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Both ECB And BOJ Warn More QE May Be Response To Chinese Currency War
Minutes from the ECB’s most recent policy meeting reveal that Mario Draghi and company have a number of concerns about the pace of economic growth in the euroarea and about the outlook for inflation which, much to the governing council’s surprise, "remains unusually low."
Board members also took note of increasingly volatile EGB markets and made special mention of the second bund VaR shock which took place at the first of June, something the central bank attributes to "overvaluation [and] one?way market positioning related to the public sector purchase programme." In other words: "our bad."
The bank gave itself the now customary pat on the back for the "success" of PSPP noting that the "moderate frontloading of purchases" (a reference to the effective expansion of QE that was leaked to a room full of hedge funds at an event in May) was going smoothly, other than the above-mentioned nasty bout of extreme volatility.
As for the economy and inflation, well, that’s not going so hot. "Overall, the recovery in the euro area was expected to remain moderate and gradual, which was considered disappointing from both a longer-term and an international perspective [while] consumer price inflation had remained unusually low."
Between that rather grim assessment and the comments cited above regarding volatility, one is certainly left to wonder what it is exactly about PSPP that’s going so "smoothly."
But as interesting as all of that is (or isn’t), the most compelling comments were related to China. Here’s the excerpt:
In particular, financial developments in China could have a larger than expected adverse impact, given this country’s prominent role in global trade.
Consider that, and consider the following statement sent to Bloomberg by an adviser to Japanese PM Shinzo Abe:
If [the Chinese move to devalue to yuan] suppresses external demand in Japan too much, the BOJ may further relax monetary policy.
Clearly, the ECB meeting took place ahead of China’s FX shocker, so the governing council’s reference to "financial developments in China" likely referred to the stock market collapse that was unfolding at the time, but the takeaway is the same: if developments in China’s financial markets serve to further undercut Japan and Europe’s quest to boost growth and stoke inflation (i.e. if China succeeds in exporting its deflation to trading partners), more QE and more easing will be just around the corner.
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THERE SHALL BE MOAR!
:shocked expression:
(Currency) War......What is it good for? Hint: to keep the status in the quo.
"Begun, The Currency Wars Have" ~ Yoda
IMHO,
World currencies (except USD) will continue depreciating.
World economies will enter Recession (if haven't already & US may technically not be in recession due to BLS fudging).
Risk assets (inveswtment capital) will undergo a Flight to Safety like nothing we have seen before (Treasuries will rally with 10yrT possibly hitting 1.35% in yield).
Timing? It has already started. Playbook actions will accelerate when FED actually raises the discount rate (which they must do for domestic political reasons).
Be prudent & cautious on your investment positions.
NoVa
This truly is like falling off a cliff. Right now we're teetering on a ledge part of the way down before resuming the drop.
Not a single underpinning problem is solved yet what I hear on the radio this AM is China is good as their markets went up.
QE moved our stock market up too so I guess its ALL good the world over.
QE = printing money = devalue the dollar = the rest of them do it. We are stuck in this vicious cycle now by golly!!!
This is why I'm completely amazed by everyone acting like Thomas Picketty is some great economist for acting like growing income inequality is some inherant flaw in capitalism, R>G, but ignores money being handed straight to the rich through QE. They do QE and then are surprised that it causes a currency war or increases income inequality. Call it what it is, printing money and handing it to the rich and no one would be surprised at the outcomes
And the folks that cry about tax and spend but are too stupid to understand that QE is the same thing only worse. I'll take tax your income and spend it on public projects over Tax your savings and give it to the banksters.
World debts are too high to ever be paid off. QE forever.
And the clueless clowns continue with blundermania for they know no other way....
Because all of the previous QE has been so effective? Time for tar & pitchforks
More Herion for the addict is needed. STAT
Jubilee Reset. Or. QE Forever. Those are the choices.
Well, that's why those with the assets and power will do everything they can to keep the system running. Reset means that assets get redistributed and power shifted. And that all sounds nice and good, but the process of getting there usually involves war and revolution. Not to mention all those currently getting free stuff suddenly find themselves searching for food.
They really, really fucked up with Iraq. They just blew way too much capital there trying to engineer historical progression. By now Iraq was supposed to be a glorious utopia spreading free trade and democracy to the entire muslim world, all the sunni and the shia and kurds proper secularized by choice not by the tyranny of a dictator. But it just was not to be. Simply cannot catholocize or secularize if the populations do not share some version of Jesus narrative. Having blew so much on Iraq, they now cannot keep their own capitals sustainable.
