The Bundesbank Replies To The ECB

Tyler Durden's picture


Did the German Bundesbank roll over and die as Die Welt suggest, by yielding to the will of the ECB and Goldman? Or is it merely setting the stage for the inevitable German referendum? Many claim the Italian head of the ECB won today in his ever escalating confrontation with the last remaining German on the ECB governing council, although in reality he is merely doing what he has already done twice before. The outcome will be the same: abject failure to contain the crisis which will not be resolved until and if Europe succeeds in creating a united, Federal state, with one bond issuance authority. That will never happen: after all, 17 European states will never hand over their sovereignty to a third party, especially one which is backstopped by German cash. But it can pretend. In the meantime, Buba will not quietly go, instead it has already stated what it thinks, and what it thinks is that what the ECB is doing (once again) is "tantamount to financing governments by printing banknotes" and that monetary policy is now subjugated to fiscal policy. Full text of the Buba's response below:

"In the most recent discussions, as before, Bundesbank President Jens Weidmann reiterated his frequently substantiated critical stance towards the purchase of government bonds by the Eurosystem.


He regards such purchases as being tantamount to financing governments by printing banknotes. Monetary policy risks being subjugated to fiscal policy. The intervention purchases must not be permitted to jeopardise the capability of monetary policy to safeguard price stability in the euro area.


If the adopted bond-purchasing programme leads to member states postponing the necessary reforms, this will further undermine confidence in the political leaders’ crisis-resolution capability. This underscores the crucial importance of ensuring both credibility in the promised conditionality and the resolute determination to immediately terminate intervention purchases if the underlying conditionality is no longer assured.


The announced interventions in the government bond market carry the additional danger that the central bank may ultimately redistribute considerable risks among various countries’ taxpayers. Such risk-sharing, however, can be legitimately authorised solely by democratically elected parliaments and governments.”

And here is the biggest irony: by doing everything in its power to keep yields artificially low and markets artificially high, the ECB is removing any urgency by Spain, Italy, Greece, actually scratch Greece, and all other countries with unsustainable primary and other deficits, to fix their problems. Which is of course perfectly understandable: why should politicians risk their careers with socially unpalatable deleveraging (please don't call it austerity) programs when they can just continue doing what they do, keep getting reelected, and hope and pray that the ECB will punish all those bond vigilantes who understand that this particular game will not have a happy ending.

In other words, in 3, 6, 12 months, all economic indicators in Europe will again deteriorate, budget deficits will be greater, and economic viability will be even more hindered, but at least the stock markets of the world will be at all time highs, and hedge funds will avoid one more quarter of redemption requests, even as every country is careening toward disaster. Because unless Spanish, and soon Italian depositors, reverse the outflow of their money from local insolvent banks and into the core of the Eurozone, then today's ECB action has achieved absolutely nothing. In that sense: all Draghi is desperately trying to do is restore confidence in these two fulcrum countries. He can only succeed if he generates enough inflation to 'inflate' away the trillions in bad debt held by domestic banks. However, in the process he will also set off the great inflationary firestorm that sees Germany shift from "9" to 'auf wiedersehen', not to mention Brent in EUR to all time records, coupled with a food price crisis.


It is this that the Bundesbank is lamenting: the ever greater trade off of meaningless short-term market gains in exchange for long-term broad collapse and potentially hyperinflation. Sadly, nobody else is, or will be until not even all the world's central banks can control the fate of the bond and stock markets any longe.

* * *

Finally, here is the intro paragraph from the first official response in German Welt:

Financial markets cheer the death of the Bundesbank


ECB President Draghi breaks with brazen principles of German monetary policy. The central bank is pumping unlimited money in the bond markets. Stock markets cheer - for Germany, the nightmare begins.

Read on here.

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Thu, 09/06/2012 - 11:53 | 2768463 nope-1004
nope-1004's picture

Draghi is impotent, but for now, enjoys taking center stage and ramping algos.

Germany is in the drivers seat.



Thu, 09/06/2012 - 11:56 | 2768474 slaughterer
slaughterer's picture

In-trade needs a new rubric:

"Weidmann will resign before Rajoy"

Place your bets. 

Thu, 09/06/2012 - 12:42 | 2768551 BaBaBouy
BaBaBouy's picture

Print My Bitchez, PRINT Your Digital Dollars ...

That Game Is Sorely Coming To An Ugly END.

The Chinee and Indians know it, the TOP .01% Know It, while the American and

EU Middle Class are still clueless and out to lunch on the matter...


GOLD $50K ...

Thu, 09/06/2012 - 12:48 | 2768670 zoggl
zoggl's picture

Do you think Germany, after destroying Europe in WWII, will be held guilty to destroy Europe again? No - They will print. And: The world has choosen to run on Fiat money, why should Germany not print? It`s only Paper, so what. You have to like this system, your PMs will appreciate it.  

