Don't Tell Germany Draghi Is About To Monetize 90% Of Bund Issuance

Tyler Durden's picture

The next time anyone is stupid enough to mention monetary policy "normalization", either have them read this:

The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues.


The BOJ said it plans to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month under stepped-up stimulus it announced today. That gives Governor Haruhiko Kuroda leeway to soak up the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.

Translated: the BOJ will monetize 100% of all Japanese debt issuance (source).

... And this:

in Q1, we expect the ECB to announce a EUR500bn sovereign QE program and buy EMU government bonds according to each EMU country’s ECB capital key contribution. This implies that the ECB would purchase EUR130bn of German bonds, i.e., 90% of the 2015 gross issuance of German Bunds.

Translated: the ECB will monetize 90% of all German debt issuance (source).

Or just show them this chart.


And since Japan no longer cares what the lunatics in charge do as its fate is sealed anyway, please make sure any Germans observing the above are unable to see the chart below, which shows what happened the last time a central bank monetized all of their Bund issuance.

The Germans are going to need a bigger chart.

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Deathrips's picture

Openly monetized some folks debt.



SWRichmond's picture

in Q1, we expect the ECB to announce a EUR500bn sovereign QE program and buy EMU government bonds according to each EMU country’s ECB capital key contribution. This implies that the ECB would purchase EUR130bn of German bonds, i.e., 90% of the 2015 gross issuance of German Bunds.

Note to SNB: Peg this, bitches.

Wolferl's picture

What todays Tyler forgets to say: (of course, since this blows his nice story)


Germany will have no new debt in 2015. So there will be very few issuance of German bonds, just what is needed to refinance old debt.

hedgeless_horseman's picture



since this blows his nice story


You need to go back to playing QB at Florida.

Monetizing debt is the same, new debt, or roll-over debt.

As a new (artificial) bidder increasing demand for Bunds, the ECB will drive up Bund prices, and drive down rates, even more so, since there will be less supply (stock?), according to you.

This is new money (flow?) entering the marketplace.

This is inflationary, by definition.

Wolferl's picture

Monetizing old debt is not inflationary. Government bonds (debt) are nothing but fiat money with interest rates. So if you change fiat for (old) bonds it doesn´t matter. Only if you monetize new debt it´s inflationary. And since inflation is the thingy the ECB wants buying German bonds is just plain stupid.


You are right if you point to the fact that if the ECB buys German bonds interest rates will go lower. But this will lead to deflation, not inflation. Maybe we will see a point when German government bonds are not on the market for a longer periode because the ECB buys them all. Imagine, Germany is able to sell a 30 year bond for under 1 % interest rate. But this ain´t gona happen.

hedgeless_horseman's picture



So if you change fiat for (old) bonds it doesn't matter.

The problem is the ECB isn't the issuer (Euro Bonds), so it is new money, and inflationary. 

Although, GS and all the other Lords of Fiat would love for Euro Bonds to become a reality.* 


*Paging Ghordius

James_Cole's picture


This implies that the ECB would purchase EUR130bn of German bonds, i.e., 90% of the 2015 gross issuance of German Bunds.

OMG it’s all over!! Weimar republic part2!!!! Hyperinflation for everyone!!!!!!!

You see, we put two completely unrelated things on a chart and then use similar numbers and BAM germany is japan and it's all over!!

“Net bond issuance may even become negative by 5 billion euros to 6 billion euros next year if the federal government keeps the current stock of short-term debt unchanged,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. That’s based on 2015 bond redemptions of 155 billion euros, he said. 



kaiserhoff's picture

Monetize does NOT equal printing, although the two sound similar.

The debt remains, and would be much less of a burden if they were printing.  For now, we are headed for serious deflation.

in4mayshun's picture

Monetizing means printing at a later date.

zaphod's picture

This is actually better than the USSA over the past year or so.

With QE3 we had $85B/month or more than $1T/year, so the FED was not just 100% monetizing the government's deficit, tit was also purchasing additional bonds for good measure, we had over 150% deficit monetization here in the US.

And still the wheels are about to fall off the bus. 

malek's picture

And you conveniently left out the interest on existing debt - Germany also going to pay that without new debt, at least according to their own fantasy planning?

Wolferl's picture

No, why? Interest payments are part of every federal, regional or local budget. In Germany that is, i don´t know what you do in your neck of the woods. And btw, the German constitition requires now a balanced budget.

hedgeless_horseman's picture



And btw, the German constitition requires now a balanced budget.

In France, Portugal, Spain, and Greece? 

hedgeless_horseman's picture



Good luck with that.  Maybe the third time is a charm?

Wolferl's picture

Fun fact: the Greek economy had a surplus ... only under German occupation. But we took it just once, wasn´t worth it. Maybe we should give it back to the Turks.


And even today some French remember the good ol´times and wish we were back:

Squid-puppets a-go-go's picture

we might well imagine this 'surplus' was only by diktat that the people of greece were at that juncture forbidden from consuming the lions share of their productive output

Wolferl's picture

Yep. Greeks are just like kids, they need a grown-up to tell them what to do. But we Germans have better things to do than running a kindergarden for the Greeks actually.

