This page has been archived and commenting is disabled.
SocGen Explains That Since The ECB's QE Will Fail, It Will Need To Be Increased To €3 Trillion, Include Stocks
There are a bunch of things in the ECB post-mortem note just released by SocGen's Michel Martinez, reproduced below, but here are the punchlines.
First, on the impact of ECB QE on the economy: "we argue ECB QE could be five times less efficient than in the US. In December, press reports suggested that the ECB had run studies suggesting that a €1000bn QE programme would only boost price levels by 0.2-0.8 after two years, five to nine times less efficient than the studies for the US or the UK. The impact on GDP is not provided, but it would be reasonable to assume the same impact as on inflation on a cumulated basis."
In other words, it will be an outright failure as it "triest" to boost inflation expectations and the European economy in its current format. That, as a reminder, is its stated purpose.
So what does SocGen suggest? Simple: the same thing every Keynesian says when justifying why a piece of occult economic voodoo fails to work: it wasn't big enough. To wit:
"The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn."
Or as Charles Dickens would put it:
And since there is nowhere near enough bond supply in Europe, the ECB will have to proceed with monetizing, drumroll, stocks.
Should the ECB target such an expansion of its balance sheet, it would have to ease some conditions on its bond purchases (liquidity rule, quality...) or contemplate other asset classes- equity stocks, Real Estate Investment Trust-(REIT), Exchange-traded fund (ETF)...- as the BoJ, previously.
Because what tens of millions of unemployed Europeans really need to help their lot in life, and to boost their confidence, is for the central bank to buy the stocks sold by the richest 0.001%.
* * *
Full note from SocGen:
Large QE with symbolic risk sharing
The ECB announcement today was well in line with our call that the sovereign QE programme could be large scale but not pari passu. The share of mutualisation is symbolic (1/11%). Yet, they point to higher volume than expected overall (€1140n in total) and reinforces the probability that the ECB would reach (or go over) its stated intention of 1trn increase in balance sheet.
A) The size of QE programme is €60bn per month, €1140bn in total
The main measure is an expandable asset purchase programme that includes European agencies and sovereign and complement the current programmes (Covered bond and ABS purchase programmes). Those new programmes will start in March 2015 and run until end September-16 or until the inflation outlook converges to 2.0% medium-term, which means that it could be bigger. The combined purchases will amount to €60bn per month. Apparently, the expanded programme will not include corporate bonds.
There was a large majority to today’s announcement while the Governing Council was unanimous on the idea that QE is a legal monetary policy tool.
Hence, the ECB will purchase €1140bn (60*19) from March 15 to September 2016. Today, the pace of covered bond and ABS purchases is close to €13bn per month, so additional purchases represent €47bn per month. The ECB stated that “purchases of securities of European institutions will be 12% of the additional asset purchases”. A quick rule of thumb suggests €230bn in ABS and covered bonds, €110bn in European agencies and €800bn of sovereign bonds.
The ECB also decided to cut the spread on the TLTRO rate, that would now be equal to the refinancing rate (0.05% instead of 0.15%)
B) Criteria to be specified in March
We know that the new programmes are running until September-2016 at least and that purchased bonds will be hold up to maturity. Obviously, purchases will be made on the secondary market for European issues and government bonds.
In terms of rating, it is likely that the conditions will be the same as for the ABSPP and CBPP3. First, the ECB will purchase investment grade bonds.
Secondly, for Greece and Cyprus (which are not investment grade), the condition would be that those countries “have an ongoing programme with the EU/IMF”. This would suggest that any failure to extend the current Greek programme that expires at the end of February would exclude Greece from any asset purchase programme.
Can the ECB buy at negative yield? Yes, said Draghi during the press conference
Which maturity? Details will have to be specified in March but Draghi suggested that maturities could be of 2-30 years.
Interestingly, Draghi said that it will have two limits on its purchases: 30% of the issuer outstanding and 25% of the issue. This latter limit will prevent the ECB of having a blocking minority in CACs, with the aim “to ensure that the ECB is pari passu”. As we argue below, this is not convincing, given the low degree of risk sharing.
C) Minimum symbolic risk sharing (8% risk sharing only on government bonds
As we expected, purchases of government bonds will be done according to capital key. The point is the degree of mutualisation is minimum(1/11). For most purchases, the National Central Banks (NCB) will purchase their national government bonds and bear the credit risk. The silver lining is that the less the credit risk is mutualised, the larger a QE program could become in volume terms.
The main piece of information in the ECB communiqué is here: “With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing”.
So the ECB indicates that the degree of risk –sharing is 20%, which seems a good compromises. However, regarding government bonds, the decree of risk sharing seem symbolic(8/100-12=1/11). To put is simply, the ECB will purchase €70bn on a risk sharing basis while the NCB will purchase the remaining €730bn. Noteworthy, the ECB will likely give objectives to the NCBs (purchases according to the capital keys).
This approach is consistent with our long held view that the ECB QE could not be both large and pari passu. Legal and political hurdles remain large because of the two articles of the European Treaty: Article 123 on prohibition of monetary financing and Article 125 (no bailout clause or no mutualisation clause). The ECB might well be pari-passu ex ante as Draghi argues. Yet, in the case of a debt restructuring, either the CB would avoid the debt restructuring (remind that the Eurosystem avoided the Greek PSI in 2012) or the (bankrupt) national government would probably be obliged to recapitalize its NCB. In both cases, the bigger are the purchases, the larger is the expected loss given default of the private sector. Investors risk seeking such way of proceeding as a lack of confidence in the euro area. Hence the final outcome on sovereign bond spreads might be uncertain debt sustainability concerns increase in the future. The flow of purchases will be positive but lower liquidity and higher expected loss given default will play out negatively.