Thu, 09/06/2012 - 13:14 | 2768764 walküre
walküre's picture

You're settling for short term gain and a confusion of historical facts.

Thu, 09/06/2012 - 15:52 | 2769234 zoggl
zoggl's picture

Short term gain? PMs are a long term store of wealth ..... PMs are stable during times of impoverishment of the masses by inflation. I don t understand your argument "confusion of historical facts".  

Thu, 09/06/2012 - 14:14 | 2768945 Sandmann
Sandmann's picture

How did Germany destroy Europe in WWII ? By invading Poland ? Well the USSR did that too munder the Molotov-Ribbentrop Pact. The USA declared itself neutral on 2 September 1939 - yet Poland only existed because Woodrow Wilson wanted it to exist. It is hard to say Germany destroyed Europe....what was that Europe ? An Anti-Semitic dictatorship in Poland which cancelled Jewish passports; a Fascist dictatorship in Hungary and Romania and Spain. It was hardly a happy and settled Europe.......anyway what is this "Europe" ? It is about as much "Europe" as it is Brazil and Venezuela and that space between Mexico and Canada being "America" - one economy, one language, one people

Thu, 09/06/2012 - 16:19 | 2769301 zoggl
zoggl's picture


Destroying Europe: Bombing, murdering, occupying, invading all neighbors, France, Austria, Italy, Poland, and many more (WorldWar) ..... There was no political European union at that time of course, but the impacted regions were the same. And Germany was the!! aggressor against everybody. Part of the plan to create the political European Union was the integration of the Germans into a group with shared interests, to avoid wars, which makes sense. The big countries ask now for a bail out. What would happen if they don’t get it because of the Germans? They would blame Germany of course. I’m not saying this is right, I’m just saying this would happen. Germany will be blamed for the destruction of the political European union and nationalistic tensions will raise. As I said above, this is why they will print anyway. Germany does not want to be guilty and exposed and they also don’t want to destroy their own export markets which feed them.  


Fri, 09/07/2012 - 02:33 | 2770760 Ar-Pharazôn
Ar-Pharazôn's picture

wait wait wait...... Germany destroyed Europe?................


so define destruction cause they left Western Europe pretty much ok, other thing is Eastern Europe.

Thu, 09/06/2012 - 12:47 | 2768669 saturn
saturn's picture

It seems rather that Germany is impotent until they leave the eurozone and will issue a call to assemble a new competitive union against the old one.

Thu, 09/06/2012 - 16:32 | 2769350 caconhma
caconhma's picture

Germans leaders are just paid-agents of the zionist banking mafia.

The good news: this is the death of the present puppet Germany created following the Germany WW2 capitulation.  With Germany's economic collapse, EU and NATO will follow. The next after will be US$ as the reserve currency collapse followed by a present US economic/political system disintegration.

Thu, 09/06/2012 - 11:59 | 2768488 bank guy in Brussels
bank guy in Brussels's picture

Merkel is quietly but effectively backing Draghi in order to save the German banks, pension funds, and insurers.

The Bundesbank is doing the job of whining and complaining that is needed for political cover in Germany, but as Ambrose Evans-Pritchard in the UK Telegraph says, Merkel will ignore the Bundesbank.

The ECB Board is nearly unanimous ... including support from one of the key Germans.

The can has been successfully kicked ... ZeroHedge is over-playing the 'Germans vs Latins' theme, that is really a mock argument for domestic political show in Germany

The UK Telegraph has this well-covered


Thu, 09/06/2012 - 12:05 | 2768511 nope-1004
nope-1004's picture

The can has been successfully kicked

Exactly, with no solution forthcoming.  It's all a farce, as there is no way in hell all 17 nations will embrace one bond for all - won't happen.  There are only 2 solutions:  Dissolution and default, or inflation and civil unrest. 

The first affects US banks bigtime, the second it too close to home for the EU.  Draghi is being pulled 2 directions and has no ammo.


Thu, 09/06/2012 - 12:20 | 2768563 LawsofPhysics
LawsofPhysics's picture

So Merkel chooses inflation, why, because it worked out so well for the Germans before?

Thu, 09/06/2012 - 12:23 | 2768578 eddiebe
eddiebe's picture

Obviously not, but because that's the way her vampire masters and buddies live off the lifeblood of their serfs.

