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In Shocking Move, ECB Cuts By 10 Bps, Sends Deposit Rate Further Into Negative Territory
While everyone was expecting Mario Draghi to announce ABS purchases, few if any had expected the ECB to also cut rates. Which it just did whacking its corridor rates across the board by 10 bps, in the process sending the Deposit Facility rate even further into negative territory, now down at -0.2%.
From the ECB's monetary policy decision:
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
- The interest rate on the main refinancing operations of the Eurosystem will be decreased by 10 basis points to 0.05%, starting from the operation to be settled on 10 September 2014.
- The interest rate on the marginal lending facility will be decreased by 10 basis points to 0.30%, with effect from 10 September 2014.
- The interest rate on the deposit facility will be decreased by 10 basis points to -0.20%, with effect from 10 September 2014.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.
To be sure, the EURUSD is down nearly 100 pips on the news, and this is even before Draghi has announced his "Private QE" which announcement is due in 45 minutes.
So now that it will cost Europeans even more to deposit money at the bank, here is a snapshot of how delighted, giddy locals from the Old Continent are reacting to this latest ploy to fix "stuff" by the ECB.
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Yellen the felon won't be happy. Must...weaken...USD...MOAR...
Long Euro mattresses
BBB. Balance the Budget Bitches.
whats with these piddling -.05% figures? I want a full retard reverse Volker - rates at - 20% please
Opa!!! This will take care of all that "slack in the labor market"
Just symbolic. Go short.
They know they're in trouble.
More free lunch for the banks, more ass fucking to joe six-pack.
So what now, bankster? Am I supposed to buy a german car instead of saving for my future? The overpriced car depreciates much faster. So if you want money velocity to increase you have to make savings cost a helluva lot more.
Well said. To have blindly allowed the Euro to have crushed the periphery for so long isn't politics or economics it is now religion.
Gold price rigged means no inflation .... er ... right?
Now you're catching on.
Is this where Merkel rushes in the door and demands that someone give them their gold back.....LIKE RIGHT FREAKIN NOW!
That's just wonderful Mr. Dragass. Now imagineer us all up 1,000,000,000 each, so that we can pay you back 500,000 (0.05%) while spending 10,000,000 each and every year on ego-stroking earth-destroying bullshit until we all die, and then the world will certainly be a better place, don't you think? Thanks for all your help in doing Gods work across the pond Dragass.
That Sonny's runnin' wild. He's thinkin'a going to the mattresses already... [/ CLEMENZA]
The insane asylum has been overrun.
Are you saying the inmates are now in charge? Do tell...
Its just under new management.
I don't understand why this would be considered "In Shocking Move" to this crowd? Must be a new Tyler known as "EarlyShift".
New Tyler is former Sorcha Faal writer.
When you're essentially paying someone to keep your money you are insane. When you think that zero interest rates will stimulate the economy after having no evidence for years now that this policy works you are insane. Need I go on.
"Compulsory" direct deposit was introduced in the late eighties (Sure you had a choice - job or no job). Bank fees were introduced in the early nineties. No-one complained. No-one was shot or hung. No-one protested. Since then TPTB have been amazed with how much they can get away with and how little they have to say to "justify" it.
Economic policy in one lesson: Steal money from the weak. Make them think they deserve it. Promise things will be better tomorrow. "You will be richer, if only you were poorer". That is all.
Each central bank trying to out-nutty the other one. Next, they'll have to put ISIS in charge to make things any worse.
are you kidding the dollar sky rockets on the news. someone trying very hard to keep PM prices down the dollar up .52 silver 0 gold 1$ unbelievable.
This game will be over within 3 weeks.
Either that, or we will know its all just kabuki theatre.
Our very own Truman show.
Seems more like Groundhog Day.
lol, 6 weeks more of winter !
https://www.youtube.com/watch?v=qLcjUmBncZ8
Somehow I doubt it. Whoda thunk it cld go on this long?..clearly theres nothing to stop it from going on for 3 ..4..5 more years...heck maybe more.
The housing bubble building up needs a little boost
Hold on......let me find my shocked face.
Shocking I say...It's all Bullshit!!!
You got the memo about the pill right? Good!
Buy more stoxx. No Russian Gas and War in the Winter?! Buy More Stoxx.