Will it work?
In a joint paper with rates strategists (What kind of ECB sovereign and what impact?, we argue ECB QE could be five times less efficient than in the US. In December, press reports suggested that the ECB had run studies suggesting that a €1000bn QE programme would only boost price levels by 0.2-0.8 after two years, five to nine times less efficient than the studies for the US or the UK. The impact on GDP is not provided, but it would be reasonable to assume the same impact as on inflation on a cumulated basis. These figures are consistent with our own estimates.
The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn. Should the ECB target such an expansion of its balance sheet, it would have to ease some conditions on its bond purchases (liquidity rule, quality...) or contemplate other asset classes- equity stocks, Real Estate Investment Trust-(REIT), Exchange-traded fund (ETF)...- as the BoJ, previously.
So the onus will remain on delivery of better-designed fiscal policy and structural reform. But it is difficult to be hopeful on these fronts.
* * *
Of course, this means that the time to frontrun the expansion of ECB QE 1 has begun. The only problem is that for Draghi to act, stocks will have to crash first, and they can't crash if they are frontrunning the event the follows from their crash.
Good luck figuring that one out.
»
- 35311 reads
- Printer-friendly version
- Send to friend
- advertisements -
And people believe that politicians matter.
A bank...calling for MOAR money printing?
Unpossible.
Why don't central banks monetize drumroll... mortgages?
As if we need telling, everyone is begging for ECB QE to fail.
it's just a good reminder that megabankster can only one thing: ask for moar
two years to get the ECB balance sheet down one trillion, at roughly 40 billion per month
now two years to get it slightly higher, at roughly 60 billion a month... while the LTROs continue to be paid back
meaning that in theory in 2016 the ECB is roughly again at the same spot as in 2012. but since nobody really notices the LTROs being paid back... the psychological effect is that of printing
no wonder SocGen megabanksters ask for moar. they were cheated, compared to their counterparts over the pond
Ghordius, you have changed your tune over the years. No?
I change my tune when the facts that support my tune change. And one of the facts (that generate so many downvotes) is the balance sheet of the ECB, still lower then in 2012
here is the interactive statistic of the FED of St. Louis http://fredblog.stlouisfed.org/2014/05/the-ecbs-balance-sheet-continues-...
in July 2012, the ECB's balance sheet was at 3'000 billion. now it's at 2'150 billion. if this QE goes on, in 2016 it will be at... roughly 3'300 billion
that's, in the year 2016, 300 billion more then in July 2012 if you forget about further LTROs and TLTROS being paid back. just saying
-------
if you wish for a comparison to the FED, here it is: http://research.stlouisfed.org/fred2/series/WALCL
July 2012: 2'800 billion. now, 4'500 billion. that's double the current ECB level
Ghordius, don't you think that the figures you quote are suspicious. Don't you think that they are marked to model, like everything else?
It's a good point that. Do these central bankes really mark to market, are they above board with statistics they issue, or do they issue figures that justify their past and future practices. Banks are no longer reliable reporters of their books, not in the least. Should we now accept that Central Bankers, have religion, and produce honest figures in these charts.
Frankly. I do not trust anyting that sits in the 1%'s hands. They lies are monumental. No matter what they are, inflation, employment, assets on the books, liabilites, etc. etc.
People cry "Audit the Fed" (or other central banks). But it is not actually possible to get a normal Audit Report, ever.
If they ever were required to be audited, the accounting bodies would simply implement (in advance) "Special" Generally Accepted Accounting Principles (GAAP) which apply only to Western Central Banks. These rules will to allow them to "mark to model" and apply whatever valuations they choose to ensure they appear solvent.
Audit Report would then say that the financial statements present the Fed's financial condition in accordance with Special GAAP.
Because they can print, they're automatically solvent. It's just a question of at what cost to thee and me - like they could care less about us.
Not all balance sheets are created equal.....
Both are/were garbage but I suspect the quality of these future "assets" will be of markedly poorer quality. Let's back up the truck and purchase sovereign debt at already preposterous yield. Can you say interest rate risk?
Do you have any used Volvo's in inventory? Low mileage of course...............
I know I sure haven't.
And for this I am truly sorry.
Especially for my readership.
"To understand these things you just have to get into the mind of a total idiot. Indeed...BE THE IDIOT."
All I can say is...I'm sorry.
Je suis idiot!
disabledvet, a good 60% of the time I cannot understand what you are saying.
Yet I often upvote you. You are not only a fixture of the Hedge, but one of its more surreal offbeat people. This place would lose too much colour if you were gone. You are a different voice, and with our best here you bear the red-arrow scars to prove it.
So, speaking as one of your idiot readership, I'll just say don't apologise, and don't ever change.
Oh holy fucking shit. Are these dumb asses kidding?
We keep kicking the can down the road, and eventually we'll kick it right into this bankster-constructed house of cards. Then the shit really hits the fan. (Feel free to add your hackneyed phrase here to help me describe.)
The DAX is the new DOW - BTFATH
"Will it work" is not an issue...
If massive new debt generates any GDP at all, that's all that matters...
