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ECB's Balance Sheet Now Far Bigger Than Fed's, More Levered Than Lehman, PIIGS Exposure Up 50% In 6 Months
While well-known to most, what may be lost on all those calling for the ECB to commence outright printing, is that as today's Bloodmberg chart of the day shows, the ECB's balance sheet is not only far greater than the Fed, at $3.2 trillion compared to $2.9 trillion for Ben Bernanke, but at 30x leverage, has the same risk as Lehman did at its peak. However, one major distinction between the Fed and the ECB is that while the Fed continues to be shrouded in almost impenetrable secrecy on an absolute basis, it is transparent as a wet t-shirt competition during Spring Break at Panama City Beach compared to the ECB. From Bloomberg: "Without information on the quality of assets on the ECB’s balance sheet or how far it’s willing to allow leverage to increase, investors may doubt the bank’s ability to prop up the financial system, and demand higher yields to buy some countries’ bonds, he said. "Sovereign spreads could rise again if investors become uncomfortable with ECB leverage without a fully detailed rescue package,” said Tyce. “The ECB is providing liquidity and confidence to the banking system, yet all the while its own leverage and balance sheet size is hitting new highs. It seems likely that the market will begin to watch the rising leverage with interest and growing concern."
Technically the market should have been watching said leverage long ago, but then again, it is "the market" which lately tends to compete with the rating agencies in how far behind the curve it is. Because where the market may be surprised, is that as think tank Open Europe indicates, "Through its government bond buying and liquidity provision to banks, we estimate that the ECB’s exposure to weaker eurozone economies has now reached €705bn, up from €444bn in early summer – an increase of over 50% in only six months, raising fresh questions about its credibility, independence and possible losses it may face in the case of future sovereign defaults." Bottom line: the world's biggest hedge fund - ECB Capital LLC, Onshore Austerity Fund, is also the world's most insolvent. Which by implication means that when the ECB fails, and it will, it will be up to the Fed to bail it out.
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I don't think even Lehman at its prime had $705bn of subprime assets.
This time is different! No, really!
Did Lehman have printing presses?
Pay no attention to the man behind the curtain
http://www.youtube.com/watch?v=YWyCCJ6B2WE
uh...a central bank in a fiat world cannot be "leveraged." They just print shit. There is no asset backing anything.
yeah but German sentiment beat expectations...rally on
No, and they also had to do accounting. Fools.
Does Draghi have a psychoanalyst? He must be suppressing a tremendous amount of worry and fear.
I picked a terrible time to quite methamphedomines.
I picked a terrible time to go broke and have no printing press so I can buys my methamphedomines
Well, one difference between Lehman and the ECB is that, unlike Lehman, the ECB doesn't have competitors who will benefit from it's demise...
why don't cha, just keep putting the Pedal to the metal and shoot for the stars. THe only way cars can fly is off the cliff. No one respects wisdom, anymore. I guess MF global was the first turd to float to the top, from the sewerhole.
The holidays is near enuff, is it too early to start drinking? Fuck it I like the holidaze.
balance sheet, mother of mercy, call it leverage sheet
Meh, Balance sheet is right. On the one side you have a giant steaming pool of worthless poop. And on the other side you have the crying masses asking them to pile on more.
The ECB assets are crap
Junk bonds from the land of G-Pap
Their fall is complete
With a bad leverage sheet
There's no getting out of this trap!
And the Fed's balance sheet is filled with such strong assets..
Like MBS.
Your observations are astute, your highnesty.
What is never mentioned by anyone, ever (ZH included) is that these figures are for the Eurosystem, not the ECB.
You can estimate all you like, but at least we should all understand that the VAST majority of this balance sheet relates to individual govt central banks.
The Euro will not be sacrificed like the dollar, watch and see.
I guess we FOFOA readers are in the minority here ;)
Monti's a Goldmanite. So is Draghi. They cannot fail. Carry on! May the spirit of Corzine be with thee..
Blowing the bubble so huge that when it all implodes it guarantees total devastation.
There wont be any 'FED bailing it out', it will be 1 World bank, 1 currency 1 govt.
I don't know about one bank but definitely one currency (the dollar) and one government (USA)
We already have that...
Petrodollar, baby! Sell oil for gold? We invade your country and kill you. Make policies we do not agree with? We invade you - under the guise of fighting terrorism and seeking WMD's- and overthrow your lawful government. Decouple your currency from the fiat system and move to back it with gold? You are labeled a tin-pot dictator, we incite insurgents with psy-ops, pay them handsomely, equip them and invade your country to aid the insurgents in the name of "democracy" and kill you.
It all boils down to control and money.
