the 'blue' and the 'red' pill so I'm now a zombie super-star football ballerina.

So, what's the secret?

darkpool2's picture

Nothing to do with planes.....everything to do with bribery and corruption and payoffs to senior government folks in various SE Asian countries......now move along please, nothing you need to hear more about

NoDebt's picture

I think we're all turning Japanese.

Sudden Debt's picture

you mean our dicks will shrink down to 2 inches?

sodbuster's picture

For some, 2 inches might be an improvement.

Sudden Debt's picture

it's in your best interest that your money become worthless over time...

sodbuster's picture

Want an indicator of HOW worthless money has become? Check out the sticker on a new Suburban- $70k! New diesel pickups in the $50k- 65k range!!! But yet, the truly stupid are shits and giggles cause their house "went up" in value. Meanwhile, people who have scrimped and saved all their lives, are offered less than 1% on the money they have saved. The Fed and all these central bankers are the biggest thieves of all time.

AdvancingTime's picture

It appears the central banks of the world have made the crux of their existence a balancing act. You can almost imagine these bankers standing atop a fence. On one side lays a field of inflation and on the other a deep pit of deflation. A new round of easing by central banks to combat a slowdown in growth may again be in the cards but do not be surprised if this time it is less successful. The magic of this policy is losing its luster. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/11/central-banks-try-to-balance-on-f...

NoWayJose's picture

How does the Euro go from 1.39 to 1.35 - a 2.5% drop in less than 2 months - yet this not have any effect on inflation? The Japs have trashed the yen and have achieved 'inflation'. Never mind - the numbers are made up anyway...

Ghordius's picture

remember that the european CPIs have energy and food in their calculations. and both went down in prices. and no, every time I make a few checks I have to find out that the figures are roughly accurate

which reminds me I have to challenge Sudden Debt about a few of his comments on food in his area

falak pema's picture

yes Merkel's austerity policy puts huge loads on the sovereigns, who were hoping that ECB printing and infrastructure investment would kick start EU growth and allow inflation to take the pressure off bank debt overload; all the while the lending rate stayed low.

That is Lagarde's message to ECB : ramp up the print as your inflation level leaves you plenty of room to pump and dump money so that the economy and banks can breathe.

Only problem : this runs into Merkel's NEIN. As she be the lender of last resort to ECB back up program and if the shit hits the fan....she gets it in the face. 

So NEIN it stays. 

Merkel is caught between a rock n a hard place. Austerity protects her financial risk but kills her market ! 

Now that Obammy is shooting at Putin there goes another client and energy supplier.

Mutti is now in the eye of the Euro zone cyclone; both East and South. 

THE DORK OF CORK's picture

Euro based wage and income deflation was used during the crisis to mask the free banking based highly inflationary production process within the euro construct which uses manic cross border trade to gain access to scarce money.

Irish Median Real Household Disposable Income (Euro) by Urban and Rural and Year
Urban areas
Y2004 : 40,056
Y2008 : 44,315 (peak)
Y2012 : 34,886
Rural areas
Y2004 : 30,717
Y2007 : 34,787
Y2012 : 30.337

 

The deflation was used to protect the rentiers.

ONS data.
“Since the start of the economic downturn, median household income and GDP per person have both fallen. However, the fall in UK median household income has been smaller than the fall in GDP per person over the same period. Between 2007/08 and 2011/12, median income fell from £24,100 to £23,200, a percentage drop of 3.8%, while GDP per person fell by 6.5%.”

Ghordius's picture

that's the ugly side of "little inflation". first, there is the usual downturn after an "animal spirit" unsustainable boom. and then... people find out that they are earning less

if those 2012 numbers were double - with half their purchasing power - people would feel "richer". or not

meanwhile may I remember the esteemed ZH collegue from Ireland that his country had a huge unsustainable credit-fuelled RE boom? and the telephone tapes of the Anglo-Irish bank managers? good to see you again, btw

THE DORK OF CORK's picture

Nominal numbers also reach back into 2004 if you care to look.

http://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=SIA19

"Ireland that his country had a huge unsustainable credit-fuelled RE boom? and the telephone tapes of the Anglo-Irish bank managers"

You are using financial metrics of scarcity to describe events.

