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ECB Will Boost QE By 120% To €2.4 Trillion, S&P Predicts
Earlier this month, when we previewed the September ECB meeting and subsequent Draghi presser, we noted that the “the deflationary boogeyman still lurks” in Europe and as Richard Breslow wrote that morning, “the five year/five year inflation gauge that Draghi has said the ECB watches very carefully remains at very depressed levels [with] no sign from the swaps market that inflation is expected to hit target as far as the eye can see.”
Breslow continued, “say what you will about the market being wrong, but the market has had a better track record on predictions than many central bankers.”

Well, sure enough, on Wednesday we learned that less than a week after the Krugman “success” story that is Japan stumbled back into deflation...
...inflation has officially turned negative (again) in Europe where consensus hopes for an unchanged print were once again disappointed when the September CPI print came in negative on the back of a drop in commodity prices, confirming the latest inflationary impulse from the March launch of QE is officially over.
The message being sent here is fairly straightforward, but for what it's worth, here's a bit of color from Bloomberg:
The euro area’s inflation rate unexpectedly turned negative in September for the first time in six months, adding pressure on the European Central Bank to bolster stimulus.
Consumer prices in the 19-nation currency bloc fell 0.1 percent from a year earlier, according to a preliminary report published by the European Union’s statistics office in Luxembourg on Wednesday. Economists predicted an inflation rate of zero, according to the median estimate of 38 analysts in a Bloomberg survey. Unemployment in the region remained unchanged in August at 11 percent, Eurostat said in a separate release.
Data “was broadly driven by the energy component,” said Giada Giani, an economist at Citigroup Inc. in London. “There are very little inflationary pressures even aside from the oil-price shock. It should be bottom for the year.”
Brent oil has plunged by a quarter since the end of June amid speculation a global glut will be prolonged. Oil is poised for its lowest quarterly average price since the start of 2009.
Energy prices fell 8.9 percent in September from the previous year, Eurostat said. Core inflation, which strips out volatile elements such as food and energy, remained unchanged at 0.9 percent.
The setback comes as the euro area’s recovery shows signs of strengthening. Economic confidence unexpectedly increased in September to the highest in more than four years as sentiment in the industrial and services sectors improved. A gauge of economic activity points to a 0.4 percent rate of expansion in the third quarter amid rising orders and backlogs of work.
Even so, unemployment is only falling slowly from the 12.1 percent peak reached in 2013. The region’s jobless rate fell less than initially reported in July and remained unchanged in August, according to Eurostat’s report.
Wages will only increase at a moderate pace amid weak growth and a gradual decline in unemployment, said Michael Schubert, an economist at Commerzbank AG in Frankfurt. That argues against noticeably stronger underlying price pressure.
In other words, the promise of €1.1 trillion in asset purchases (i.e. money printing) has not only failed to engineer a robust recovery complete with the promised dramatic declines in unemployment and/or dramatic increases in wages, it hasn't even managed to keep Europe out of deflation. The most hilariously absurd thing about it all is that it is indeed unconventional monetary policy that has helped to keep otherwise bankrupt US drillers in business thus perpetuating the very same low crude prices that everyone now blames for the disinflationary impulse.
Of course these are post-crisis central bankers we're talking about here, which menas that when a lot of Keynesian cowbell doesn't work, the only cure for the deflationary fever must be more Keynesian cowbell which explains why Japan is about to double down on Abenomics (from JPM: economist Masaaki Kanno says in report that Bank of Japan will announce additional easing on Oct. 30), and why the ECB will almost invariably expand PSPP. Indeed, S&P is now out calling for ECB Q€ to last for nearly two years longer than originally planned and for the size of the program to be expanded to a Dr. Evil-ish €2,400,000,000,000. Here are the main points via Bloomberg:
- CB will extend its QE program beyond Sept. 2016, most likely until mid-2018, and it could reach EUR2.4t, S&P says in report.