Joe A's picture

Yes, and then they had to give the money to nazi Germany. Greece has plans to sue Germany over that now: they want it back with interest because the repayment they got after the war was just peanuts and an insult.

Yes, let's have the nazis back in Europe. Naaah, let's not.

Wolferl's picture

True, shows you how far away from reality the Greeks live their life.

malek's picture

1. You ever learned the difference between the consitution (Grundgesetz) and regular laws in Germany?

And btw, the German constitition requires now a balanced budget.

2. Yeah, sure because the politicians always faithfully follow the law <facepalm>

Wolferl's picture

Have degrees in law AND political science and i´m pretty sure i know the difference between a constitution and regular laws. Not sure if you do.


We are talking about Germany and in Germany laws and constitutions matter a lot. EVERY German has the right to sue the government if they don´t follow those budget rules in the constitution and you can be sure at least one of those 80 millions will do it.

malek's picture

I stand corrected, they really did a 2/3 vote to change the Grundgesetz.
I still see this as a pure political stunt - they had tried to limit Neuverschuldung before and it didn't work.

The litmus test is if there are real penalties written into it. Penalties directly against the politicians that is.
To my understanding a consitutional rule never has a clause in it what is to happen against someone violating the rule - that piece is done in regular laws (which can be changed by simple majority.)

So the whole "so sue me" becomes meaningless if
- there is no punishment threatened against politicians
- the judiciary is not willing to follow through on such threats
- the politicians abuse excemptions clauses in the law
- the politicians change the laws and put some additional "excemptions" in the law on punishments (by simple majority)
- the politicians change the ways of measuring the controlled value, in this case Neuverschuldung
and for sure you can come up with a few more.

Wolferl's picture

In brief: every German government has to present a budget law for the next year to parliament. If this budget don´t follow the rules of the German constitution it can be challanged before the German constitutional court (Bundesverfassungsgericht) BY EVERY CITIZEN OF GERMANY, and of course by the opposition in parliament. And believe me, this court is all to happy to kill every law that doesn´t comply with the German constitution. Knowing this every German government will not even try to cheat with their budget besides some minor details sometimes. And the punishment? If the court kills the buget law government will have no money and will probably not getting reelected in the next vote.

malek's picture

 will have no money

Oh so that's how rogue governments were stopped countless times before, especially in the times of fiat currency!

sun tzu's picture

Mind telling us how they ran up over 2 trillion euros of debt if they don't issue new public debt?

Wolferl's picture

Read my comment above, i´m talking about no new debt NOW and in the future.

sun tzu's picture

Really? Germany which has run up over $2 trillion of public debt will NEVER have a deficit again? LMAO you fucking idiot

Wolferl's picture

That´s what the German constitution says. And if there will be deficit in one year, maybe because the tax revenues drop in a year because of an economic crisis, that deficit has to be made good over the following years.

sun tzu's picture

Mind telling us how they ran up over 2 trillion euros of debt if they don't issue new public debt?

eatthebanksters's picture

Madoff went to jail for practicing Ponzi on kids????

FieldingMellish's picture

Euro to $ parity in 6 months.

Dragon HAwk's picture

So if it's free Money why stop there  do it  100X and everybody's problems woudl be solved..

what a racket..

DetectiveStern's picture

Capitlism for the poor. Socialism for the rich.

101 years and counting's picture

does that mean german rates go negative out to 20 years?  so, germany will get paid by anyone wishing to buy their debt.  now thats a ponzi scheme the central printing fucks can all be proud of!!!

TheReplacement's picture

When we get to that point I'll be printing and selling my own bonds.

madbraz's picture

Very silly analysis.

sun tzu's picture

It's one of Ben's jocksniffers

TheReplacement's picture

That is some awesome rebuttal material you posted there.

Please tell the bankers who pay you that they are getting ripped off, not that it matters since they just type 1s and 0s into your account anyway.

Still, it is insulting that they send a 3rd grader to do their bidding.

no more banksters's picture

Too late:

"Germany becomes now a key factor for the desirable federalization of the eurozone through an unprecedented "haircut" of the social state, labor rights, pensions and salaries, in the name of the fiscal discipline and competitiveness. Dijsselbloem's "suggestions" to Germany show characteristically that the power will be transferred from Berlin to Brussels and to the European economic mechanisms which already took the power from politicians through Draghi's decisions."

lasvegaspersona's picture

I'm betting draghi will not harm the Euro, at least he will have a viable currency as the dollar is consumed by 'the Belarus Syndrome'.

wmbz's picture

The un-fed has their nose to the grind stone.

Keep humping boyz you can get that chart up to 5 trillion! It's for the people and children of course.


red1chief's picture

I'm sure Germany knows. Vassals have no say in such things.

earleflorida's picture

<Germany and WWI war reparations (Gold Confiscation?) Y/N?>

,and  why Germany is looking very closely at an alliance with Sino-Russo...

luna_man's picture



Prolong this madness if you must...I'm starting to find it amusing.


kindda like watching "blazing saddles"