This page has been archived and commenting is disabled.
ECB May Launch More QE In Response To Fed Inaction, Board Member Hints
As noted earlier, the very simple calculus of yesterday's Fed announcement boils down to the following: "markets are now "tantruming" and demanding that if the Fed will not hike rates, then at least the BOJ or ECB will provide more QE." Moments ago the EURUSD briefly hit 1.1450, a 150 pip increase since the Fed statement, and an unwelcome development for Europe's economy which has been treading water only due to its weak currency which has supported the European trade balance.
So now that the Fed appears to have made a grave policy error judging by the market's initial reaction, it is up to the ECB and BOJ to step up (even if as we warned two weeks ago both are running out of monetizable material) and try to preserve some confidence, i.e., halt the selling.
Sure enough, that is precisely what happened earlier today when infamous ECB board member and hedge fund leaker Benoit Coeure hinted that if only the market drives 5Y5Y's even lower, i.e., inflation expectations, the ECB will have no choice but to boost QE.
To wit:
- ECB'S COEURE SAYS ECB CAN ADAPT QE ASSET PURCHASE PROGRAMME IF DOWNWARD RISKS TO INFLATION ENTRENCH
- ECB'S COEURE SAYS WHATEVER U.S. FED DECIDES, EURO ZONE AND U.S. MONETARY POLICY ARE ON VERY DIFFERENT PATHS
This is happening even as the much touted European recovery is supposedly now faltering:
- ECB'S COEURE SAYS GLOBAL GROWTH PROSPECTS HAVE DARKENED, HAVE WORSENED MARKEDLY IN EMERGING MARKET ECONOMIES
- ECB'S COEURE SAYS EURO ZONE ECONOMIC ACTIVITY SHOULD CONTINUE TO IMPROVE BUT AT A SLOWER RATE THAN PREVIOUSLY THOUGHT
- ECB'S COEURE SAYS WHATEVER HAPPENS INFLATION WILL ONLY RISE VERY SLOWLY IN THE EURO ZONE
Better yet, Coeure came this close to admitting that which shall never be admitted by central bankers in polite company, namely that QE is nothing but a mechanism to manipulate exchange rates (and boost stocks in the process):
- ECB'S COEURE SAYS EXCHANGE RATE IS NOT A TARGET BUT IS A VARIABLE IN ECB ANALYSIS OF PRICE DEVELOPMENTS
And yet all the wrath of the world is focused on China's and its "massive" 3% devaluation when the Yen has gone from 80 to 120 in three years simply due to printing money?
The ironic conclusion: ECB'S COEURE SAYS MONETARY POLICY CANNOT RESTORE GROWTH IN LONG TERM
But it sure will try, and quite soon at that - just push those 5Y5Y fwds low enough, and sit back awaiting more Q€.
»
- 10383 reads
- Printer-friendly version
- Send to friend
- advertisements -
And buy what with it exactly? knobheads
Paper and inflation.
Remember 1923. Please, all you CB people.
http://denk-bubbles.com/remember
Too late. Remember, all stimulus is fungible. This time however, it will be global weimar.
...followed by a gobal Nazi-state.
No., not enough energy available to support a global "Nazi-state".
Global chaos, period.
"Laws" that cannot be enforced are fucking meaningless.
This is the correct answer. The status quo is very nearly over and the dreams of the NWO cannot happen without cheap, abundant fuel.
Aye, more failure, as they buy crappier and crappier paper. And the real economy? Bollocks to it they say
Has anyone looked into the bible code. THere is not a year mentioned after 2016. I think this is it. The CB's have lost control and yesterday was the turning point.
The ECB could buy gold.
Hold on....let me find my shocked face.
https://www.youtube.com/watch?v=srw3RdiIlrQ
I'm thinking the shocked face will be more like this.
https://www.youtube.com/watch?v=AYrpROr9Gmk
Here he is all grown up......where does the time go?
https://www.youtube.com/watch?v=vIMwMsY0ndo
Bankers printing money... what a frickin surprise.
a fucking hint ain't gonna cut the mustard boyo
Personally I would prefer more hookers and blow, but that's just me.
Trying to fireup those algo's to avoid a black Friday.
You mean more money printing assholes...lol good theater.
Cheap oil = collapsing global economy
Low commidity prices = lack of demand for raw materials from which real things are made
Central Banks can prop up stock markets (for now) but eventually reality will set in.
Maintaining the penthouse suite while the foundations are crumbling.
More central banker insanity.
this time on a global scale.
Yes, and we are experiencing an acceleration of the opposite feedback loop that initially catalyzed the bubble in the 2000s.
