Actually The ECB Has Already Handed Out €1 Trillion; And Why Germany Equates ECB Printing With Hyperinflation

Tyler Durden's picture

For anyone who thinks that the ECB is some pristine virgin which has barely been touched in that special monetary printing place, we, or rather JP Morgan's Michael Cembalest, has some news for you: "To-date, that’s what the ECB has done: of the 1.1 trillion Euros extended to European banks and governments (through sovereign/covered bond purchases and repo), 970 billion has been given by the ECB." So anyone demanding that the ECB print even more outright (which incidentally we are certain will eventually happen - our thoughts are identical to those of Dylan Grice from two months ago: "ECBCTRL+P: The Next Steps In The European Implosion") should probably keep this in mind. It will also explain why German members of the ECB are dropping like flies, and why Germany, which better than anyone else, most certainly proponents of modern reincarnations of failed Keynesianism, knows what happens when central banks have gone wild, is certain that the ECB proceeding to move from €1 to many, many more trillions of explicit monetary support, will mean nothing short of hyperinflation.

From JPM:

The bottom line is that the only entity in the world with the firepower to save Italy in the short term is the European Central Bank. If you remember the little plastic men exhibit from Labor Day’s Eye on the Market, most of the arrows pointed to the ECB, indicating that just about everyone, other than the Bundesbank and perhaps conservative parties ruling Germany, thinks the ECB should solve the problem by printing money. To-date, that’s what the ECB has done: of the 1.1 trillion Euros extended to European banks and governments (through sovereign/covered bond purchases and repo), 970 billion has been given by the ECB. The modest remainder has come from the IMF and EU countries themselves (e.g. fiscal transfers).


German members of the ECB appear to have resigned out of frustration with money-printing (Weber, Stark) and remaining ones like Wiedmann mentioned this week the reluctance of Germany to accept more of it, referring to the institutional memory of the Weimar Republic hyper-inflation. I have included 2 charts below on Weimar that show what he is referring to. There is no space here to assess whether such concerns make sense at a time of household and corporate de-leveraging in Europe; what matters is that HE thinks they do. We do not know the most critical answer: are German members of the ECB fighting a battle that has already been lost? In other words, will the destiny of the ECB be to print a couple of trillion Euros to buy or lend against sovereign debt for the next several years? Until European policymakers answer this question, investors cannot be expected to have a lot of confidence in its markets or in its institutions.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
qussl3's picture

Germany should just go back to the DM.

And peg it to the EUR.

Hilarity ensues.

boom goes the dynamite's picture

Welcome back my friends to the show that never ends we're so glad you could attend, come inside, come inside.

Emerson, Lake, and Palmer

SheepDog-One's picture

Well you forgot the next line which tells people the show is guaranteed to blow your heads apart.

DaveyJones's picture

"seven virgins and a mule" best describes current events

boom goes the dynamite's picture

there behing the glass is a real blade of grass, be careful as you pass, move along, move along.

sabra1's picture

i'd peg it to the yuan! better to be on the winning side!

eaglefalcon's picture

Then you get the Chinese nervous so that they start pumping money too to "defend" their currency

Ruffcut's picture

Oil is the trigger for hyperinflation. as long as the oil producers keep taking bogus bucky and yucky euro, the slow path of destruction will continue. Printing makes real products and productivity stressed out.

Hyperinflation states that your currency is either weakening rapid or dead on arrival.


Just peg it to a peg......same thing.

FinHits's picture

I agree that would be funny if DEM would come back, and even more funny if the peg to EUR would be one-way-only (i.e. DEM could be *weaker* then EUR)!

Let me once again question the questioning of ECBs virginity on money printing. Again, I am *not* convinced at all that any ECB printing has *yet* taken place. Sounds like the well experienced lady of U.S.A. is trying to put down a chaste lady through that "Basel III is un-American" bank of hers:

"To-date, that’s what the ECB has done: of the 1.1 trillion Euros extended to European banks and governments (through sovereign/covered bond purchases and repo), 970 billion has been given by the ECB."

Giving<>Printing. Sovereign/covered bond purchases have been "sterilised", i.e. equal amount has been taken away from bank markets. If I am not mistaken, repos are also covered by eligible bonds submitted to ECB.

Happy to be proven wrong.

Whatsoever's picture

1 Trillion is nonsensical.

185 Billions, which are continously sterilized.

Pracitcally no inflation so far in EUROZONE.

And the ECB - fortunately - is not the BUBA

wang's picture
wang (not verified) Nov 10, 2011 9:28 AM

ECB will print - how long does it take to print 2t - best that they start soon (how about Freitag)

Fips_OnTheSpot's picture

Go ahead, ECB. We will go ahead to Mrs Merkel the "other day" -- while I can sit on my coins ...

Bundesbank rumor: expected inflation by end of 2012: 25%

Good night.

Long-John-Silver's picture

Attempting to fill the Black Hole known as Europe is futile.

Spitzer's picture

I gotta run but how much is sterilized compared to the Fed printing ?


King Euro, the dollar is garbage.

CrimsonAvenger's picture

I think they should all be sterilized.