If it generates 10 new jobs now, it has worked...
And thousands of jobs "saved". MDB thanks for keeping us on point.
No job left behind!
that bar just keeps getting lower and lower for CBs, even as the sums required to get over it get higher and higher.
"throw a few billion more on that pile, i won't be able to springboard off it as it stands now"
Long German wheelbarrels.
There's only one problem in all this....
This is the EU attempting "massive QE" this time...
I say "Fail"
Attempting, and all while calling Germany's bluff. Let's see how that plays out. Merkel is part of the Euo elite, and will avoid fighting this if she can. Will the Kraut in the strasse put up with it?
I got me a Troll - drop me a line sucker and introduce yourself
How long can this insanity continue before people stop believing that their fiat currencies are worth ANYTHING?
Pretty paper with fancy ink, take it and go back to work, fool
I'll give it a shot. Here goes. I believe the gentleman is trying to say that Central Bank QE is much like a man who visits prostitutes. Eventually one will bust his nut in the wrong skeezer and get the AIDS. But until then, let's keep spraying the seed.
No
This is gold. The EU says they will rip off $1 trillion in purchasing power from those who hold euros and a bank can only ask for more.
It used to be that a TRILLION was a big number. Like, a million million.
Now, not so much.
pods
Gold and silver are back at their i3 day highs. Look for a breakout soon.
Breaking out huge against the CAD. Wait til the "real" breakout.
Crackheads will be crackheads, until dead or spirituality. That is what they do.
Yep, addicts s have to have ever increasing hits to keep satisfied.
<<It used to be that a TRILLION was a big number. Like, a million million.>>
Pods, didn't you get the memo. There is no inflation!
MOAR MONIEZ!!!!!!
Come on HH, there's no such thing as a bad idea if you just throw enough money at it and 3-4 trillion should do the job nicely....
The QE is a sign of significant failure of the economics. They have gone all the way down this road and there’s been no economic progress for the people, only profit gifts for the banks. And Draghi’s remedy, let’s go deeper.
It’s failing, big time. The Swiss have escaped. They saw the euro printing coming and knew it was going to get increasingly worse.
Draghi is proving the political folly of having a euro zone ; central planning rewards failure because it declines letting the inefficient fail.
JR, people at large still don't know what QE is, how it is implemented, and what the effects are. They don't care either, as long as the supply chain gears turn another day. "Blah blah blah needs blah blah blah bailout to survive, and there's no other option." That's the presented and perceived message. From the macro perspective of looking at countries and CBs, monetary and fiscal policies are of complete failure to the people and complete success to the banks and gubbamins. That, anyone with even a cursory understanding of CB and gub affairs knows. From the micro perspective of JoeAverage's worldview, things are stagnating along while the purchasing power, disposable income, and ability to save are eroded, along with incremental regulations on life's activities, for reasons beyond Joe's level of understanding and inquisitiveness.
It is imperative in today's world for a human to be able to see and understand both macro and micro perspectives.
Evolution is survival of the fittest. Competing entities may be physical or ideological. If humans aren't fitter than CBs and gubs, CBs and gubs win.
The central banks are gaining ground but it’s quicksand. It will not support their weight. And while the public doesn’t understand this development, it will understand the collapse of the banking system when it touches bottom.
And, so, you are correct, Skateboarder, and so am I. It’s not a cycle. Central planning is linear. It starts with the pretense of good intensions and picks up baggage with every decision as it heads for disaster.
IOW, you don’t get to the point where all of a sudden what the Central Planners have done begins to succeed and begins to restore the economy; it just gets worse and worse. And rather than face what their problems are, these men are gambling that the end won’t be reached while they’re still in office. Draqhi looks at what his policies are going to do for him quarterly….he’s not interested in cutting out part of the cancer. How much more foolish could he be than with all the problems the Central Planners have, he’s going to manufacture even more euros?
I maintain that this is not a recession; this is the end of central planning. The Fed's banker-designed economies have finally begun their final chapter.
“Crash and burn”…this is what it would look like, according to Austrian-born economist Friedrich Hayek, the economies sliding down the hill and the bankers running after them trying to lasso them. Too bad Hayek isn’t here to see it.
Fantastic post JR. "Common Core Economics"
"let's go deeper"
they will go deeper until the moment they become the Danish, the Swiss, or the Chinese (soon) and realize they have to capitulate.
it's a psychological phenomenon, one with a predictable outcome.
Draghi is Italian and he's a Goldmanite to boot.
The Mafia is in the house AND running all the bookies.
Eurolira is here. That's all this Italian shyster knows to do. Germans called the Lira "chewing gum currency".
That's exactly what the Euro is turning into. Naturally Hollande the French poodle is onboard because his country has devalued at least 2x in recent history.
Germany needs to leave the Euro. Who gives a fuck if other Europeans cannot afford German exports. BMW and Mercedes are still the best cars and quality always costs more. German products are status symbols for many consumers. Besides, the Chinese will pick up the slack from European buyers.
At least they should try it and let the chips fall where they may. Germany is extremely productive and competitive. It could pull out and come out ahead like the Swissies.
The politicians don't matter. Draghi sure wasn't elected. How many Euros want this programme?
coincidence????
i think not.
"As China takes it currency global, Zurich is set to become a center for yuan trading in Europe with Chinese and Swiss officials poised to sign a financial deal on Wednesday.