War in the winter does not matter anymore since the invention of 'heaters in the car'. Now we have heaters in the trucks, tanks, launchers, and this sweet little gem the Black Knight Transformer(yes, it's got heat, a 10,000 service ceiling and road speed of 70mph).
https://www.advancedtacticsinc.com/technology/black-knight/
India just purchased 16 of them. Watch your ass 'merica, our gold is OURS!
Nothing to see here; everything is 'contained.'
http://olduvai.ca
shocking, that megabanks are raped this way. what are they supposed to do with their excess liquidity they hold for their gambling casinos? lend to the economy? /s
but wait, the narrative is that this is of concern for the small depositors... never mind
The farce must always be presented as beneficial for those it never is intended to benefit.
Along the lines of do it for the children when they are in fact the last in line.
They could always just put it into the stock market and.... oh, nevermind. You know the rest.
I'm sure me and at least one other person here would benefit from a "Negative Interest Rates For Dummies" writeup, if you would be so inclined.
Pathetic.
HAHHAHA everyone in the pool!!!!
Other than beer and wine, what does Europe export?
did you read the ZH articles about european trade? europe is still the trading continent. counterquestion: what does Europe not export? energy (and commodities in general)
Other than beer and wine, what does Europe export?
Attitude.....and lots of it.
you are right, we should be more humble. I'll take George W Bush and his early speech on how humble he wanted to be as a template, from now on
now seriously, do I really have to bring statistics on european exports in this discussion? it's anyway OT
You do realize Bush is gone right? Believe it or not.....he's been gone a long time now.
Can't think of the new guy's name.....but it will come to me.
I'm not a US Dem, and, frankly, I don't understand US politics. Bush Junior will always stay as a shining example of humbleness for me. His legacy has changed the world. Please send him to us
Oh we will......you can call him Jeb.
Fuck off. Go threaten someone else.
US politics is very easy to understand.
Whoever has the $$$ calls the shots.
Whether by getting themselves elected, or via proxy by visiting the "Buy yourself a Senator/Congressman" saleroom thats been running a long time.
Red and Blue are the same kinds of piss in different colored bottles. Any perceived difference in policy is purely for the plebs benefit to keep the process alive (they are needed every two years to help out). Once elected its a case of fuck the plebs and I refer you to the second line above.
Hope that helps ;)
<edit> No different from politics in any country in Europe. We are sadly in the age of the parasitic self-serving career politician (otherwise known as C.U.N.T). Not many out there who put the interests of their electorate before their own.
"We are sadly in the age of the parasitic self-serving career politician (otherwise known as C.U.N.T). Not many out there who put the interests of their electorate before their own."
Lighten up! Why should anyone not grab all they can and lay the burden on future genirations.
"Whoever has the $$$ calls the shots" <~~~ Winning
Who the FUCK down arrowed this?
Just goes to show that the common retard can even hang around ZH.
Thats a lol right there. Thanks for the chuckle GZG
<In my best GWB voice> "Sure, I'm a humble guy. I was raised that way by my mama. Now watch this drive..."
do you realize that 75% of ZH posters have GWBush derangement syndrome
Only 75 percent?
We're in a solid recovery.
Mistral warships....oh wait
Don't forget that fine German porn!
crap movies
Too bad it's all priced in.
Can someone please explain to me exactly who is paying the -0.20%.
Is it the common folk with a checking/savings account, or is this the money borrowed from the central bank by the smaller banks in an attempt to get the smaller banks to loan it to the business/private sector?
Depends, if you are an American in the end you.
Well I am American. This is the ECB. I'm assuing your are taking a shortcut to say that the dollar is covering losses for the Euro. I can say it, but have difficulty understanding the process.
If you want this year's homecoming parade in my town, you have to pay for it. [/Mayor Carmine De Pasto]
This is a ECB move and only the banks have deposits at the ECB. It covers deposits the banks hold at the ECB not what they borrow. They are being charged to park their money somewhere 'safe'. The rationale is the ECB wants them to move the money back into the economy via loans to stop the deflation. Loans create money, paying off loans and having excess funds end up in the ECB destroys money. Anyone feel free to correct anything above that is stupid.
that is what they will tell you the theory is but in truth central bankers only ever want one thing, for people to buy stocks. banks pay for deposits --> charge customers for the priviledge of "safety and services" --> customers pull deposits and buy stocks or bonds. it always boils down to this. they know damned well that lending ain't gonna happen. only deabeats want to borrow so the only way banks are going to lend is if they get a central bank or gubbermint guarantee of a bailout (or immunity from lawsuits for selling crap to the muppets).