- Expected amount is more than twice the original EUR1.1t commitment
- As EM currencies have declined, the euro has begun to appreciate again, complicating the ECB’s QE program
Note the last bullet there. This has become a self-perpetuating nightmare. Global QE is forestalling the creative destruction that in normal times serves to purge speculative exccess and correct capital misallocation, contributing the very same global deflationary supply glut that's tanking commodity currencies. The resultant pressure on EM FX then leads to relative strength for DM crosses jeopardizing inflation targets and leading to still more advanced economy QE. Of course when one DM central bank eases, the immediate effect is to trigger easing by a neighbor. The best example of this is probably the ECB-SNB-Riksbank connection and it means that this a never-ending Keynesian insanity loop, and in case the self-feeding dynamic wasn't strong enough as it is, when the EM meltdown finally filters back into DM markets, the attendant turmoil will also be used to justify more easing.
Summing it all up in one horrifying image...

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Since it's working so well so far.
Hold on....let me find my shocked face.
https://www.youtube.com/watch?v=srw3RdiIlrQ
If Japan and ECB do another monetary expansion, won't the dollar rise further, and further pressure the emerging markets thereby defeating the benefits of MOAR QE?
Which is exactly why the US will stay on the QE train. Race to the bottom. Just have all gov't agree to dilute all currencies at once. Debt problem solved.
The central banks have an outdated playbook on inflation. In today's over financialized world the debt shrinking benefits of any inflation is quickly offset by an almost immediate releveraging of this higher asset value and we just end up where we started. Central banks can only help in times of scare liquidity. They no longer can drive economy...doubtful they ever could.
Every body get out there and print, print, print more and more fiat. I want to be a billionaire too.
Hey ... I don't fell good. Jonesing. Has anybody seen my smack?
you are...just change your currency to Vietnamese Dongs....at 25000 to 1...who doesn't love dongs
And despite all this new fiat, gold prices will go down.
As predictable as the Nobel Prize Winner telling lies. Or the NSA spying on you.
It's a simple principle really. The more free money, the more there is to lose shorting the gold market. Losses don't matter when it's free
Theoretically.....they could drive it down to where they'd pay you to take it.
Morr play money for the rich!
Ripley: These people are here to protect you. They're soldiers.
Newt: It won't make any difference.
[/Aliens]
Yeah. The oligarch plan to try and save the dollar. QE in Euro and Yen
Nixon said "We're all Keynesians now."
To which I say "We're all becoming Japan now."
We're all zombies now
If you really want to catch people leaning the wrong way, you leak lies into the press (which is all too happy to ablige since they are lazy and corrupt) and then when people react to the lies, you spring the trap and go the other way.
Goldman does it obviously through this and other media outlets. Do you really think that Goldman and the criminal cronies would allow ZH to stand without being able to control it? This is not a free world.
There is plausable deniability, since it was only a rumor.
The usual suspects here will start blaming Jews and Zionists in 3, 2, 1
Let me guess, you're a Jewish Star Wars fan with Polish ancestry?
Hint of Polish there.
Disclaimer: Polish women are hot.....especially if they're military.
https://www.youtube.com/watch?v=5huWVN54KYQ
Feck this EU CPI reading. Life in EU is fecking expensiver.
Not just QE but inflationary monetary policy in general is corrosive to the real economy.
In short, when someone is getting 'money-for-nothing' someone else must get 'no-money-for-something'...and hence will quit producing something.
Moreover, people who get 'money-for-nothing' have different spending preferences than those who must sacrifice to gain wealth. The phrase 'easy come, easy go' comes to mind.
The more monetary inflation that exists, the greater the percentage of businesses that grow to service the lucky recipients of the 'free money', and the same resources committed to servicing the 'free-money' spenders cannot simultaneously be available for the production of needful things.
Those 'free-money-service' sectors of business cannot exist apart from monetary inflation. And they crowd-out viable businesses that produce needful things.