“A memorandum of understanding will be signed between the central banks of the two countries during Chinese Premier Li Keqiang’s visit to Switzerland. It is an important step in the internationalization of the RMB, especially in Europe,” a government official was quoted by Chinese news agency Xinhua.
Switzerland is basing its push for the offshore yuan business on the country’s close ties with China, one of the nation’s biggest trading partner. Switzerland is the first country among the world’s top 20 to have a free trade agreement with China.
The Chinese and Swiss central banks already signed a bilateral currency swap agreement worth 150 billion yuan (24 billion dollars), in July last year.
Under the deal to be signed on Wednesday, China will give Switzerland a quota of 50 billion yuan (about $8 billion), under its Qualified Foreign Institutional Investor (QFII) scheme to support the establishment of the Zurich offshore RMB market.
The first branch of a Chinese bank will be set up in the Swiss financial hub for future RMB clearance after it gets approval from regulators of both sides.
China has established offshore RMB markets in Hong Kong, London, among other places, in a drive for the internationalization of its currency.
The world’s second-largest economy started pushing for the great use of the yuan outside the mainland in 2010.
China is promoting the use of its currency as an alternative to the dollar in global trade and finance and more and more nations now want to capture the fast-growing market for offshore trade in yuan, also known as the renminbi."
Am I the only one expecting some real financial fireworks at the after Chinese New Year turns?
Anytime from 20th February, look out below.
well schmucks stand in long que's and empower them with a vote... never really got that!
This is looking more and more like corrupt Goverments constantly ploying
against private sector Self-Sustainability.
What do the Europeans say?: Moooo.
What do the Americans say?: Baaaa.
What do the Japanese say?: Duuuuuuh.
ECBQE will fail, but not before a good solid 6 week rally to ES 2250
ECBQE may never happen despite Draghi's dog and pony show today.
Nobody has written any cheques yet.
Good to see you're back.
Why don't these fuckers send me a check for 100k!! I will boost the economy!
heh - boosting the economy (that is, productivity and trade) would tend to set slaves free.
Every bankster knows the best (that is, the cheapest) labour is slave labour. That's why your cheque is not in the mail.
Will it work? Yes, it will make the extremely wealthy wealthier. In this way its objective will realized.
send a kiss..I'm in Davos chatting about this. You are rather precient, have you conisdered our technocracy workshop, follows on rather well....never mind its coming to you anyhoo.
Interest rates have already collapsed.
Seems the market already has this "plan" and its consequences figured out.
Not a good time to be an exporter to Europe....internally or externally. Russia is already in recession, Ukraine pretty much no longer exists.
Why am I a buyer of anything here?
Sure...gold and silver surge to start the year. The only thing QE did policy wise was take out Detroit. "Just add Berlin, Rome, Madrid, Paris" etc to the list. Its all good.
We need it bigger because its not generating the massive inflation and "escape velocity" we were expecting?
Wow. Some deep thinking going on with that one.
"We need it bigger because its not generating the massive inflation and "escape velocity" we were expecting?"
+1000, thanks. I know, this is Jeopardy so you had to state it as a question.
I'll take "The End of the Monetary System" for $3 trillion Alex
actually the backlash is going to be ugly....like WWII ugly. The greed of the banks as they continue to fail and are rewarded is stunning.
Explainer 2: Decentralized money to replace centralized money.
Explainer: ECB to commit suicide by printing.
Give me moar!!!
GOD DAMMIT - We have to save Euro people from having a lower cost of living, what ever it takes.....
Right you are Sir! - We have a culture to preserve.
(NB: This above is British humour, & in no way is it meant to insult anyone on the wrong side of the pond. Thank you)
"One of the officers has lost a leg"
http://www.metacafe.com/watch/an-PczuJYn4bhbJmm/the_meaning_of_life_1983...
this is not going to end well.
When I read the QE amount, I assumed it was per country*
* I was wrong :(
QE is blantent theft from productive forces and will lead to the destruction of the thieves
They need to keep the system alive while they steal so they can get their crowd control microwave units fully operational.
I call em oligarch toasters because once they are used they will be turned against the oligarchs shortly thereafter.
I guess sometime soon the question becomes: Do they pay their security forces which they will need to entrust their lives to in gold or fiatso TP?
Or perhaps lands and castles......................
When I hear about things should/wont work, I wish they would provide their definition of Success.
Another Money Boo Boo
That was good for a laugh, not just a grin MBB...
Seriously though gentlemen and the odd (or even) lady on here....QE has brought the shameless global central bank ponzi out in the openest way now.
And yet we stand powerless.
And like someone said above, people still vote.
For prollyticians who are serfs to bankers.
The game, the rulebook, open hands and yet the 7.7 billion bleat as they are beaten down one more time.
What is it going to take?
"What is it going to take?" It's going to take drastic, hyper violent action by some one (or many some ones) with nothing left to lose.
personally and I could be wrong but my vote to change the paradigm is NOT violence. They own the drones, the police, the military and the media. Any narrative they want to concoct to use these tools against their own populations can easily be made up. You can already see them working toward a "domestic terror threat" narrative. So any kind of violent uprising will be immediately turned into a "terror" threat which the hoi poloi will believe completely. Ergo the 5% needed for revolution will in all likelyhood be too small this time around.
Martin Luther King showed us all how to use NON-violence to attract both attention and support from the masses inside the U.S to exact real change. So did Ghandi etc. but unfortunately because this method is so succesful it requires a very charismatic leader who also is inevitably assassinated.
