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Don't Show The "Deflation Isn't Going To Happen" ECB Germany's Declining October Prices
Remember when this past weekend, as part of its stress test "worst case" scenario, in all its wisdom the ECB decided not to stress test a deflationary outcome in Europe's immediate future...
Despite the market clearly screaming "deflation, deflation, deflation"...
... because as ECB governor Constancio said "the scenario of deflation is not there because indeed we don't consider that deflation is going to happen."
Well, don't tell the ECB, but according to just reported October regional inflation data for Germany, the country that is supposedly Europe's growth dynamo is now in outright deflation:
- Brandenburg CPI -0.3%, Previous 0.0%
- Hesse CPI -0.2%, Previous 0.1%
- Saxony CPI -0.2%, Previous 0.1%
- Bavaria CPI -0.3%, Previous 0.1%
And lest someone think this is purely a "core" phenomenon, Spain also reported October CPI which was not the balmy 0.0% expected but a negative print as well, at -0.1%.
So, is it already time to rerun "the most successfull and thorough European stress test" yet? Judging by the clobbering Italian banks have gotten virtually every day in the past week, it is probably not a bad idea.
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Mail me my check.
Wait a moment, oh here it is, checks in the mail.
Wake up and smell the Euro-QE cookin'!
Mail me my check.
As long as you don't demand physical possession....we'll send you a check all day long.
Just goes to show how low the central banksters have become counting on inflation to save their sorry asses now!
Heating oil or gasoline now down more than 10% in Germany in October. No wonder inflation is negativ. But Germany is not an major oil producing country so this doesn´t matter. That negative print is actually bullish for the German economy since it puts more spending power into the consumer pockets. This is why Germans love deflation.
Is that you LeBeau?
Did they stress test a scenario where someone exits the EZ? I didn't think so.
Unthinkable!
"Inconceivable!"
http://www.youtube.com/watch?v=qhXjcZdk5QQ
nobody is asking the other question: isn't the whole concept of a "stress test" an import from... America? Well, how did it work out, there? lol
the other question: who is going to exit the EZ? Even Greece's "bad socialist boy" Tsipras repeatedly stressed out that he does not want to take Greece out of the EZ, since a greater majority of Greeks do not want to go back to the Drachma
so the correct question is: is there a stress test scenario for debt restructuring? but before that: what are stress tests really for? in the American experience, for example?
but do go on betting on the wrong horse to pamper an old British hope. speaking of Britain: when is the UK finally going to leave the EU? if the British media continues this way, UKIP is going to put a giant outbord engine to the island and skipper the country in a different ocean
Stress test is Kabuki theater to reassure the public that the banks are being regulated when they are not. I don't take the "stress tests" to be meaningful at all. The results are the power brokers deciding who succeeds and who fails.
I have four words that would change my mind about all this:
MARK ASSETS TO MARKET (bitchez).
They are having mini "coming to Jesus" "theaters" to look like someone is doing something when really they are rearranging the deck chairs, even as the water is pouring in. We get distracted by the chairs and don't notice the boat is sinking.
MsCreant, I agree with you, but there is a little snag about your request in the context of the typical, (non-megabank) bank in the eurozone: they lend - in form of business loans - to the real economy which is much, much more based on small and medium businesses, which have much less (to none) publicly traded stocks and bonds
meaning that it's difficult to mark most of those balance sheets. there is no market for them. the system, the whole imo sane part of the economy of the eurozone is really that antiquated, compared to the UK and US
and so whenever those "stress tests" or other typical valuations are imported from overseas... well, for US or UK banks business loans are often a declaration of failure. the worst part of their balance sheets. the one part they could not sell through the markets to greater fools
now of course if you find a way to convince me and all the other eurozone entrepreneurs of the private "persuation" to go public... then you create the demand for finance through "assets" that can be easily valued-to-market
up to now, Draghi is talking about banks bundling our SME business loan debt into "vehicles". me, not convinced. I already talked to my dear banks, besides threatening them as usual to repay all my business loans, and told them that if they bundle my debt for securitization, then it's the last time they see me. And I'm for sure not the only one that is keeping some debt through banks for sake of flexibility, not real finance needs. All my contacts of the same type are constantly between complete self-finance and a small banking involvement
further, remember that we are talking of inflation/deflation of prices for goods and services
in the range of -1% to +1%, this translates in shops and businesses not changing prices. neither the price tags nor the price lists nor the price calculations behind them
it takes a shock to change such behaviour. once businesses and consumers have settled to the idea of non-changing prices...