So to the extent there is monetary inflation, it kills the real economy in equal measure.
For this reason, when the inverted debt pyramid collapses, it will not just shrink the monetary base to its un-inflated state, it will not just interrupt business to the extent that loans become unpayable in real or nominative terms, it will actually cause the sectors of the economy who have no business apart from providing things for the 'free money' people to buy to collapse such that a SIGNIFICANT percentage of total real resources will have to reorient away from what they've been doing, to what they would have been doing had there never been monetary inflation.
Increasing QE no less is a sure sign of economic improvement!
I've been holding out about 50% of my "market-cash" and investing (short, of course) in dribs and drabs.
I'm getting really close to pushing all my chips in and letting the cards fall as they will.
I'm about 25% in June'16 puts, 50% in Jan'17 puts, and balance cash (not including my vast horde of physical metals and hard cash, which may or may not have been lost somewhere in a lake).
Back to the point...the insanity is getting so deep that I can't help feeling that there is no point fretting the day to day.
As soon as the next 2017 contracts come out, I'm putting the rest out there and sitting back in the hammock to watch the show.
I will still have to get up at 6am to feed the goats, chickens, and dogs....but no more stress. All my cards on the table.
Tick tock, tick tock...
dont use puts. Use actual short positions. With the elevated VIX, they're killing you with premiums. Also, someone who is bearish might consider some long dollar- short euro/yen, or short high yield debt to round out a more balanced risk profile against the central planners and their perpetual attempts to rig equities higher. Just a thought.
A healthy majority of my position was bought with prices much higher and vol lower. I don't feel bad filling the gap here. The shit is just starting to hit the fan....
Im short from much higher prices as well, with a large position in puts. It doesn't change the FACT that premiums are significantly elevated now that prices have dropped precipitously. Go ahead and overpay for downside leverage, its your money.
Plus, if you have conviction, puts yield a MUCH greater reward on the downside for any significant move (which we WILL have).
Do it. And prove once and for all that you are lost with no hope of achieving your aims (ie saving your ass).
Gives me and mine some more stacking time as well.
the Cask of Danaides....
Happy drinking of wine Mr "whatever it takes".
As for us we will have to lick our own boots to even smell the dregs of that "wine fest for nothing" !
Amazing that Germany is going along with this given their dire warnings against that type of QE (buying junk bonds) previously.
Hold on to your gold. buy tiny amounts when you see a good price. Diversify with tools , alternative energy sources , lands , and if you can , self defence. Also select your friends carefully...you may need a hand at some point.
He is sure to get a Christmas and hanukkah card this year...from Goldman and Jp Morgan. I mean for bankers this is like shooting people in a barrel...or is it taking candy from grown working people?
Well boys and girls, that sounds a lot like QE to Infinity Squared to me. Increasing exponentially, it has to happen that way, it's all in the mathematics of Fiat money. It can't NOT increase exponentially.
disapoointed in ZH a little... the rankley defiled workers at fiat chrysler have pretty much decided the UAW (useless Awful workers) are useless POS negotiaters after giving free pass to the company to rape the workers. all in the name of haning over health care to the union to skim while giving away huge fees and management to you guessed it... WALL Street. people in the union have been hiring and apppointing frends and relatives to 100000+ jobs organizing while raising the dues 25% and raiding the strike fund for general expnses. such a debacle that it is hard to imagine they can still show thier faces in the locals.
disapoointed in ZH a little... the rankley defiled workers at fiat chrysler have pretty much decided the UAW (useless Awful workers) are useless POS negotiaters after giving free pass to the company to rape the workers. all in the name of haning over health care to the union to skim while giving away huge fees and management to you guessed it... WALL Street. people in the union have been hiring and apppointing frends and relatives to 100000+ jobs organizing while raising the dues 25% and raiding the strike fund for general expnses. such a debacle that it is hard to imagine they can still show thier faces in the locals.