They tried moving towards that in a place called Europe. It didn't work out. The concept was flawed and were unable to keep it together. Eventually the whole thing fell to pieces catastrophically leading to cold wars and depression.
-Sent from the year 2013
Right, but nevertheless they're all-in now.
We're all Greeks Now.
http://www.youtube.com/watch?v=vdED3rVgIu4
I always hated the "bailed out by the Fed" bullshit. The banks were bailed out by the taxpayers, aka the wealth creators, and those with savings.
The Fed does nothing but print coloured pieces of paper with arbitrary denominations. They're fucking socialist scum wealth distributors at best, through managing inflation, crony capitalism enablers, through distributing newly created money to the elite, at worst.
Fuck the Fed.
"Taxpayers" (or victims) provide 57 cents of every dollar the federal.gov spends, the rest is borrowed from idiots, banksters and the FED. The FED (owned and controled by the TBTF banksters) bailed out their member banks by buying trillions in crap "assets".
The FED (and now the ECB) are the "zombie" banks. They can take on as much crap as the banks and governments can create, as long as, we are living in a fiat currency world. If you use gold and silver for money, not so much. The ponzi would be over, and the collapse would be epic.
Who is the bigger idiot, those of us who pay our taxes or the idiots who loan the gov't money? We pay taxes, in part, to support the slow bleed of a society destroyed the idiots you describe.
"Who is the bigger idiot, those of us who pay our taxes or the idiots who loan the gov't money?"
Since one does it by choice and the other through force, I will go with the idiot who lends the government "money".
Perhaps... but one is paid handsomely to loan what isn't theirs. The other pays directly from what is theirs, never to see it again. I'm still on the shorter end of the stick, I think.
In the case of the bankster shills, you are right (money for nothing). But for the poor, scared Tbond buyer putting his life savings by choice into a "safe" 2% 10yr., not so much.
Language creates a false reality. I would posit that the bigger issue isn't a matter of who exactly did the "bailing out"... though you are correct in what you say... the bigger problem is with the actual phrase "bailed out". I think the phrase implies some sort of finality or solution. The financial system isn't "rescued" by the bailout, the inevitable may be delayed and burden may have shifted slightly, but nothing was really "bailed out"... at least in the way that the phrase is usually used.
If appropriate descriptive language were used to explain the fed "bailout", people would have a far different opinion of the matter. This is by design.
'Language creates a false reality.'
Rhetoric, pre-packaged PR talk, monotone speech that seems unassuming but actually is quite hazardous; those create a "false reality" and have nothing to do with 'language'.
"The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum.”
? Noam Chomsky
I'm a big fan of Chomsky and was thinking of him when I wrote what I wrote. I don't think we disagree, except for, perhaps, semantics. Rhetoric is language. Using a word to "label" an entire idea is language. Labeling an activity a "terrorist" activity which then shapes the perception of an event is using language.
As stated .. the author doesnt even know .he admits ... what the ECBs ASSETS consist of
WITH WHAT will the Fed Bail out the ECB ?
Since it is EUROPE who is OWED 2.3 Trillion USD from American Banks .. NET ...and NOT the other way around
Come on .. there must be some FED AUCTIONS coming up !
As judged by the RHETORIC !
So the $16 Trillion NET of U.S. taxpayer dollars floated in secret bailouts from the Federal Reserve to European banks do not count, eh? The GAO micro-audit of the Federal Reserve Bank exposed that little gem months ago. Try again, chief. They owe us their firstborns and their appendages. They are leveraged beyond belief to what is THE U.S. Bank. Even taking away $2.3 Trillion owed, there is a balance of $13.7 Trillion owed. It is all relative. Since the ECB and the individual European Central Banks are linked, forming the Central Banking System of Europe, well, you get the picture. The taxpayers in every country are screwed because of the ponzi. Bank on it.
I think predicting the failure of the ECB is WAY premature. Stick to your knitting of the ESF issues Grandma Durden.
What's an "EEEE-CEEE-BEEE" and when is Dancing with the Stars on?
Hilarious!
Who owns the ECB?
Dr. McGillicuddy. With a pint o Guinness on the side.
Me.
Goldfein, son of Abraham...
Nothing Really Matters, It's All Palaver These Days - What's The Point, Who Cares.
I am starting to think that nihilism, atheism and reality tvism might be the new religion
Must be why Futures are soaring as Bloomberg says. Bloomberg also reported last night that Europeans are simply merry about their future. LOL
DWTS > ECB
Now where did I put my fluoride?
Very good news for the markets right, right.
Risk on. Haha.
Lehman you say what's that?