Then, it was positive (e.g. Western consumers spending like crazy, China producing, markets going up, etc.), and now it has turned profoundly negative. Each crisis reverberates around the world and creates further turmoil, or "drag" as the moronic economists would say.
These feedback loops are tremendously powerful, and they provide another way to understand why Central Banks have only been able to delay the inevitable collapse, but have no chance to stop it.
You got it tinky, exponential equations really are a motherfucker.
Exactly Batman. CB's around the world are playing ring around the rosy. First the FED, then Japan, and next up ECB. Lets not forget China! It is now coming back to the Fed to turn the faucet on once again. Sooner or later it will all fall down!
Demand is down globally as more and more taxes are being placed on the sheeple. The free stuff brigades now have it all. Might as well not work these days and live off of those that do. I could not do it but more and more every day with the new minimum wages going up are because they want less hours as their handouts go away. Mcdonalds is now a career choice we are indeed in big trouble.
Please give more. and some more.......
Not enough for total destruction!
Damn you Janet! You didn't give the 1% enough free money, so here's moar from us.
feel...gravitational..horizon...
"There is the possibility ... that after the rate of interest has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control."
- John Maynard Keynes, The General Theory
Nice.
:::dove clap:::
And that's when NIRP comes into play.
Seems like the Fed's inaction yesterday should have taken all remaining credibility out of CB lipservice. Until they show me the money, I'm assuming a short halflife on the effects of more BS jawboning.
yep btfd is dead. it's getting really pathetic. reaffirming zirp for another three months only bought them a fifteen second rally this time. of course there was a three day front-run but still there is usually some follow through when the dullards get the news. the jig is up.
The Fed knows that even a quarter percent riase in interest rates will create a liquidity sieze-up. But ZIRP means that no-one's making any money from debt. Everyone's rushing around trying to find some way to get a return, which means that even the most conservative are pushing the risk envelope.
I think there is a part of chaos theory that describes this sort of scenario- the one in which instability becomes systematic, and no matter what one does, the action only iincreases the level of instability. Picture a light aircraft porpoising on landing, or a man trying to balance on a string. The more correctional efforts are added to the dynamic, the more unstable the situation becomes.
It appears that for the FIRST time it no longer matters. The Fed just announced the economy is about to collapse again and instead of a nice healthy 1/8 pt rate hike, MOAR QE is very likely, and stocks are being sold! This is the tipping point where worship of the Fed's omnipotence ends. Bankers have nothing left and the debts and deficits are massive. It used to be just jawboning more stimulus was enough to crush the shorts, but no more.
Silicon Valley is the largest property bubble in recorded history, and even with super low Fed bubble-inducing rates, it is about to pop. Look out below, the new Wal-Mart economy cannot sustain Americans living large...no way. Good bye McMansions (again), granite counter tops, and the Tesla and Lexus too.
Party over...finally. Next, watch as the republicans try to push austerity onto the jobless entitlement society. Good luck Donald! LMAO.
"instead of a nice healthy 1/8 pt rate hike, MOAR QE is very likely, and stocks are being sold!"
European markets are crashing for some reason (EU related financial news?) even though all of the moronic Keynesians (I know, redundant terms) worldwide pleaded for a hold-off on rate hikes. The DOW follows. This is possibly just as engineered as many of the closing market rallys. With low volumes and HFTs, it's apparently easy to manipulate. Rather than indicating a loss of confidence in the Fed, it could just be an intentional "See, the Fed was right to not raise rates!" move in an attempt to save face for the Fed.
lever up you ass and go long, Gartman!
They're printing like a bunch of banshees from hell now. Its on like donkey kong.
According to Macquarie Research:
https://app.box.com/s/hx16540dwpct4uj5h5iohxsa4197zozd
Time for a policy U-turn?
Back to the future: British Leyland
From conventional QEs to more unorthodox policies…
- As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or the public sector needs to continue resisting via expansionary policies.
- Since ’08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was Central Banks that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures. However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB’s QE and increase in BoJ accommodation since Dec ’14).
- Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since ‘01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.
…as efficacy of conventional monetary QE is questioned
- At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also ‘insiders’ (such as recent SF Fed paper). As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines. If the public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?
- There are several policies that could be and probably would be considered over the next 12-18 months. If the private sector lacks confidence and visibility to raise velocity of money, then (arguably) the public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.
British Leyland failed, but it might work at least for a while
- British Leyland (formed from nationalized British car companies in the late ’60s) destroyed its automotive industry but for a time it provided employment and investment. Central Banks directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle. It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our ‘Quality & Stability’ portfolio and improve performance of ‘Anti-Quality’ screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.