Non violence is the way forward but this time without a central figure who can be eliminated. In the end the 5% who are aware need to wake another 5% and that would be enough to overcome the inertia we face as a culture and hopefully start the revolution toward real change, politically, financially and socially.
That being said their will be a faction that will go straight to violence and will immediately distort the conflict. The non violent revolution simply has to wait out this inevitability and start real meaningful change once this distortion has been squashed by TPTB
I think orthogonal actions will triumph this time :-)
Question as always: Is the Human Race as a whole non-violent? Are the enlightened in a great enough number?
I pray they are. I have children and nephews and nieces. I hope our societies can evolve and move forward.
That is exactly what it is..give me more....we demand it....free money they think..but it will come at a price....I think the world just shuned the Central Bank movie from the Oscars because of Central Bank fatigue...just like Selma..
'You going to wire it for 220 voltage?'
'220... 230 -whatever it takes.'
does this mean that things are really shitty around the world?
"When I said an alien invasion would fix everything, I was certainly expecting more than just this one pathetic mother-ship." -- Krugman
+1 LOL
""When I said an alien invasion would fix everything, I was certainly expecting more than just this one pathetic mother-ship." -- Krugman "
But the Aliens are not much larger than individual electrons, about the size of the ones and zeros in your computer.
They are called The Derivatives, and that single mothership has over 90 trillion of them on board...
Lacy Hunt explains it well: https://www.caseyresearch.com/cdd/stumbling-into-2015-with-lacy-hunt
Well, QE is not enough in size because it is supposed to fit the 0.1% population. What do you expect, you pleb.
Well Draghi has NEVER said it stops at 1.1 T ...
Do whatever it takes...stays his mantra!
germany would never sign off on that, not on the bundesbank balance sheeeeet.
These fucking bankers need to be lined up and summarily executed... They make heroine addicts look like saints.
Interesting comparison. More to the addiction angle than the banksters would ever admit to. But now that is step one, isn't it?
At least they got the 'it will fail' part right
So, the ECB is going to hoover up sovereign debt already sitting at record low [read: absurdly proposterous] yields. Someone remind me again how this isn't going to blow a giant hole in their balance sheet IF and WHEN rates are lifted? Vive L'Euro!!!
Here we go, QE 2 after 2 hours xD
Is no one else under the impression that global growth is starting to tap out?
BO, fantastic avatar btw
This sums it up:
The ECB is acting like a clown on a minefield.
*crosses fingers* Please be a mime! Please be a mime!
In the midnight hour she cried...
With a rebel yell she cried...
Moar Moar Moar
Moar Moar Moar
Christine Lagarde, managing director of the International Monetary Fund (IMF), said on Thursday that expectations of a bond-buying program in Europe had already had an effect."To a point you can say that it has already worked," Lagarde said on a panel in Davos. "If you look at currency variation and where the euro (Exchange:EUR=) is at the moment, you can't deny that there is expectations there that QE is about to come and is announced and will be significant." European laggard economies were poised to benefit from the higher inflation expectations which would come with quantitative easing, Lagarde added.
She is just reading from the script she was given. All the players play their parts diligently. Devoted to the cause they are.
3 trillion for 2% inflation... Europe has a 16 trillion euro’s economy...
that doesn’t make any sense!!
They just want to buy stocks with free money and use the dividends as income!
Income to a private central bank!
SIXTEEN TRILLION IT IS THEN!
Merkel nor the German population would ever go for this. It would be the end of the Euro and Drahgi knows it.
This is like drinking your own piss and thinking it nutricious.
The scam lies in the ECB acting like the greater fool... they buy the stocks high, then the market is allowed to crash and those in on the timing get to buy up full control for a pittance.
Redshield tactics at their finest, Waterloo all over again except this time almost everything is actually destroyed - but the chosenites will have title to what's left...
When I was young I had a old aunt who was pretty rich. And she always used to say that she got rich because her husband bought stocks in companies in the 30’s.
Now after the war, our currency inflated over 90% and was struck by a severe deflation because there where no jobs and everything was destroyed.
They had bought stocks from factories that made plastic pots, which was very hot back than because plastic was something new and way lighter than iron or bacalit.
That increased her net worth dramaticly and then they went to Germany and bought livestock en masse at discount prices and sold them at a nice profit over here.
So...these prices may look crazy high right now but when we’re struck by massive inflation those prices will look like peanuts.
And for the rest, there could also be a deflation wave in wages like we’re already seeing right now that gives you also a advantage.
they'll get away with it too. As long as they have firm control of all the markets and are able to supress wages, there won't be any inflation, and the TBTJ boyz can keep getting fatter. Great system!
In the end, a Five year Plan. Direct purchase of stocks(and voting rights). The complete merger of the State and business, Big and small, in Europe and here too. All prosperity will cease in a Universal Republic.
We've passed the point of no return. It was passed years ago.
Yep, should be intuitively obvious we're in a post free market era and TPTB will simply say it's too painful/impossible to go back...and poof, your new republic is born.
"Yep, should be intuitively obvious we're in a post free market era and TPTB will simply say it's too painful/impossible to go back...and poof, your new republic is born. "
PLEASE STOP ABUSING THE WORD 'REPUBLIC'.
You don't have one.
We don't have one.
No one presently living anywhere on this Earth has ever seen such a thing.