in other words, I don't expect deflation. this is a banker's and "growth fetishist because overleveraged" nightmare, not a producer's nor a consumer's. this is not a crisis of the real economy. and - and this is the hardest fact to swallow for people outside of the eurozone - banks here are a different breed altogether, when not megabanks, for which anyway no real solution can be forwarded
the beating will continue
It's all one big teeter totter. Do we deflate for the consumer, or inflate for the bankers. Guess who won the argument.
that's a false choice, it's always inflate for the bankers
no govt or CB ever intend or want to deflate, deflation only occurs because they can't stop it, not because any of them chose it
"no one could have seen it coming"
Cue the compliant corporate media to keep those 'inflation is key to economic prosperity' stories on the front page...
http://olduvai.ca
Yeah, they'll be telling stories about how some guru in India caused the gold melt-down and how silver production is 10-times demand and how the Fed has not been buying through Belgium and stuff like that right there.
Bailins bitches!
Time to get the popcorn out boys! I love a game of dominos and Hungry Hippo!
My PMs are behind the woodshed again. That deflation is a real bully.
I just bought an ounce of swiss phyzz,
Lets play the deflation out, defaults everywhere, a run to cash, then a realization that there is not enough cash, then a run to Phyzz?
Yeah, physical AMMO!
Yes, that too; however, it is a warm feeling to have a pound or two of yellow metal stacked beside a stack of mag'd full metal jacketed 5.56.
Several Stones of yellow metal with a larger caliber would be my choice.
I really think we are not far off right now.The bond market and the USD already had a
near death experience this month.Once this election is over, who knows....
Silver traded under $10.00 for 90 out of the last 100 years .... It's just another bubble letting out steam .....
“The continuing shortages of housing inventory are driving the price gains. There is no evidence of bubbles popping.”
- David Lereah, NAR’s chief economist, August 2005“If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing.”
- Anthony Hsieh, CEO Lending Tree"People who talk about a bubble are blowing smoke,"
- Michael Carney, Real Estate EconomistCalifornia State Polytechnic University Pomona.
Thursday, February 10, 2005
Your gurus can't save you now.....this is Thunderdome.
How many years has the DOW traded above 17?
I own some property free and clear and I have some PMs. Both are for my family. One day Jr. will probably kick me in the balls for being such a jack ass.
Deflation is a bitch for PM's. If you think the price has been hammered because of vile conspiracy, just wait until it is hammered by falling prices.
Cash rules in deflationary times. Nasty, cellulose, greasy, germ-ridden fiat cash. You don't know where it's been, but damn if you're not glad you know where it is.
Gaggy, but true. Still buys whatever you need - for now.
bullish
But the Jobless statistic in Otober is superb.
http://statistik.arbeitsagentur.de/
And business is still very good in all fields despite all the booos
Remember - they are lying - so actual numbers even worse
You are right to question the validity of the German data but on what grounds?
Compared to USA it's a hardcore bastion of truthfulness.
can't be. all governments are lying, they all lie the same lies and they all lie in the same manner. don't they?
There is a difference between manner and degree.
like when France was calling BS on the "WMD in Iraq" meme. damn liars, the cheese-eating-surrendering-monkeys I was being sarcastic ;-)
Mostly due to crude... Buy food lately? cant believe its better in europe....
This is the rock and hardplace problem, they change the basket in the US to make it real, they have to up social security checks, and they dont want to do that, as well as a bunch of other indexed stuff. They dont change it we officially have deflation. Deflation, is code words for we need bigger presses, only problem with that is they are running out of stuff to buy.... I assume the next round will be infrastructure projects, and cash for clunkers/?
the fed will overtly buy common stocks eventually.
Yeah....any day now.
His comment uses the word overtly. I bet they are doing it now. When you find pallets of money laying around in Iraq, you know they can and are "doing" what ever they please. No accountability for them, only for us.
Sure, just like those 30 year bonds were paid off early.
I just misread your comment and then realized I may have actually had a glimpse of the future in my so called error.
The "Fed" is going to refer to the group of people who are going to get to eat.
"The Fed will buy common stocks (the starving can't they ain't got money for food)."
"The Fed will print more money (the starving cannot, which is why they starve)."
Now that QE is officaily over, and ZIRP is still officially ongoing. (I know it is true, because I heard it on NPR), what could possibly go wrong?
Let me see...