Wait, were you talking about the central banksters or about their printing escapades?

Spitzer's picture

I find it odd that the dollar bulls claim to fame is that Bernanke will not be able to outrun the defaults by printing yet they all agree that this political deadlock in the ECB will be able to outrun the defaults and bring on hyperinflation. 

tmosley's picture

The degree to which the false dichotomy of "you are either a Dollar bull or a Euro bull" has warped your thinking.

The Euro is fucked.  Get over it.  Freegold is a fantasy, a transition state at best.  There is no window where you can buy Eurogold with Euros.  Period.

Motley Fool's picture

out of curiosity. Do you imagine some solution or do you simply think the world is gonna end, all people are going to roll over and die?

Didn't junk you...but maybe I should have. :P

tmosley's picture

Wow, more false dichotomies.

The world isn't going to end.  A number of governments might.  Their currencies, certainly.  But not the world.  

That is, unless they do something REALLY stupid, like instituting worldwide wage and price controls, then declare that no-one is allowed to change jobs, as they did at the end of the Roman Empire, the action which lead to more than a thousand years of serfdom.  Hopefully our technology will save us should that happen, but such things are of little consequence in the face of arbitrary authority.

Spitzer's picture

look at world CB holdings. You sure didnt make a good case that this isnt a Euro vs Dollar game. Typical cop-out of a closet dollar bull.

Closet dollar bulls cant stand the Euro. 

tmosley's picture

Uh-huh, sure.  The guy who has been screaming for years to get out of the dollar is a "dollar bull".

Bull shit.

If you are wedded to paper, you'll burn with it.  Enjoy it, paper bull.

Motley Fool's picture

Alright. Didn't intend to create a false dichotomy. Let me rephrase.


We agree the current system will end, relatively soon.


What then?

tmosley's picture

Who knows?  The best case scenario is a drastically reduced federal government accompanied by free banking and circulating gold specie, perhaps alongside notes of whatever type of backing issued by private banks.

Worst case scenario is the dollar is re-issued and this crap keeps going for a few more years until all of the real capital is gone, then we collapse and become a third world economy with a strongman dictator.  Of course, if that happens, you can at least leave, said strongman won't have the power to seek out American expats outside of the borders of the US.

Most likely case is a return to a gold standard, but one "officiated" by the government.  That will allow for corruption and manipulation to seep back in until we return to the current situation within a few generations.

Motley Fool's picture



I don't want to argue with you. From my perspective you are in my camp. You are buying physical gold. You do not have to understand Freegold, it is not required.

I would however  like you to read one article by FOFOA if you wish :



Spitzer's picture

what the fuck kind of comment is that ? There is a reason why there is a 0% tax on gold in the euro zone. Gold is also available at banks across Europe.

tmosley's picture

Where?  Which ones?  What is the source of that gold?  If gold is available for Euros at banks, how is it that they have stopped selling gold, and are instead accumulating?  If gold is so freely available, why hasn't it all zoomed out into private hands?

All I see is waving hands. Waving hands, and the hope that somehow, some way, this time will be different, such that a paper currency that is being printed like there is no tomorrow can somehow last.

BS.  Let's see a video of someone walking into a European bank with Euros and walking out with gold from the Central Bank.

Spitzer's picture

Gold on the open market, just like now is available at the market price.Not tje ECB gold.  The source ? Mine supply, scrap, who ever is selling.

Show me a currency that hasnt still lasted for the use of transactions. Most Hyperinflated currencies are still in use. Even the Zimbabwe dollar. Even the Russain Ruble. 

tmosley's picture

If the ECB gold isn't available, then there IS NO BACKING, and NO DIFFERENCE BETWEEN THE EURO AND THE DOLLAR.  If the dollar can fail, the Euro can fail.  You could buy gold with Deutchmarks early on in the German hyperinflation, that didn't make them gold backed.

The Zimbabwe dollar was abandoned, and is no longer in circulation.  All hyperinflated currencies have either been re-issued with monetary reforms or have been abandoned.  The later was the case, with the Ruble being replaced by the New Ruble.  

FOFOA will lead you down the path to ruin with this crap.  He is half right--buy gold.  But the thought that you can buy the Euro and expect to be safe is asinine.  It's a paper currency, just like any other.  I mean, here you are trying to justify holding Euros because "currencieslast for use in transactions", as if taking a 99.99% hit is no big deal.

Get real.  And by "real", I mean physical gold and silver.

Motley Fool's picture

Fwiw. It is obvious you have no clue what he advocates... which is not euro paper, but physical gold only.

tmosley's picture

No, FOFOA advocates "Freegold", a system where you have a transactional currency and a savings vehicle, which are linked only by a floating price.

The Euro is considered to be an example of this, and Spitzer here, among others, have taken FOFOA as gospel, and are now heavily invested in Euro paper.