Greece will play the role of Judas Goat, and be kicked out; then the EU will make a great show of closing ranks and appearing 'all the stronger for it'.
The EUR will soar as will U.S. equities. Shorts will be left in a state of horrified disbelief and teeth-grinding paralysis a-la 2009.
ECB = Europe's Completely Bankrupt
Wonder where are rating agencies to d/g France,Austria, UK and Germany...
But the author forgot to mention that Greece is not Spain:)
Don't tell the Germans. Lets pretend that the ECB is not printing money and not gambling like a big hedge fund.
In the 1980s, the word "million" sounded like a lot. In the 1990s, we started getting accustomed to the word "billion" and its significance. Now, both of those pale in comparison, as we have been lulled to sleep by the word "trillion". We've been rendered listless in our congizance of such sums.
When exactly do we include the word "quadrillion" in each post and comment regarding Central Banks and their minions?
Oh, and by the way, it's Turnaround Tuesday - do you know where is your "Santa Claus Rally"?
http://fidweek.econoday.com/byshoweventfull.asp?fid=446945&cust=mam&year=2011&lid=0#top
Housing Starts "much better than expected" in November.
Santa, do you have any balls in your sack?
this is why 1500 dollar gold is funny and will be un belivable in the future.
wondering how many times I have to say the same th8ing on this site. the ecb will take the crrap off the banks hands, and then force the sovreigns to make it whole. thereby transferring risk once more from the private sector to the public. that is the purpowse of a central bank in the anglo saxon system. it's the simple reaqason the only thing that will work against these criminals is revolution.
Europe needs to start dumping more garbage debt on Bernanke and the Federal Reserve through swaps. They don't call helicopter Ben for nothing. Since the Bernanke is a money printer and a virtual vaccuum cleaner of garbage debt it's time to dump on the US federal reserve. Bernanke thinks he can save the financial world. Let him try.
More on the Canadian housing market.
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/merrill-classic-bubble-signs-in-canadian-housing-market/article2276241/
And a balance sheet as stated equal to the US .. WHICH HAS HALF THE POPULATION of EUROPE .. isnt may be an ideal world ... but divided out on the POPULATION .. still about HALF of what the US has acummulated of "BALANCE SHEET " per Capita
Compared to Composite GNP of EUROPE ( which is BIGGER than the US ) also considerabley more comfortable than the US
Compared to Currency Account Balance ( which in Europe is POSITIVE ) and compared to TRADING Balance ( which also is POSITIVE in EUROPE ) far more affordable than in the US where both INDICATORS OF REAL WEALTH CREATION are NEGATIVE
What is also NOT MENTIONED is that the DEBT of EUROPE are DEBTS to EUROPE ITSELF .. not to the US ..where the OPPOSITE is TRUE .. it is the US which NET OWS 2.3 TRILLION US DOLLAR .. to EUROPE
Lets get just Half of that back ... n the Balance Sheet of EUROPE should be POSITIVE ...
If Europe on top of that sells its massive holdings of US TREASURIES .... MAN .. there will be means for a Mercedes /European Family .. for Christmas
Your figures are all wrong.
Eurozone population: 330 million, vs. U.S. 300 million.
Eurozone GDP: $12.5 trillion, 80% of U.S. GDP.
http://en.wikipedia.org/wiki/Eurozone
Stop wasting our time with your know-nothing chauvinist opinions.
SO this is in the Spain article on Bloomberg right now...what does the unlimited comment mean?
Spanish and Italian bonds gained as the ECB prepares to offer banks unlimited cash at its benchmark rate of 1 percent to encourage lending and stave off a credit crunch. The yield on Spain’s 10-year benchmark bond fell to 5.092 percent at 12:35 p.m. in Madrid from 5.184 percent before the sale. The ECB, which will allot the funds tomorrow, has also loosened rules on the collateral lenders can use so that they can borrow more.
Well said dcb.
Stabeeletee?
Bank run continues. ECB stuffing the hole at banks with hypothetical and symthetic money to cover dwindling deposits. Bank leverage to private deposits has gone hyper. Trillions in "assets" but not a physical euro in the vault. Will a single withdrawel, just enough to buy a big mack, bring the entire financial system down.
Santa is here........everyone one dance
or may be this year we will opt for FIAT and Renault/ Citroen / European .. its their turn to get a turnover boost.. this Christmas
The only pleasant image from the whole article.
Forgive my noobish question but can someone explain to me (or give me a link) what the balance sheet of central bank really means? Why does it really matter when they can print & expand ad infinitum? When do they get in trouble exactly?
Honey Market don't give a shit. EUR and oil are flying high after getting Gaddafi-ed. This is a great set up for the shitty number coming out tomorrow.