So QE was a bond buying program. The goal of buying all those bonds was to keep interest rates low, and bond prices high. In other words, yeilds are held down. The theory is, if interest rates are low, kept low, then people will borrow more.
But debt saturation is a reality. The numbers have been faked, but that's not the worst of it- all the excess liquidity generated by QE, and by ZIRP, at the bank level, has simply been plowed into the stock market.
The banks have been using ZIRP to borrow money from the Fed, and then buy bonds, knnowing that as ong as the Fed was in QE mode, they could sell the bonds for a profit, and then use that money to buy stocks. This made for a double profit as stocks went up, driven that way by the false engine of the Fed's economic policy.
How much of all this excess, this Caligulaesque orgy of bankster incestual greed, has trickled down to Main Street?
The housing market is DOA. Construction is down. Jobs have been "added at the highest pace since 2007" according to NPR, but who really wants to flip burgers at McDonalds? You're not buying a house on that paycheck, even if you have three such jobs and medicaid.
But this is beside the point. Why did the Fed REALLY end QE? It's not because the economy is better. It's because the stock market is too inflated. It is a monster that threatens the entire economy. The Fed wants to bring it under control, but in classic mad scientist fashion, it has waited too long, and now it is too late. The monster is going to cause mayhem and destruction, no matter what.
Here is what is going to happen. The Fed just took away one of the free money tits that the banks were greedly sucking on. Bond prces will stay high for a week or two, but not forever. Watch for an immediate plateau in bond prices. UP is the mantra, not flat. Moar! Moar! Where can the banks get moar?
When the market has been CAPPED, because there is no more positive pressure from the Fed, Moar can only come from shorts. Mark my words, there will be an orgy of short positions in the bond market very soon. Prices will be driven down faster, and yields will go up faster, than would happen in an ordinary market.
Holy FUCK. I am a high school graduate. I spent the entire time stoned, and I don't remember anything about high schol. My diploma is worthless. I am a high school dropout by the standards of reality. I sobered up and educated myself by reading books, of all things. But my point is, I have no education, and I can see this. The fucktards at the FED, what the FUCK is their problem? Are they trying to kill me or are they JUST FUCKING STUPID???
I suspect there is a disconnect between the Fed and the predatory banks that feed from the Fed. The Fed is not motivated by greed, at least not at the policy level (maybe higher up). So the Ivy League Fucktards with economics degrees at the Fed who make policy make that policy based on economic theory. It would actually be better if they made policy based on greed- then at least the policy would make sense. The predatory banks- they have a greed genius.
Anyway, I digress. So, there will be shorts in the bond market and yeilds will go up. This will dry up excess funds to dump into the stock market. the shorts contagion will spread to equities. The whole dynamic will become actively deflationary as profits are made on the way down just like they were on the way up.
The fed will look on comaplacently, but as market pressures force interest rates up, the FED will start to hemorrhage cash as a holder of almost 5 trillion in bonds held at ridiculously low interest rates, and purchased at ridiculouly high prices. Will the FED sell bonds at a loss, driving bond prices even lower, and interest rates up even more? Or will the Fed hold onto those bonds, and risk bankrupting itsef (is that even possible?).
Don't even talk to me about what will hapen to me and you. Sure, we may see 1.50/gallon gasoline, but with no money to buy it, who cares?
Or will the Fed hold onto those bonds, and risk bankrupting itsef (is that even possible?).
I think we are facing the prospect of a profound willingness to test the bounds of possibility.
looking ahead, I think we are facing the prospect of a profound willingness to test the bounds of reality
Could anybody explain to me in a concise manner ( 3-4 lines ) why bankers are so shitscared of deflation ?
Just point me in the right direction so I can research it better.
Thx
main income from assets - property and paper money - bonds, treasures, etc
Less they worth - less they gain.
It's the pillars of sand underneath the global markets that get washed out, a ponzi's worst nightmare.
Assets secure loans. Assets worth less (lower price, deflation) cause loans to be called in or they need more assets to secure them (margin calls). People start selling off assets so that they can pay back the loans that are being called in. Assets become worth less because the market is flooded with them. People who can't pay their loans are "Bankrupt" and what they do have gets taken from them.
This is called the "big unwind."
I coud say more, but I am over my sentence allotment!
Banks lend out cash for revenues and hold assets/collatoral. The sum of that collatoral is going down in value in a deflationary environment but they've already lent out the cash.
The whole financial system is based on this model and consider they're already way overleveraged (they've lent out a lot more than they should based on that collatoral).