Really not sure why they thought secularization was supposed to be preferable to what they had already anyway. Secularization in the west got us the worst degeneracy, the worst decadence, over half the population on some sort of psychiatric med. Everyone has depression. This is progress? Let it all burn down and start over, authentically.
Jubilee Reset and QE Forever are specialty sandwiches at a K street deli. Some other menu options include:
Feed the Algo
The Paper Addict
We Don't GAAP
SNAP Sliders
The Barbarous Relic
debt is owed by somebody and to somebody.
A debt jubilee would be akin relinquishing their control over others.
To the debt holders that is probably not an attractive option.
QE seems to be a more gradual proces of lowering the debt to levels that are "sustainable".
Everybody was ok with the FED and the ECB doing QE, but when China devalues its currency, somehow that's a catastrophy. Why didn't any country respond to the QEs and why do we now have to respond to China?
It's just a change in PR strategy. Frankly, I commend them for getting the announcement out before the eBux actually started flowing. Makes them look more credible. /s
China out debted the US and EU combined for the past 7 years - fourfold. They are in deep shit if they think they can inflate this away given that their populace (their version of the FSA) would literally pull out the pitchforks.
Everyone is crowding into the corner as central banks continue to paint.
Not "everybody." Just everybody in power.
that's what I meant
It's good that they've found a use for the overproduction of gasoline .
Was wondering who they had picked to pull the next QE shift. Now we know. Wonder when the rotation is going to swing back to Yellen.
No shit Sherlock!
Maybe that mysterious explosion in China was ECB's and BoJ's response to China's actions.
All wars are banker wars.
Hurry up and QE to infinity. Then I can go and buy up property/land like that bloke in Wiemar Germany. - Didn't he buy the hotel he worked in (as a bell-boy) for 1oz of gold?
The market is screaming for tax cuts / new spending plan to stimulate economy.
There's no need to raise rates because Obamas policy of higher tax / higher insurance and more regulation failed to get the economy going
( huge surprise).
They relied on low rates QE. Which might work with lower taxes / less regulation .
Obama can't go back on his high tax theory. So no improvement until he's gone.
He took the debt from 65% debt to GDP 9 trill to 102% 18.5% and messed up the economy as we'll.
The economy needs tax cut / reduced regulation / debt restructure republican .
The European have fallen to the USA BS recovery mith. So they went printing as the boss asked them. Now they are finding out the obvious: you cannot create real economy with fake money. On the other end they are now trapped in the lie. Soon all this will end in disaster and then they will look for a scapegoat, may be China will be it.
"The European have fallen to the USA BS recovery mith."
Oh no it/we/they have not!
Unfortunately without revolutionary zeal within the military - (think Portugal 1974), - overcoming hidden zionista control wont be easy. I would say check back in a millennia or two, but Fukushima will have done it's work on this sorry mess well before then.
Mine's a Glenmorangie. Thxs :)
"Overall, the recovery in the euro area was expected to remain moderate and gradual"
ROFL
Oh Mario, you are such a comedien.
If only you had a sense of humour to match; you controlling amoral turd
When all you have is a hammer, every problem looks like a nail.
I think QE goes beyond keeping the banks solvent. In Europe and USA, the entire social/political framework (transfer payments) was modeled to actuarial perfection, meaning when the systems went upside down (payments exceeded receipts), any market hiccup would be catastrophic. After 2008 market correction, the Euro and dollar systems were suddenly way behind the curve where monetization wasn't an option but a necessity. The central banks know they have no option but to monetize everything. QE is just an inocuous Fed term established to keep society from the realization that they are monetizing at full speed. This situation is why the major central banks fear and hate gold. it's the light that risks illuminating the truth the bankers are keeping in the dark.
So,these bums in Europe,Japan and China print as much garbage as they can and turn around at the same time and buy U.S. Treasuries,in order to finance out of control spending by politicians in order to finance $200 trillion of coming entitlements that can't be financed by tax receipts.You have to ask yourself the question as to how do you value U.S. debt when essentially it is all being purchased with more printed fiat electronic paper junk from other lands?
I wish someone would throw money at me when I piss them off. I can do that all day.
This I posted to another article and I feel it is relavent
Real people know the difference between PET ROCKS and PET PAPER. Anyone who is still holding PET PAPER will get what they deserve for supporting the WORLD WIDE PONZI PAPER SCHEME (WWPPS), designed to enslave billions of people. The doors to get out of this enslavement are going to close very fast, once the U.S., Japanese, E.U., Chinese and every other citizen realizes that devaluation steals years of value from their savings. U.S. PONZI PAPER SCHEME, Japanese PONZI PAPER SCHEME, E.U. PONZI PAPER SCHEME, Chinese PONZI PAPER SCHEME, What's the difference?. JOHNLGALT