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European Banks Close 2011 With Near Record Cash On Deposit At ECB, €9 Billion Overnight Increase
In the last daily update of 2011, the ECB announced that European banks saw their usage of the central bank's deposit facility rise yet again following a modest drop the day before to fund some Italian bond purchases, and increased to just shy of the all tie record of €452 billion, at €446 billion, a €9 billion increase overnight. And while this is obviously not a seasonal pattern based on historical observations, nor is it banks holding their cash for 2012 auction use, as the carry opportunities are already there with the BTP back over 7% (although LCH still has to get the memo), we look forward to the first update of 2012 to see just how much more this non-seasonal expansion will rise by. One thing is certain: when the next, February 29, LTRO is conducted, European banks will park about €700 billion with the ECB in the biggest circle jerk ever conceived in modern monetary history.
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I love the smell of fiat in the morning...
Too strange and funny and sad. People are dying for the lack of liquidity and yet it must be stored for use tomorrow.
Money has become a joke. It's management has become a farce.
It's role in our lives has become ridiculous.
Looking for a return to value so these price games die already.
My motto for 2012..... illusion inversion!
ori
/world/
Ron Paul 2012 Movie Trailer
http://www.youtube.com/watch?v=BvemsAQUylg&feature=related
I changed my party affiation from independent to republican yesterday just so I can vote for Ron Paul in the FL primary.
"the biggest circle jerk ever conceived in modern monetary history" will be tomorrow when the idle dollars are activated to maintain the TBTF status quo. Reminds me of Schwartzkopf and Powell and the painfully drawn out build up to the Battle of Kuwait- the endless prepositioning of massive resources for the "big quickie". Ben & Timmy's colorless personalities make for poor TV though... so I wonder who will be tuned in or paying attention for the main event?
Bah, this is just temporary 31/12/2011 window dressing to get nice clean year-end balance sheet asset risk position that is easy to comment on the 2011 annual reports and the likely EBA stress test updates.
There will be a January effect of sorts. I predict the first week of January will already see a reduction of this position, with much more efficient use of carry trades, possibly even in European government paper. This herding to ECB behaviour will then be repeated near the end of first quarter 2012.
A good point. Banks have succeeded in rendering Money useless as a Store of Value or a Medium of Exchange. We end up with neither Stability nor Growth.
LIBOR to infinity bitchez!
18th of january it is down to 200+ again.
Based on Chart 2 presented in this [Zero Hedge] post, I'd say you're about right.
But the larger point stands - there is a clear trend - "down to 200+" is not a good sign.
Circular funding indeed.
its not that strange...it is down to the ECB maintenace period. The mimium reserve requirements are currently around €207Bn. Current maintenance period ends at 18th of january.
The big-point is that this is not new. Look at what happened June2010 and the dramatic reduction of deposits onward.
June2009 ECB issued its first 1yr LTRO...it took a couple of weeks and then the credit squeeze was gone.
I believe we will see a simillar pattern this time. Many argue that this time it is different because of the tighter capital rules imposed on EU banks and the deleveraging. Maybe, but I dont think so.
More credit will be offered 1 of March in the form of LTRO II. An additional unlimited 3yr LTRO from ECB. To participate in that Banks need eligible collateral. We will see a continued and increase scramble for collateral (including Gov bonds) beween now and then. If I don't remember wrong Italy will race 200Bn of Bonds in 1Q2012.
y&h, thanks for the information. Now... maintenance period... let me see... (wft euro coin has go back shop polish up meh? not...)
OK. That kinda explains the spiky pattern at roughly month-long intervals. I can see after the 2009 LTRO deposits spiked up instantly, and took some time to decline - can't leg into the market all at once, I get that.
Still - is it not the case that the gradual accumulation of reserves since summer 2011 has been driven more by interbank distrust?
And if those Italian bonds get taken down and hocked at the ECB, isn't the circle completed? Governments bootstrapping through the ECB to fund themelves by printed money, even if the "ink" is nominally temporary?
I take your point about the technical aspects of the reserve amounts but the trend of peak reserves is climbing higher after the initial shock of 2008, not going lower.
Absolutely it does (depend on distrust). At least the excess part of €207Bn. The 207Bn which is the minimum requirements "computed" by the ECB.
The min req. dependes on the liability side of the balance sheet of the banks (deposits, emissions < 2yr, repos). And that side of the balance has increased as well...so the 450 something is not entirely down to distrust between banks.
OT: Gift that is Greece
Execution of the State Budget January – November 2011
According to the data available for the execution of the State Budget for the eleven months January – November 2011, on a fiscal basis, the deficit amounts to 20,490 million Euros compared to the new target of 21,063 million Euros set in the voted Budget for 2012. During the same period in 2010, the State Budget deficit amounted to 19,516 million Euros.
Total State Budget revenues (Ordinary and Investment Budget) are 165 million Euros below the new target, but total expenditures (Ordinary and Public Investment Budget) compensated for this revenue shortfall by amounting to 738 million Euros lower than the new target.