The banks will have trouble lending out more cash for revenues if they are constrained by the decreasing value of the collatoral.
one word: leverage
I think you won.
Future debt in a deflationary environment is bad because you might be able to buy an asset cheaper tomorrow than today. Therefore nobody does/can take out a loan to make a purchase today because you'll have buyer's remorse tomorrow and the bank's collateral declines in value. Credit effectively grinds to a halt and banks lose their ass. However, ZIRP has confounded this picture.
thanks all for the answers !
I kind of get that the system is based on ever rising prices ( or maybe price stability at a minimum ) to keep the credit wheel turning. But on the other hand, deflation offers banks the opportunity to buy more assets themselves, no ?
Deflation is merely a tool IF you control the currency. From the POV of a currency controller, deflation is just a short position. But today, banks at the JP Morgan and Goldman Sachs level are in the position of speculators, not controllers. That's why they don't like deflation. The FED, the currency controller, is schizophrenic, or more accurately, trying to serve two masters. On the one hand, the Fed has a mandate to keep inflation low and employment high. That is schizophrenic enough, but the Fed also has to obey its bankster masters as well as it's crazy-making mandate. I don't think anyone can understand Fed policy at a high level. It's like trying to understand a woman. She wants to have her cake and eat it too, AND she has a hormone volcano in her pelvis. You go figure.
Actually only the vent of the volcano resides in the pelvis. The large magna chamber is the hypothalamus:
http://en.wikipedia.org/wiki/Volcano
Love Dr Jessica.
Every time I hear "deflation" I look for lower prices and only find higher! I think I have finally figured it out though. When they say deflation they are simply telling me that what I already own is now worth less, but anything I might need actually costs more! Deflation of MY assets, including my cash. Driven like sheep we are, into the stock markets. The only "safe" place for our assets, right? But are they corralling us for our own good, or to be shipped to the slaughterhouse? They are all Hannibal Lecter, starting with our brains while we still live to finishing up with our liver and all the rest.
Things you need will catch down soon.
No they won't. It's called biflation. It's what I've been calling for for 7 years now. What you own goes down in value and what you need to survive costs more. I figured we would have seen it for about 2 years now but didn't anticipate the level of levers of the machines that these criminals have. It starts in earnest if/when the real estate market takes shitnapV2 which imo is starting to look less likely, at least in major markets like NY and DC areas. I'm waiting as a renter with cash in hand to buy but not at these prices.
We shouldn't take too much notice of these deflationary numbers. CPI is hugely under-reported in most developed countries which not only shows inflation running at lower levels than reality but is also bound to show a negative figure when prices do moderate.
I would bet that retail prices and very many other costs - services, fees, government charges etc etc - are still rising in Germany just like they've been doing for a long time. But these things are excluded from the phony calculations, yet they still represent price increases.
What we are actually seeing are the elites being screwed by their own lies. AKA: blowback.
smacker, you are completely correct in all the above... except in one little thing: you live in the sterlingzone, and can't even imagine that shoppers in the eurozone look at dusty, unchanged price tags. it's a case of your reality getting in the way of perception of other's realities
I do visit the EZ from time to time and I am very well aware of price hikes in Spain and other member states, including Germany. Spain used to be a cheap country for Brits before the euro was introduced. Then prices went thru the roof. But, as always, they were never reflected in Spanish CPI.
Apart from that, we know that EU politicals use the same dirty tricks as Brit politicals. Or worse.
smacker, wait a moment. you are mixing up a few things in memory lane
yes, there was a price hike at the introduction of the EUR. how long is that ago? it did reflect in the Spanish CPI... then
further, analyze your point of view: "Spain used to be a cheap country for Brits before the euro was introduced" it takes two to tango that dance: what happened to the British Pound?
there is still a little short of a million Brits that live in the eurozone, mostly pensioners, and for them, it might be not that cheap anymore, but cheap (and sunny) enough to stay
of course very few of them ever bothered to switch their savings or investments to EUR. most of them are still betting on the demise of the EUR. should the GBP have some serious problems... well, they might come back to your islands. in exchange of one million hard-working, younger Poles, I guess
Dear Ghordius, the price hikes that took place in Spain after the euro came in were a direct cause of conversion fiddling by all concerned.
Whereas the Peseta officially converted into €euro at Pts166.67 = €1, what happened with prices was that something that used to cost Pts500 (equal to GBP2 at the time) became €5 overnight. This happened right across the board of consumer goods. A giant con-racket.
It equated to a huge overnight rise in Spanish CPI inflation but it was never reported thru their stats. At the time GBP1 = Pts250.