& absolutely no one is planning on instituting anything even remotely of the kind anywhere in the world at this time.
The word Republic is sacred to me. I was using it in the communist sense, "Peoples Republic".
and Merkel and the 4th Reich (the enlightened Reich) are in charge what bitter bitter irony that we double crossed them 50 years ago to stop this sort of thing
Time to "buy" those old bicycles...?
Why has the Bundesbank gone along with this wheeze?
Most disappointing.
Because the situation is totally FUBAR, that's why.
blackmail probably. there's only a few key guys and the NSA knows all about any embarassing secrets they may have.
Long term inflation expectations are at 1.5%, if €1Tn raises it between 0.2% and 0.8% the ECB is on target. SocGen should fire its dumb analysts.
Drahi - While you are at it... outlaw gravity !
"The potential amount of QE needed is €2-3 trillion!"
Then that won't be enough.
Print Moartimer Print
BTW, that picture should be a 350 pound person not a little boy.
Since Physical gold is their number one asset on that side of their balance sheet, why wouldn't or couldn't they target pyisical gold instead of all these paper "assets"?
Nice to know they're already talking about QE2 before QE1 starts.
At 3 trillion euros how is it really different than a debt jubilee?
Free the Serfs from debt? Are you Mad, Nigel?
It is a debt jubilee in reverse.
Forcing tax-payers to support and subsidize privatley owned assets held by a tiny minority is obviously going to make things worse not better -
Gotta love 2% inflation targetting. Translation: bankers aren't happy unless they're stealing at least half your purchasing power every 20 years.
This the same socgen that said putin was selling all his gold?
Well, that was from a different office down the hall....
If 1 trillion is not enough and 3 trillion would be more effective, why not 50 trillion?
"The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn."
These are the same shysters that are calling for $1000 gold from the other side of their mouth
They really need to learn from the chinese. Just put a zero behind the figure and viola!
So it's gonna make the rich richer? Good thing then they already own all the assets...I guess asset prices will now go up?
Consumer demand drives the economy. The problem is lack of demand. QE is futile.
Yup, you said it. Reaganomics and Davos club are ALL about supply side.
And they are running out of scams, as the consumer is now strangulated by debt, both private and government (in his name).
Whereas the supply side game makes the rich richer than Cressus. But all it leads to is self delusion.Once the bubble becomes unsustainable.
You can just see what a scam Oil markets were.
What a huge RENT is built in those prices at the pump; where governments, Oil majors and Producer Oligarchies take their cut on the way to the consumer.
At 40 $ most of that conventional oil is STILL profitable on a direct cost basis (contribution); as the fixed costs (R&d + Marketing) have long been amortized on most operating equipment.
The oil lobby along with the financial lobby protected by the MIC lobby; that is the sacred triumverate that Reaganomics + NWO + Clinton +GWB/OBama dystopian tandem in debt have now spawned.
Pax Americana and unilateralism. And now eurozone enters the hot spot zone.
If the Eurozone does not decouple from this world construct it will suffer the same asymptotal effect.
And Eurozone has chosen not to decouple from the Imperial Davos club mode.
Play on... and lets see if free money can save true freedom.
'Come on down and chum some of this shit!'
https://www.youtube.com/watch?v=2I91DJZKRxs
Wait a minute...Isnt that kid with the bowl in the picture the same damn kid who starred in Captains Courageous? You know the one, the rich spoiled kid who fucked with that one guys fishing gear just so he and his Spaniard friend could win the cod fishing contest? NO? Well it looks like him!
Somebodys fishing gear just got fucked with by somebody, most likely a spoiled kid who wants to catch some cod..
This is looking more and more like corrupt Goverments constantly ploying
against private sector Self-Sustainability.
Well I guess $1300 is a bid then, get your gold while you still can, this supressed offer won't last forever!
as buying bonds doesn't make it to the stock market. Just a more direct route of bailing out the supa riche eurotrasche.
Something like this is in play "He whom the gods will destroy, he first makes mad."
QE in Europe was a sure bet, it worked so well in the USA that Brussels and the ECB were bound to demand the same medicine as brought prosperity and record market sahre prices to the USA. What can a person say about it? The US experience was of a central bank system that resulted in a record transfer of income and equity asset values to the 1%. Nobody can debate the fact that QE in it's on the gound result was a welath transfer mechanism. Europe can expect the same result. At a time when all world wealth is concentrating in fewer hands, the ECB can't possibly expect QE to produce jobs, growth and rising works incomes. The opposite will happen.
All I can say is this was wholly predictable. A world where 1% decide everything. is a world where the 1% will decide in their favor.
I hear they may even buy Greek bonds.
"Whom the Gods would destroy, they first sell derivatives."
What's two or three trillion Euros between friends?
The US's Fed printing probably spilled nearly a trillion dollars into Europe since 2008, so I hope they're including a trillion or so spilling back to the US in their program.
The US branch of the banking mafia spilled a trillion dollars to the European branch of the banking mafia.
What it also means, as in the US, is, "don't hold cash!" As if anyone in Europe still was, what with their NIRP. Will this then be bullish for European stocks? And for American stocks? Or is that arrow already shot? DamnifIknow, and I suspect they don't, either, or more likely think they know but have it wrong.
It's amazing how clear their message has been for years... Interest rates are mostly the future value of money, they have been screaming at us for years with ZIRP, they are expecting stagnation for a long time.