I somewhat disagree. the FED and the megabanks (on both sides of the pond) want everybody in stocks. if you look a bit more closely, the national banks confederated in the ECB and their respective banking systems are much more focused on european sovereign bonds
I repeat, for most of Europe, stocks aren't nowhere as important as they are in the US, both as way to finance business and as a "Way Of Life" permeating every aspect of society and politics
Thank you my friend for the clarification. I understood the jist, but sometime I need colorful pictures to help me understand.
Now, is this what Cyprus recently underwent? It seems like that was more an attack on personal accounts with a balance of >=x.
@ DeadFred:Makes sense. Wasn't the fedrez paying interest? If so, that would be deflationary, trying to keep reserves at the fed instead of making loans out of them. Are the US and EU taking policy in two different directions? This banking crap is deliberately obtuse and, I'll admit, I don't always get it. I always feel like I'm being conned.
Seems the memo went out to the boys in the club about 2 weeks ago when every stock market in the world decided to go straight up for no reason.
Are they fucking high?
Are they stoned or stupid? You guessed wrong!
I have all kinds of friends firmly 'entrenched' into stocks.. They are all gloating - well today.
They ask me why I am not investing in the stock market. I repeat the same mantra - it's all rigged a house of cards.
Either Putin or NATO will start launching tactical nukes, or ISIS will blow up Chicongo, or Ebola pukers will materialize at your local mall.
Hope you all enjoyed the show because it's TIME TO SELL OUT NOW.
Not saying you're wrong. But I've been touting a very similar line for the past few years, and I'm feeling awfully butthurt right about now.
Don't bleed out the ass just yet.
TPTB want all of us in the SM so they can destroy our hard earned wealth in our 401k then and only then will they be happy.
Things are so great they gotta cut rates.
Unbelievable.
Mario wins this round of "beggar thy neighbour". But don't worry, everything is "fine"
Oh man, I totally prefer playing "bugger thy neighbor." Tho in this case it's the same thing.
A currency arms race to the bottom.
This won't end well.
Draghi did something for sake of doing something and has zero effect on anything. Most derivatives are in USD, not Euro.
It's a placibo move.
The only thing that matters is Target2.
Will northern european manufacturers accept southern european bonds as payment for real goods and services?
I'd say, no they won't.
What are Target2 unpaid bills right now? Eur500 billion?
Draghi fell off the wagon again. He's back at snorting catnip.
ECB policy is interlinked with Target2 unpaid bills.
Fed policy is interlinked with derivatives
This is apples and oranges.
All that matters is real trade. I am waiting on a large payment from a Brazilian customer. It isn't the customer's fault, it's the Brazilian government.
One thing is for sure. I ceratinly won't be doing any more trade with them soon.
Once goods and services stop crossing borders, troops will. Let's hope the people of the world actually recognize who is to blame. Quite simply, that would be leadership in both the public and private sector (since they are now one and the same).
Absolutely.
Interesting that all farmers understand what I say, all of them.
Most people don't know Target2 is what matters in EU, which is the mechanism that completes payments of goods and services among EU countries.
An italian can buy an Audi financed by an italian bank, but if the italian and the bank can't pay then those bills pile up at Target2 until simply north reduces output and they have.
Feel for you there LoP.
I stopped doing intl. trade after a LoC was force majeured on me.
Fucking ship was sunk in habour, nearly bankrupted me.
Will never keep all my eggs in one basket again.
LOC = Letter of Credit. Many don't understand international trade jargon. Just piped in to spell it out.
Sorry for your losses. If i is not dotted or T not crossed, they find ways to destroy final shipment destination. Brazil was a good example from other poster.
ECB monetary moves are mostly about Target2
Fed monetary moves are mostly about world derivatives
Apples and oranges
I am guessing it is intended to aid in devaluing the euro.
It may help but less so when everyone is manipulating.
What for?
Real trade?
Carry FX trade?
Real trade is dying world wide.
FX trade brings no food on the table, it's just gambling
What part of all fiat dies don't people understand?