What FOFOA doesn't realize (for some reason) is that a currency is stable ONLY BECAUSE it is used as a vehicle for savings.  If savings are implicitly divorced from the circulating currency, then you will have hyperinflation by definition.  When everyone has gold for savings, they will simply transact in gold.  Why?  Because the governments are printing the transactional currency to fund their deficits!  Even a tiny increase in a transactional currency not used for savings will destroy confidence, and lead to an immediate exponential increase in monetary velocity, as everyone rushes to get rid of paper for anything solid.  "Freegold" simply collapses into a gold standard, in the form of circulating specie, not even necessarily one issued by a government bank.

Motley Fool's picture

I see.

Question. Did the zimbabwe dollar lose all value during their hyperinflation?


How about the jamaican dollar. You may not be aware but almost nobody there uses it for savings, instead using the  USD. How does that currency still exist?


Lastly : Do you even know what all the flaws in the gold standard are, and why Keynes called the gold standard ( not gold) a barberous relic?

tmosley's picture

To answer your question, yes, it did.  The currency is no longer used for transactons, and has no value aside from novelty items for westerners.

The Jamaican dollar has fallen against the dollar by 99% since its introduction in 1968, even as the dollar has fallen by a similar amount against gold.  That is TERRIBLE inflation.  I would like to see some documentation on the assertion that no-one saves in Jamaican dollars.  They must, to some extent.  With that rate of devaluation, absent government printing, I would venture a guess that between 10 and 30% of their savings is actually in J$.  

There is nothing stopping it from going into hyperinflation.  Only perception.  And MOPE only works until it doesn't, then it doesn't work for generations.  

Spitzer's picture

there is no meaningful savings in J$. Think about it.And there doesnt have to be.

tmosley's picture

Whoops, didn't see your last point.

There are many types of gold standards.  They range from gold exchanges standards where onlly foreigners can get gold for their paper, to circulating gold bullion coins from private mints, and everything in between.  The freer the monetary system, the better it is for all involved.

I could care less what that cretin Keynes thought or said.  His head was screwed on backwards, and the West will go into deline because of it.

Spitzer's picture

The basic concept of freegold is going on right now. Look at all the deals that china is making with Brazil and Russia denominated in their currencies yet they both still happen to have dollars that they are using as a store of value.


And there is countless examples of circulating currency that has no equity or savings behind it, yet it still works fine as a medium of exchange. 


tmosley's picture

"Fine, fine, everything's just fine."

Is that a good summary of your outlook?

There are exactly ZERO currencies that have value (beyond novelty or as collectors' items) without savings.  NONE.  The value of the currency is proportional to the savings to issued currency ratio.  If no-one holds it, it is because no-one wants it.  If everyone holds it, it's because everyone wants it.  That's all there is to it.

Spitzer's picture

You walked right into that trap. Of course the Euro is not backed by gold . That is the whole point.

This is about what currency has a better chance of being the world transactional curreny going forward. The Euro that uses gold as a store of value or the Dollar which uses debt as a store of value. Me  thinks the Euro has a better chance considering the bull market in gold started almost to the day that the Euro was introduced. But if you think that the debt that  the dollar uses as a store of value that is running on a 30 year bull market has a better chance then so be it. 


tmosley's picture

The point is NOT which of these cancer patients will die first or last.  The point is that they are BOTH GOING TO DIE, and SOON.  They are both in the hospital on life support.  The amount of money or influence one stands to inherit from the other is of zero consequence.

Spitzer's picture

They will both still exist for years to come, just like every other currency. 

tmosley's picture

I have a million dollars in confederate war bonds.  You know where I can trade them in for gold?

I also have a 50,000 reichmarknote.  You think I could trade that for gold?  How should we value that?  As a DM?

qussl3's picture

The key to who inflates more is the structural deficit.

The US is fucked in that respect.

The EU as a whole not so much.

However, there is the little problem of the EU not growing, while the US does seem to be able to stumble along.

So perhaps that structural deficit simply hasnt manifested itself in the EU yet.

Furthermore, the EU has not recapitalized its banks - yet, while the US has laid a downpayment already.

It's still a toss up between the two, with the US having address more of the underlying issues already with the printing press, can the EU afford not to go there?

Who knows.

But it would be the first time in history the bankers willingly destroy their hosts should they refuse to print.

DaveyJones's picture

sterlization leaves room for error, castration is best

Rogier's picture

Under the current program close to 100% is sterilized, so no effect on inflation let alone hyperinflation.

tmosley's picture

Until someone defaults.  

Spitzer's picture


Greece is already defaulting

tmosley's picture


Bye bye Euro.

Edit: unless, of course, someone else pays for them.  Which is likely.  But NO-ONE can pay for Italy.

Spitzer's picture

Did the Icelandic krone dissapear off the face of the earth or is it still in use ?

Motley Fool's picture

Better question.


You are aware some Australian states have gone bankrupt before. The Aus$ didnt die. Questions :


why wasnt the australian dollar blamed as the reason for the state's demise?


Should we blame the dollar currency if a company fails?

tmosley's picture

Was all of Australia insolvent at the time?  Did they take on the debt of those states despite their insolvency?

Differing conditions lead to differing outcomes.  The same conditions lead to the same outcomes.  Similar conditions tend to lead to similar outcomes.  The trick is figuring out how similar the conditions are between current and historical events.