The only question is, who will win in the long run...the people (deflation) or the CBs (inflation). Our weapons are down sizing, debt payoff, etc. Their weapon is devaluation.
If you want to help the cause, unload your digital assets and buy real assets.
And win…
The Swiss Declare War
By Bionic Mosquito
January 22, 2015
Well, that is what one might conclude after the events of the last week. As is well-known, the Swiss National Bank decided to remove the peg/floor in the exchange rate for the Franc against the Euro. This move was made suddenly, with no announcement or even a hint beforehand.
There is so much wailing and gnashing of teeth in the financial media. There is much I might say about this event; I will use the writing of two of the more prolific economic financial writers of today to help me on my way. Both John Mauldin and Ambrose Evans-Pritchard (with two pieces, here and here) have written about this event; they each offer comments worth addressing – comments that help give context to some of my thoughts. (Forgive me as I will write in the language of the macro-economist; using their own words, the failure of their logic can be demonstrated.)
Ambrose offers his analysis:
The Swiss National Bank has lost control.
Think about this…while the SNB allowed the ECB to dictate monetary policy for the Franc, the SNB had control; now that the SNB has decided an independent policy, it doesn’t have control. What? This passes for logic?
John Mauldin regularly writes about currency wars (describing the Swissie as “The First Casualty of the Currency Wars”), as if a currency war is something new to this generation. It isn’t. As long as money can be manipulated by fiat, there have been currency wars; as long as mercantilism has been official economic policy, there have been currency wars.
He offers the standard eulogy to the death of a weak currency:
Every bank and business that held non-Swiss-franc debt or investments took an immediate 15–20%+ haircut on its holdings. Swiss investors lost at least 10% on investments in their own stock market and more on shares they held in other stock markets.
In Swiss Franc terms, this is true. However, 100% of the holders of Swiss Francs saw a tremendous gain on their holdings – of course, not in Swiss Franc terms, but relative to the wealth of everyone not holding Swiss Francs. Denominated in dollars, Euros, Yen, Pounds, and even gold, the Swiss are much wealthier today than a week ago. This is a great trade-off.
It gets even better, although you wouldn’t know it to read Mauldin:
Forty percent of Swiss exports go to the Eurozone, and the Swiss franc is now over 30% higher than it was five years ago – with almost half that movement coming in one day. Those exporters just got hammered.
Ambrose chimes in:
…the howls of protest this morning from the Swiss export sector. Nick Hayek, head of Swatch Group, said the collapse of the floor would cause havoc. “Words fail me. Today’s SNB action is a tsunami; for the export industry and for tourism, and for the entire country,” he said.
This is the tired old “a cheap currency is good for exports” line. It might be good for specific companies (and one or two CEOs can always be trotted out to express this view). But what about the other side? Only a small portion of all goods and services produced in Switzerland are exported (net exports of about 5% of GDP). Meanwhile,100% of all goods and services consumed by people in Switzerland are either produced in Switzerland or imported; well, at least I am pretty sure about this. Therefore, for a small percentage of the population (those producing for export), one could argue (although even here I disagree) that a cheaper currency is helpful; for the entire population, a stronger currency is beneficial.
From Ambrose:
The franc surged 30pc against the euro in early trading after the Swiss National Bank stunned traders by scrapping its three-year currency floor and freeing the exchange rate…
So a Swiss resident could buy 30% more goods from Europe for the same amount of Francs, and the same amount of goods from Switzerland. They can buy more stuff for the same Franc, yet somehow this makes the Swiss poorer?
And why do I disagree on the export side? In order to produce, one must consume. Where do Swiss exporters buy the goods and raw materials necessary to produce? While Switzerland is a net exporter, it imports CHF 15B / month while exporting CHF 17.5B / month. Someone has to pay for those imports before they can export.
Once a manufacturer consumes existing inventory, it now must go to market and compete against those able to buy with other currencies. Better to compete with a stronger currency, I think.
If you don’t believe me, try this: Mauldin cites his good friend, Charles Gave:
They [the SNB] didn’t mind pegging the Swiss franc to the Deutsche mark, but it is becoming more and more obvious that the euro is more a lira than a mark.
But the Swiss, not being as smart as the Italians, do not believe in devaluations. You see, in Switzerland they have never believed in the ‘euthanasia of the rentier’, nor have they believed in the Keynesian multiplier of government spending, nor have they accepted that the permanent growth of government spending as a proportion of gross domestic product is a social necessity.
Of course, the Swiss are paying a huge price for their lack of enlightenment. For example, since the move to floating exchange rates in 1971, the Swiss franc has risen from CHF4.3 to the US dollar to CHF0.85 and appreciated from CHF10.5 to the British pound to CHF1.5. Naturally, such a protracted revaluation has destroyed the Swiss industrial base and greatly benefited British producers [not!]. Since 1971, the bilateral ratio of industrial production has gone from 100 to 175…in favor of Switzerland.
The last time I looked, the Swiss population had the highest standard of living in the world – another disastrous long-term consequence of not having properly trained economists of the true faith.
The same could be said for Germany and (until very recently) Japan – in both cases a stronger currency and a net-export economy was not mutually exclusive.
It seems the Swiss only went dopey when they announced the peg (well, also maybe when they de-linked the Swissie from gold).
Mauldin goes on to bemoan the plight of the borrowers – debt becomes more difficult to service if the currency becomes stronger. As if protecting those who choose to consume more than they produce is the only sound economic theory around.