T2 looked way worse, not long ago. but are you sure you understood what T2 balances really are? One of my partners took once profits from his Greek farming business and transferred them from a Greek bank to a German bank. He himself has a Irish passport
For Target2 purposes, this fiat money balances were a minus for the Greek national bank and a plus for the German BuBa
why? because his profits, for T2 purposes, were "created" as Greek money by the Greek National Bank. So, in theory, they are still Drachmas, even though he now used them to buy a German bank vehicle that invests in Spain
Target 2 is an interesting statistic. beware of statistics, though
Target2 is where the bank that financed a Greek person buy a VW pays the bank in Germany.
If the Greek bank can't pay, then normally ECB would buy greek bonds, hence create euros which will be passed on to the german bank completing the payment.
Hence, the german producer was paid with greek bonds, not with greek olives.
Are germans that stupid?
wait a moment. go step for step. credit creation of a Greek buying a VW happens at the moment of collateralization. so the bank pays the German exporter and creates domestic credit with the (now imported) car as collateral
where do you need Greek bonds, here? remember, we are talking about the eurozone, not the US. be sure you make the correct credit creation example
http://www.ilsole24ore.com/art/finanza-e-mercati/2014-04-16/ecco-come-fu...
As far as I remember you can read italian.
If not, I'll find something in english
Here's in english
http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/qef136/QEF...
So, basically the greek bank pays the VW dealer, not the manufacturer.
Bank of Greece and Buba settle trade payments via ECB within Target2
In a country with massive t2 assets (buba) and those with liabilities -- who eats the losses if the bank carrying the liabilities (hellinic entral bank) leaves the euro?
T2 only works if the system keeps going. As soon as you see a emz nation leave - buba goes bankrupt and then we're all fucked.
exactly, T2 only matters if a country wants to leave the EMU. At which point the whole discussion becomes at the same time very theoretical and very heated
remind me, what would happen if the BuBa left the eurozone in this environment of currency wars? where would the Deutsche Mark have to hide? exactly, under the skirts of the EUR, together with the CHF and other small currencies
nevertheless, please check on my example and think about it: T2 is an interesting statistic, but you do have to understand it, first. then you'll understand that it's not what it appears, at first sight
I understand perfectly what t2 is and why it exists.
T2 only matters if someone leaves - and because of t2 Germany will go down with the ship. No doubt. That being said -- I don't understand why the strength of a theoretical dmark when compared to the euro (if it were to survive a gerexit).
This talk about t2 is pointless until syriza overthrows the government. Then it'll be a discussion as most zero hedgers rush for the fiscal exits.
http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/qef136/QEF...
Haus-Targaryen, I'm serious. What would happen if the Deutsche Mark would reappear? Everybody and his grandmother would place some bet on it
It would be a medium-sized currency where only the big ones and the very small and usually pegged ones are fit to survive - in this current environment
the speculative pressure would be immense. and what do Germans want anyway out of their currency? price stability. in the ballpark of 0% to 2%. which is exactly what the EUR delivers
for all practical matters, the Deutsche Mark never disappeared. lo and behold, it is the EUR. as per design, and in a more practical size
and Syriza overthroving the government is one thing, but in my knowledge, two thirds of Greeks still want the EUR, and... would continue to use it even if a golpist Syriza forces a Drachma down their throats
one of those days you have to explain me what exactly brings you to ask for a Deusche Mark comeback. should the shit hit the fan, then it would make sense to re-birth the DM, and the other 17, too. Which is another part of the design, and a solid contingency plan
"and what do Germans want anyway out of their currency? price stability. in the ballpark of 0% to 2%."
Why would they not want, and be entitled to, falling prices ? Which I guess would happen in the case of a strenghtening currency and a resulting fall in import prices. Are the Germans working their ass off in order to have price stability ? ( any strenghtening of the currency seemingly undone by the profligacy of other countries ? )
Anyone doing business in Greece is dealing with the worst credit on the planet and there is no getting around the interconnected nature of the Greek banks and their bonds in any trade. Period. Therefore the risk being taken by doing business their is really really high.
I still do business in Greece. profits are high, too. the rewards for risk
Yes. History repeating itself never gets old does it?
It's 'placebo', not, 'placibo'.
thank you
Hey Rothchild Quote 'Sell when their dancing and buy when there's blood in the street.'
"The streets will flow with the blood of the non-believers!"
http://www.youtube.com/watch?v=GhlS89e-7qg
Wait until he surprises us by de-announcing private QE.
Everybody loaded up ?
Moar proof 'they' can keep this farce going for much longer than you think possible.