Thu, 09/06/2012 - 12:24 | 2768581 john39
john39's picture

the germans are not the issue... merkel serves her masters... her political career is subject to sacrafice at any time, like the rest of them.  don't think in terms of national interest, the banker cabal is in full control

Thu, 09/06/2012 - 12:28 | 2768591 Manthong
Manthong's picture

Those with their hands on the levers of financial and political power do not care what the people think. The system will be preserved regardless of the levels of counterfeiting required. That goes for their crimson caped constitution court accomplices in Karlshruhe, too. If a something like opposition or referendum happens to threaten the system, the levers will be used to concoct an economic catastrophe to coax compliance and cooperation from the commoners.  

Thu, 09/06/2012 - 14:37 | 2769040 Peter Pan
Peter Pan's picture

What is truly scary is that we could be in for a period of extended misery without any real resolution for DECADES like Russia and China were under full on communism.

Thu, 09/06/2012 - 15:24 | 2769148 nevadan
nevadan's picture


In a word: expediency.  Politicians and bankers will always make the expedient choice. 

Thu, 09/06/2012 - 12:22 | 2768576 Yen Cross
Yen Cross's picture

Might I add, that the ECB buying isn't the issue. We all know Germany will vote for that to happen next week. Germany will "NOT" allow wonton spending by the ECB without Troika like constraints on the "INSOLVENT" E/U members that receive bailout money! That in itself is why the ECB will be ineffective. One rule for all will never apply. greece is already pissed off over the ECB not taking a haircut during it's bailout. [ example]They(ECB), had bond seniority, and now they won't with new bond purchases.

 nope-1004  arrow up for you.

Thu, 09/06/2012 - 12:32 | 2768608 Rip van Wrinkle
Rip van Wrinkle's picture

Only one solution in any event.


Civil unrest. Period.

Thu, 09/06/2012 - 13:08 | 2768746 Poundsand
Poundsand's picture

It's like the people in this boat.  Riding along, feeling like everything is going great.  The driver seems to stand there in total control, quicly reacting to ever changing conditions on the lake (watch his throttle hand) and then.....

Watch this video and you tell me who the chick in the middle is, and who the driver is, and who the woman who easts the windscreen is in the world of finance.



Thu, 09/06/2012 - 12:28 | 2768594 CCanuck
CCanuck's picture

The only thing the Telegraph covers well, is the bottom of a bird cage.

Thu, 09/06/2012 - 12:34 | 2768623 AurorusBorealus
AurorusBorealus's picture

This has been my take on the thing all along as well.  I think many hard money people viewed Merkel and the Bundesbank as the only rational actors in the herd, and overestimated their hard money musings out of sympathy for the position.  As I have said in the comments on here several times, more is at stake than a monetary union; if Germany does not hold with the South, Russia will, after centuries of trying, finally have their foothold into Western Europe, by moving in to pick up the financial tatters of the Mediterranean countries (as Russia is already doing in Cyprus, and likely soon in Greece).  This is an unthinkable outcome for most Germans (remember the East / West German split?) and most Finns, Norwegians, Swedes, Austrians.: the culmination of the fears of many generations of Western Europeans.

The Americans are no longer a stable ally; they have been mesmorized thoroughly by Israel and the influence of zionist money on American elections.  Continental Europe is very much on its own in this crisis, and the German leadership fully understands that to turn their back on the rest of the West is to condemn the whole of Europe.  Furthermore, there is the very immediate issue of German pension funds, banks, and insurers, as you point out.

Thu, 09/06/2012 - 13:16 | 2768772 PontifexMaximus
PontifexMaximus's picture

You got it. Merkel want's to be reelected, she doesn't care about the decision of Karlsruhe, because the ECB is on a "higher" level than the BuBa. And J. Weidmann makes gute Miene zum bösen Spiel, as Goethe would say. Draghi (GS) is the winner. Whether you like it or not, it's a matter of fact. The London HF crowd does not like him at all.

Thu, 09/06/2012 - 14:19 | 2768961 Sandmann
Sandmann's picture

Hjalmar Schacht was a Director of the Danat before the Reichsbank. At the Danat he covered up the secret non-performing loans to President Hindenburg's son and the dodgy loans to Nordwolle which brought down the bank - he emerged at the Reichsbank working for Adolf Hitler and ended up in a Concentration Camp. The secret loans to Hindenburg's son were the blackmail tool used by General Schleicher and why Hindenburg had to remove him with Von Papen and Hitler in 1932

This path is very familiar to Germans.....Draghi is treading a path trodden in 1920s Germany

Thu, 09/06/2012 - 12:55 | 2768687 gatorengineer
gatorengineer's picture

Please tell that to the Bots........  My score card is Draghi 10E9 German taxpayer 0.....

Thu, 09/06/2012 - 14:21 | 2768976 Peter Pan
Peter Pan's picture

Draghi is soaring high along with the markets.
But like Phaethon in Ancient Greek mythology he is destined to lose control of the sun chariot and like Icarus the wax that holds his wings together will melt when faced with the grim realities of gargantuan debt, unemployment and galloping defcits.