Ambrose feels sorry for the poor central banker:
The SNB has to pick its poison. It is damned for one set of reasons if it holds the currency peg, and damned for another set if it ditches the peg. Welcome to the world of horrible dilemmas facing modern central banks.
Poor babies. I have a solution! Money and credit could just be left to markets; what about that idea?
On a slightly different topic, but equally important: Mauldin also introduces the reality of the default already taking place in the United States, and which could also be deployed everywhere (citing Will Denyer):
The US has just provided a remarkable example of the third option at work. Last year, the US Treasury paid a record amount of interest, roughly US$430bn. But over the same period the Fed remitted almost US$100bn to the Treasury, thanks to a balance sheet bloated by QE operations.
As long as central banks do not reduce their balance sheets of government securities, and as long as they return interest to the treasury, it is easy to state that the national government has defaulted on that portion of the debt held by the central bank. What is it called if the borrower never has to repay the debt and doesn’t have to pay the interest? Default is pretty descriptive.
This is the path possible for Europe, if a change or two is adopted:
But what about the eurozone, where many governments are involved? Normally, any profits made by the ECB are pooled and distributed to member countries in proportion to the central bank’s capital subscription weightings, which are based on population and gross domestic product.
What would make a big difference is if the ECB made an exception to its normal profitsharing practices, and said that all profits on Portuguese bonds will go back to the Portuguese government, all profits on Italian bonds go back to the Italian government, and so on….
There you have it – your cake and a full belly. When does the game have to come to an end? I don’t know, but as more and more assets are demanded by the non-productive (those living off of the largesse of central-bank financed government) and there are too many non-productive feeding off of too few productive, it will.
Mauldin does properly see the end game, at least for Europe:
Unless and until its members create a fiscal union and come up with some formula to mutualize their debt, the Eurozone will remain imbalanced and will become increasingly likely to break up.
I am betting on “break up.” I just don’t know exactly when.
And what about the end game elsewhere? Take a cue from this comment regarding the SNB:
Jeremy Cook, from World First, said the retreat was a “total capitulation” in the face of forces that are too big even for a central bank with plenty of firepower. “Nobody wins when you stand in the way of a freight train, except for the train.”
One by one, this will be true for each central bank.
The traumatic day in Switzerland has exposed limits of central bank power. It is a foretaste of how difficult it is becoming for countries to resist the tidal force of devaluation policies and currency warfare as deflationary forces sweep the world. The monetary hegemons are left having to pick their poisons.
Or have their poisons picked for them.
End the Fed.
http://www.lewrockwell.com/2015/01/bionic-mosquito/the-swiss-declare-war/
CAUSE AND EFFECT
On January 15, 2015 the Swiss franc is de-pegged from the euro.
A few days later the talk is whether EUR 1 trillion is enough QE or should it be EUR 3 trillion. Let's assume that the ECB told the SNB of its plans for QE.
Apparently the Swiss, are willing to sell fewer exports and buy cheaper imports and not be tied to a currency whose object is to depreciate itself by printing more money.
It worked quite well for the US, who had $18 trillion in bonds to buy back. But the careless ECB doesn't have a fraction of that amount of bonds to buy back.
When the Swiss pegged the franc to the euro, they did it to protect their currency and economy. They unpegged it for the same reason.
"Sufficient unto the day are the troubles thereof." And the troubles in September 2011 are clearly different from the ones of Januaru 2015.
A bit of a thread jack, but ties in with all this shit, especially when old boy Draghi announced 1.1 Trillion more fucking theft from the Europeans pockets.
A little over an hour after the QE extravaganza was announced, Margaret Thatchers chief 'Cunt' was announced dead, a man by the name of Leon Brittain, at the tender age of 74.
This utter piece of filth, a now known paedophile protector, loosing documents related to child abuse of unspeakable proportions implicating a huge number of very important people in the highest echelons of the British establishment, going right to the very top kicks off? A document, or said documents that implicate his own 'Clan' of disgusting fucking child rapists and the news is announced just after Draghi drops his 'QE Bomb'?
Good time to hide bad news eh? Was this dirty bastard just about to be exposed? And conveniently kicks off?
There is a reckoning coming my friends. And this time, the proles will see to it.
Tick fucking tock you filthy cunts, including you Draghi you nation wrecking cunt. I will see you all in fucking hell you bastards.
:-)
especially when old boy Draghi announced 1.1 Trillion more
SocGen’s statement underscores your statement, Inthemix96: it’s not enuf…. "The potential amount of QE needed is €2-3 trillion!”
Their QE extravaganza is collapsing!
Its never enough JR my friend, they always want more as in moar.
100 trillion printed from thin air, with interest added wouldnt be enough, it never is.
Look after you and yours my friend, there is a storm coming, and at some point, we will all be inthemix.
Never forget who caused this shit mate, cos I had fuck all to with this, as I know you didnt, but as ever, us mugs will be left to pick up the pieces. So lets direct some anger for a change eh? These fucking muppets think we are all as in-bred and as thickly laid with shit as they are.
They are in for a rude awakening...
Bank on it
;-)
The good news, Inthemix96, is there will be pieces of them for us to pick up. I’m ready. Take care.
You'll be alright mate, take care as well friend.
By fucking Dog himself we are going to need it.
;-)
http://cdn.meme.am/instances/54153265.jpg
What more is there to say?