The truth is houses are in vast surplus.

They should be 10,000 euros a pop or something.

Why are they 100,000 euros plus.

I tell you why.

We must sell them to external customers with money to get access to hard currency.

But why this manic effort at external trade no matter how absurd.

Free banks create credit for cars and other great euro stuff which we must pay for it prices elsewhere.........

This is the euro dream / nightmare.

 

Ghordius's picture

how much does building a house cost in Ireland again? even without counting land? 10'000? how many man-hours do you get for 10'000 euros in Ireland?

THE DORK OF CORK's picture

Whats your point ?

The goods are in surplus

The money cannot be recovered.

Ghordius's picture

my point is that there is a thing called market price, and a thing called replacement costs

and in between, you'll find real speculation (not the casino betting in the financial markets, that's betting pure and simple)

you are arguing that the market price of a house in Ireland should be around 10'000, due to lack of demand. I'm asking: what is the replacement costs?

THE DORK OF CORK's picture

They will not be replaced.

Many houses will likely depreciate into dust if we go back into a more national system

Again whats your bloody point

They were simply conduit goods of extraction.

We can get on with half the number no problem.

It was a consumer war economy of overproduction - it was not supplying intrinsic demand.

People were simply looking for a yield as their basic income (purchasing power ) was far too low.

Whoa Dammit's picture

OT: CDC Ebola Guidelines for US Airlines

My takeaways:

We  have Quarantine Stations (are these new or have they been in place for other diseases?)

Sick passengers to be given masks "to reduce the number of droplets expelled into the air by talking, sneezing, or coughing" ( is it now airborne? )

Close contact is considered to be among other things a conversation at < than 3 feet (Once again is it airborne?)

http://ftpcontent3.worldnow.com/waga/documents/ebolaguidelines.pdf

desirdavenir's picture

In spite of what is often written here, I almost like Draghi's handling of the euro. I guess the plan is deflate and restructure on a sound basis, which would be a blessing for countries like France (and the rest of southern Europe) who would get a chance at becoming competitive. In France a pre-requisite is a collapse of housing (and CRE) prices to lower the cost structure for corporates and individuals, a stop to financialization (remember that one possible side-effect of NIRP is the freeze of money markets, and thus of shadow banking) to augment capex in production. Painful in the short term, but it leaves us a chance in the long term...

THE DORK OF CORK's picture

"the ECB's ongoing and losing war with disinflation, and soon deflation, shows all you need to know."

They are losing because they want to lose.

Wage and income deflation within euro states helps the rentiers at this moment of time.

If you look at UK balance of payments data you will see that the UK decided to favour more real goods over income (from RBS style free banking style operations) since 2007/08.

To achieve this goal wage and income was extracted from its euro hinterland via the introduction of IMF and ECB debt packages.

Surplus goods no longer consumed in the euroland hinterland finds its way into the financial centers

desirdavenir's picture

I would rather say they want to discourage debt leveraging by targeting money markets and try to engineer a gradual balance-sheet recession. Good in the long term, again.

Re. the rentiers, do you know a lot of people who have cash earning high yields anywhere in Europe ? Nowadays "rentiers" heavily use leverage (and thus debt), and discouraging endebtment targets them first.

THE DORK OF CORK's picture

Please read what I said.

If you look at UK balance of payments data you will see that the UK decided to favour more real goods over income (from RBS style free banking style operations) since 2007/08

The UK as a real goods trade deficit of 100 billion + Sterling a year - most of this comes from the Eurozone and not Asia.

The game changed in 2007

rentier activity is now all about the extraction of real goods from previously income producing hinterlands.

desirdavenir's picture

this is short term... Pillage today also means loss of industry (which is not competitive against importated goods at the current price).

ps: I wasn't aware UK's trade deficit was this large... Not saying that France would teach them a lesson (actually we tried to copy their model), but 10 billions pounds in july alone ?

THE DORK OF CORK's picture

The UK masks the data via "services" which is nothing more then driving around in circles while burning real goods