Thu, 09/06/2012 - 11:53 | 2768468 mammoth mo
mammoth mo's picture

So this is another step on the road to the end.  Merely a footnote.


Thu, 09/06/2012 - 11:56 | 2768478 101 years and c...
101 years and counting's picture

im willing to bet german court rules the ESM illegal, one day before ben says no more printing.  who will say they were lucky enough to buy 1430?

Thu, 09/06/2012 - 12:02 | 2768480 Monedas
Monedas's picture

Bundes Bunden Bruder Banken !                      Did I mention ....       ???

Thu, 09/06/2012 - 11:59 | 2768489 Jason T
Jason T's picture

 i sincerely feel I've become dumber and dumber in my ability to gage how this all turns out month to month.  this is getting way too complicated frankly.  

Thu, 09/06/2012 - 12:32 | 2768610 12ToothAssassin
12ToothAssassin's picture

Obfuscate, disinform and distract. Mission Accomplished.

Thu, 09/06/2012 - 14:20 | 2768967 Vince Clortho
Vince Clortho's picture


The Central Planners Club is going to do what benefits them. Period.

It is currently in their interest to print ludicrous sums.

The MSM then distracts and mis-informs the public to sow confusion and create the illusion that the guys on top are doing the right thing.

Rinse. Repeat.

Thu, 09/06/2012 - 12:33 | 2768612 ZeroIQ
ZeroIQ's picture

I'm with you.. I'm afraid rational thought doesn't help you understand the mind of a schizophrenic, as his world doesn't work according to reason and logic. There are always an unlimited amount of unrational thoughts and behaviours left, although you think you have seen them all.

Thu, 09/06/2012 - 11:59 | 2768490 Bastiat009
Bastiat009's picture

Draghi works for a bank. This bank is making lots of money because of him. No one seems to care. I have yet to hear one head of state or government says that central banks are destroying the economy. Until then ... 

Thu, 09/06/2012 - 12:00 | 2768492 Boilermaker
Boilermaker's picture


Thu, 09/06/2012 - 12:01 | 2768499 spekulatn
spekulatn's picture

"We are single-digit years away from the most profound market clearing moment" --Hugh Hendry,  May 2012



Thu, 09/06/2012 - 12:02 | 2768502 fuu
fuu's picture

<-- Gold fails to hold $1700 today

<-- Gold sticks $1700 today

Thu, 09/06/2012 - 12:17 | 2768554 Vincent Vega
Vincent Vega's picture

My gold has '50 dollars' stamped on it.....just sayin'

Thu, 09/06/2012 - 12:23 | 2768562 fuu
fuu's picture

Good times.

Thu, 09/06/2012 - 12:22 | 2768574 Uber Vandal
Thu, 09/06/2012 - 12:29 | 2768597 jowenchrist
jowenchrist's picture

I be love'n to stack my silver ... just love'n it...

Thu, 09/06/2012 - 12:55 | 2768691 Bastiat
Bastiat's picture

I'll give you $55 and pay for delivery too.

Thu, 09/06/2012 - 14:01 | 2768906 Vincent Vega
Vincent Vega's picture

Thanks but there is a $1,700 bid, away. (not that I'm looking to sell).

Thu, 09/06/2012 - 15:37 | 2769189 fuu
fuu's picture

Going to be close.

Thu, 09/06/2012 - 12:03 | 2768503 fourchan
fourchan's picture

i didnt even look at cnbc today. the cheerleaders on there must be screaming in glee.

Thu, 09/06/2012 - 12:04 | 2768508 elwu
elwu's picture

The Goldman Sachs Acolyte Draghi did what he was ordered to do by Lloyd Blankfein.

May it cost the German taxpayers what it wants.

In the medium run this spcializing of ClubMeds debt will disintegrete the EU, not just the Eurozone

Germany will get closer with Russia.

At the end of the day, even war in Europe becomes possible again, thanks to Mr. Draghi and his brothers on arms.

Thu, 09/06/2012 - 13:31 | 2768817 hombreloco
hombreloco's picture

Sir, remember this is all THEATRE. The Goldman Strangle is meant to Greenmail Europe into a Centralized Authority. Countries will pledge their all to avoid the supposed 'inevitable'. It will unfortuately work, because people want to believe it is all due to stupidity and malfeasance; they just can't believe this is all done on purpose with stated ulterior motive.

We here in the States had better call the Banksters bluff very soon. Because as this all pans out, we will see the same thing happen here as time draws near for the renewal of the Fed's US 100 year banking charter, (2013). An 1812 Redux is at hand.








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