Royal Bank of Canada is toasted.
Yes but how is this related to this article? Royal bank of Canada is in Canada, not Europe.
RBC through RBC Dexia?
anything royal is bilderberged and packaged for immediate contagion; that is the logic of the "royal" label. "Your money belongs to us, as we seem fit to use it."
"MINE IS BIGGER THAN YOURS" - M. Draghi
When the hell are people going to realize that the ECB is engaged in various forms of QE and are just not publicly acknowledging it?
Can a central bank really default? I don't think so.
why not....default by a nation is same as default by the central bank...it has happened many times before
As long as the central bank hold the power to "print" currency, it will never default. Not technically. They can inflate their money into worthlessness striving against a defualt, thereby destroying their currency, and their economy though. Zimbabwe, Wiemar, Argentina, all are just relatively recent examples of a central bank going belly up. When a big interlinked system of banks, like the ECB or the Fed pull something like this off, the effects are far, far more devastating to a wider array of economies and countries due to increased market exposure. Argentina, Zimbabwe, and the Wiemar Republic had limited impact because they were not lynch-pin economies, like the EU, China, or the US.
Where is the ECB getting the money to buy all the toxic assets? Do they print euros like the Fed can print dollars?
http://www.ecb.int/ecb/educational/facts/orga/html/or_009.en.html
A central bank like FED, ECB, BOJ, BOE can in theory print to infinity. The only check is inflation. Why should the market and notationals judge ECB more severely, if they don't do likewise for FED, BoE, BoJ is a question which doesn't need an answer as its rhetorical; its called a biased market, and its also called 'exorbitant privilege', coupled with divine rights to give protection to whichever surrogate bank one wants to defend, as one can truly print to infinity and swap at Zirp, as the resulting carry trade makes it so easy to take candy from sovereign muddled, befuddled "babies". Then you are Kyle Bass or Hugh Hendry, or Soros or Gross or Berkshire bull. The world is at your feet, you have insider track and PDs HFT offerred with red carpet wherever you want it : WS, City or black hole of Calcutty. People working overtime to pump and dump and shadow bank, transferring in the process to sovereign balance sheets the increased loss, and resulting spike in spread, to compensate for the inevitable margins you make on the derivative plays. You be the genius, they be the bumb asses. As the market salutes you with a high five. One hand feeds the market bonfire of vanity, the other provides the firewater paid by taxpayer. All the while the Titanic teeters and shudders with all aboard; winners and losers on a crazy voyage called day to day financialised capitalism, and its daily dose of market orchestrated musical chairs.
Theres no more logic in that than in a Nuke missile warhead. Its a fact of life. Some people make it a way of living, at the expense of others.
What a joke. The ECB and Bernanke are competing for the MacDaddy of all EASING. Look at Euro yields!!!!
IMF/Hungary Bailout Talks Stall – Hungary Benchmark Rate Rises (But 10yr Sov Yields Fall) – US Treasury Yields Increase – ECB Balance Sheet Is HUGE!http://confoundedinterest.wordpress.com
No one has gone bankrupt since Lehman brothers. No one will go bankrupt for years to come. They will print money to "solve" solve the problem. If the ECB is short 100 billion a 100 billion will be created and the debt payed. The problem is that the currencys can't survive years of zirp and mass printing.
Except, under even under the most optimistic picture, mass printing leads to inflation, which leads to destruction of an economy. They may not default. Not technically. When your currency is worth less than the paper it is printed on, you are dead in the water and your economy sinks. Period. Fiats are printed from thin air, creating debt, easing the current issue, but it has it's own problems. ZIRP is one of the problems. 100 Billion short - meaning you do not have 100 Billion to pay your debts, create 100 billion, your currency devalues by that much. In the case of the ECB (the European Central Banking system), it is not just billions, it is overall Trillions. Each and every time a Euro is created, it devalues the Euros already in the system. This is exactly how Europe and the US got to where they are now.
Your new debts, priced in the currency prior to devaluation from inflationary printing, become even more toxic than the debt you just paid off by printing, because your currency is now worth that much less. Investors and foreign countries start to shy away from purchasing a vehicle of that debt, ostensibly bonds, or sell off the bonds they hold in hopes that their losses will be minimal comparative to what it will be. When the Central Banks become, as they have, the buyer of first resort, then the taxpayers get the short end of the stick, and the respective economies enter inflationary depressions. Large enough currency amounts of bonds get sold back to the issuer, and it creates a worsening cycle of sell off by others who see the drop in value and move to protect what they can by selling off what they hold and moving into more tangible investments. It is a zero sum game. It is not a matter of if it is but a matter of when and how fast.