It is friggin unbelievable this shit has been kept going for so long
The gig will be up before our Dear Leader (The Lapel Pin in Chief) is ejected from the oval office...
well he sure did catch a lot of people out with that...1:30 under threat here
DAX UP 150
FTSEMIB UP 500!
IBEX UP 200
CAC UP 75
Carry trade.
Doesn't matter where it's going as long as it can go.
Right there.......there you go.
Keep your "money" In the system bitchez! They will get it one way or another.
Gipped from the movie Top Secret:
ECB: [talking on the phone] What is the condition of [the EU]?
[pause]
ECB: Very well, let me know if there is any change in [its] condition.
[Hangs up]
ECB: [It's] dead.
https://www.youtube.com/watch?v=nkWj-jd1ric
Classic Val Kilmer. great short comedy.
I think my favorite scene is where they decide Nick must play the concert to avoid "an international incident", all in the midst of WW2, LOL.
Correction.
"We found him impaled upon a large electrical device. It took our surgeons 2 hours just to get the smile off his face."
I like the marquee:
TONIGHT
NICK RIVERS
ALSO
STEVIE WONDER
LINDA RONSTADT
AND TIME PERMITTING
FRANK SINATRA
QE and further monetary war as Draghi goes full tilt to defend Euro area economy.
Mutti will NOT be pleased!
Who in their right mind is buying any EU bonds? You have got to be out of your mind.
Where in the world can anyone safely put their money now? This is completely and utterly insane.
If it costs you to put paper money in the bank - don't. Buy gold or silver and put it in a safe at home.
LMFAO!!!!!
but "rates are going up"
any second now...
Oh.......just you wait.
You're now on double secret probation.
No sense of panic just euphoria!
If you won't spend your savings, government will spend it for you.
Great photo.
And gold continues to descend. What a farce this `market' economy has devolved into.
France halting warship delivery for no contracturally acceptable reason allows Russia to say....we don't want it, keep it, we don't have to pay you anything.
Russia could punish France by claiming French default on the contract, and cancelling it and any other contract they have.
It is not as though ship building is a booming business at the moment with the Baltic Dry in the toilet......so for French to lose ship building business of Russia just puts another knife through the heart of their domestic industry.
The business Europe is losing from Russia it probably is losing permanently. Why would Russia do important business with countries that can halt delivery because of US political pressure. This type of business would always represent a risk to Russia....so they will replace their European business with other options, permanently. Either do it themeslves domestically for some things like ship building....and for food and other stuff replace Europe with more friendly countries.....
Europe is losing business permanently from Russia.....and with Nothing to replace it. It is on suicide watch...all because of US geopolitical games.
Are unintended consequences black swans, or just grey swans?
Us geopolitical games is one story - the other is the European idiots and liars - and the sheeple electing those idiots and liars. They get what they deserve what they have elected.
But "der Krug geht zum Brunnen bis er bricht". Just a matter of time. And not so much time left anymore.
German 4-yr yield turns negative for the first time ever:
It is Monkey-Hammer time again on PMs.
to be fair the US$ is going nuts higher
Against what again?
This is the last possible move before QE has to be introduced. By keeping the prospect of QE in the wings and the implication of potential hope this gives the market the central banks have managed to sustain the markets for just a little bit longer. When will they - or more importantly - the markets realise their policies will not work? We are at the end of a 40 year credit boom that has no more room to expand and must therefore contract. The hope that somehow this last little nudge in rates is going to change anything is deluded to extremes. Sadly it is these fools that are running our financial world.
Sorry Fiat, they are not fools, they are very very smart and wily. Sadly they are also dishonest, psychopaticc, arrogant, cloistered, evil wankers!!!
Rich fools.
THe ECB cannot QE like the Fed, it's in their charter. So there!! Take that!
(sarc)
You didn't save that...
ECB has ensured that all currency defibrillator's are standing by to treat patients.
Again, this NIRP drooling is unbelievable.
I don't think that was a snapshot of delighted, giddy locals from the Old Continent are reacting to this latest ploy. In my opinion it was the blind leading the blind after far to much punch.
Isn't this bullish for gold and precious metals? If you really don't want to lend aren't gold bars now more cost effective as a store of value?
In a free market system yes.
In a New Bolshevik state of market by declaration, no.
So what is the negative rate breaking point of the sheep. I always thought it would be ZERO.
Frogs in pots.
So every European with euros just lost 1 euro per 100 euros.