A small beer which cost Pts 350 overnight became €3.50 (equal to Pts580)
A meal which cost Pts 2,000 overnight became €20 (equal to Pts3300)
On top of those fraudulent price hikes, there was rising annual inflation to be added on due to the cheap money pouring into Spain from Brussels to fund infrastructure. The result was that in about 3-4 years prices doubled their pre-euro levels and Spain ceased to be a good value country for Brits.
As in: a hotel room which cost €65 one year, cost €85 the next.
Regarding old Brits that live in the EZ (mostly Spain), I believe many of them are still there because they cannot sell their EZ home (due to a price collapse-see Spain) and buy one back in Britain (due to a house price bubble created by the current government). I know of a few in that situation.
Result: they're stuck in Spain, their wife/husband has died, they're not in good health and they don't speak Spanish. Is it any wonder they turn to gin to get thru the day?
In some cases they abandon their Spanish villa and come back to Blighty to live with family. The villa rapidly deteriorates and loses even more value.
Hey let's not get too upset because when the euro was introduced, Brussels apparatchiks came out one after the other to reassure us all that the euro would level down prices across the EZ. Exactly the opposite happened: prices were levelled up to German and French levels.
Stress test is a joke
for the banks that have to "follow up", it's still a joke, but a bad one
yay deflation, i dun need inflation when my salary aint going up ><
Priced in what exactly? maybe people need more of that paper for other essential items...
morons...
Deflation is not a pricing event, it is a monetary event. Prices merely reflect what is occuring with the available money supply.
And no, bankster generated credit is not money, not even when central banks are generating it.
Debt is a piss poor currency, even worse than the paper it's denominated in, because you're left with nothing to show for it when it fails.
I saw an interesting tidbit.
If wages kept up with inflation, a Union carpenter in 1976 would be making $336,000 a year in the envelope today. The benefit package value would be double that.
Not a bad chunk of coin for a hammer jockey.
I guess that should tell you something about the 'stickiness' of wages and 'benign' inflation.
Deflation is the new global warming bogey man.
Let's add up all the inflation we have had for the last 20 years and subtract all the deflation. Are we at 2%?
Not even close?
Didn't think so.
But, but, but..................JAPAN!!!!
did you notice that if you take a number, you substract 2 percent and later you add 2 percent, you do NOT get back to the original number ?
I have to disagree. Things fall down much faster than they are built up. If the deflationary dynamic becomes self-reinforcing, defaltionary pressures will quickly become exponential. Inflationary pressures have been building (with a brief hiccup in the 30's) since 1913. It's been a long pull up, but the step down is a doozy.
Add to this that the natural deflationary cycle has been artificially arrested. We should have entered into a deflationary era around 2000. The longer an irresistable force is held back, the more aggressively it will attack once unleashed.
So you'll wait a year to buy something for 2% less than you can today?
Didm't think so.
Things should fall faster. They are priced higher not because of real supply and demand forces. They are priced high because of dollar manipulation.
But rest assured, with a 1913 dollar worth about 2 cents in today's purchasing power, we can handle the deflation of 2 % a year.
The ones that fear deflation? Government and those that hold the loans. I can live with that.
The word 'deflation' makes what's coming seem so benign, try "a global, cascading collapse, of credit as currency".
There is a wildcard that will be played in the event deflation begins. War. I am absolutely convinced it will be played by The Power, as a means of maintaining control, or at the very least, as scapegoat.
So........if EU QE doesn't materialise in the face of frank deflation, can we assume that European banks will eventually be (formally) nationalised?
dear Lady Jessica, have a look at the ECB balance sheet movements in the last year-and-half
here the FRED source: http://fredblog.stlouisfed.org/2014/05/the-ecbs-balance-sheet-continues-...
you might have to adjust the slider to the present
further, note that european banks... well, it's complicated. many of them have been nationalized long ago. it's a very diverse banking landscape, which makes generalizations as you can do in the US quite impossible
Thank you kind sir. Your excellent points notwithstanding I see a plateau after a significant fall. To QE or not to QE: it's supposed or real effects aside, that for me is the question. I am hoping the answer is auf keinem Fall.
you are very welcome. I think we'll see some of the further nationalizations you were hinting at
The wrath of unintended consequences .
"Sheeple wear Wolfskin !"
See
https://www.academia.edu/9031355/The_Were-Sheeples_Almanac
http://andreswhy.blogspot.com/2014/10/were-sheeples-almanac.html