Specifically, on an eleven-month basis (January – November 2011), net revenues of the ordinary budget amounted to 43,860 million Euros, declining by 3.0% in comparison to the respective period of 2010. The revenue shortfall can be mainly attributed to lower withholding personal income tax receipts due to the more favourable tax treatment as a result of the new tax law and reduction in taxable income, and finally to the increased tax refunds due to the clearing of previous years’ obligations. Moreover, the shortfall against the new target can be attributed to delays in the receipt of tax revenue due to strikes by GSIS employees’ and tax collection officials, as well as the shift of revenue collection by the European Union, for the last month of the year,
Ordinary budget expenditures increased by 3.657 million Euros or 6.2% in the eleven months of 2011 on a year-on-year basis. This is mainly due to a significant increase in interest expenditures of 2,638 million Euros or 20.4% thus far in 2011 relative to 2010.
State Budget primary expenditures (spending excluding interest) increased by 3.0% or 1,339 million Euros between January-November 2011 on a year-on-year basis, reflecting an increase in grants of 2.768 million Euros relative to 2010 for social insurance and health, which exceeded the reduction of 1,429 million Euros in other spending categories.
So, to sum up, austerity has increased expenditure and declined revenue. What a success story!
Read the rest of this farce from here.
http://www.minfin.gr/portal/en/resource/contentObject/id/1c8958b7-a10d-4b3d-bfaf-5b58b2b874d5
Austerity to me means a reduction in costs....so far there is no austerity in Greece...lol...but we knew that...they will lie as long as you keep giving them money...and they are still giving them money....what a joke...but who talks about Greece anymore...its Italy now...and they are talking AUSTERITY now too...lol
china missed pmi again
For all Ron Paul supporters, a history lesson:
"In 1832 President Andrew Jackson vetoed the renewal of the then Central Bank charter. America spent the next 80 years without a true central bank, and as a consequence suffered repeated banking panics and depressions"
Good luck if you try to set the clock back to the 19th Century. It didn't work then and it will not work now.
so we've had a true central bank for the past 100 years and as a consequence suffered repeated banking panics and depressions
what's your point ?
Exactly - and I'll guess that many of those banking panics and "depressions" in Andrew Jackson's time were the result of market manipulations by banks, and it is not unreasonable to anticipate that a crisis can be manufactured to bolster the case for the "need" for a central bank.
My objection to the Fed is this: it purports to remove the control of money from the political fray. This is a lie. What it is about is removing the control of money from anyone other than the elites and banksters involved, who use the central bank to enrich themselves, while dressing it up with the laughably phony raison d'etre of the dual mandate which are supposed to inspire confidence in the hoi polloi that the banksters are devoted to noble purposes. Since the entire premise of the Fed is based on complete hogwash, it needs to go. If you want to completely remove it or insulate it from the political fray you are on a losing quest, since it cannot be done. The republican form of government devised by the Founding Fathers was intended to protect against the evils of direct democracy. Surely a system can be devised which puts Money back in the hands of the People as the Constitution explicitly states. You don't need conspiracy theories to understadn the simple fact that the Fed is completely controlled by banking interests, and no other interests. Given the immense power it yields, it must be under the direct control of The People of the United States. Would we tolerate a "War Reserve" where the shareholders are the top 10 military contractors, and they alone decide when and where we go to war? Of course not. And I'll grant that functions the central bank performs may be necessary, even desirable to a growing, thriving economy, but we need to go back to the drawing board about what this looks like and what it's purpose is. Enriching and bailing out crazy speculating and derivative issuing banks should not be on the list. Bring back Glass Steagall, and disarm the Fed.
My favorite Steve Rattner moment on Morning Joe this year was when discussing Ron Paul, he dismissed him by saying that "he wants to get rid of the Fed," with an incredulous look, as if it were complete madness. The tone that followed was that the very subject of getting rid of the Fed, or rationally debating its existence, was taboo. For him, as a 1%er, it probably is madness. For the rest of us, it is necessary if we want to get our country back.
If there was a single reason to vote for Ron Paul, this is it.
The root cause is not the FED but the corrupt election system of the US (and other nations but it is exagerated in the US). Money buys you power. Thats the pbm.
FED need to be adjusted no question about. It is not independent from the banks since they own it. But here the US is quite unique. At least in the western world.
But to say no Central Bank at all is just plain silly.
I agree (and said) that you need something that performs many of the functions of the Central Bank, but I see no reason why that is not, for instance, an agency of the US Government which is no different from any agency.
I am not OK with dismissing the "no central bank" notion is silly until there is a full debate on what this organization is being created to accomplish, and who controls it. So for simplicity's sake, you start with the proposition, radical though it may be, that it must be eliminated. Then build back, via rational debate, what is needed and go from there. Complete redesign, from ground up.
Speaking of redesigns, require all campaigns to be federally financed, and pass a constitutional amendment stating that corporations are not persons. End of problem.
"America spent the next 80 years without a true central bank, and as a consequence suffered repeated banking panics and depressions" - where did you get this info?
now what school taught you that?
maybe your new moniker should be ..."youngand?????
9 billion overnight haha. When Libor kicks in there will be no stopping this train.
The little squid run to the safety of the Biggest squid.. it's their nature. The biggest rubes in Europe have to be anyone who has a bank deposit there. The Banks don't trust each other enough to hold their money but depositors do.. haar.
Europe and the US are going through a deleveraging period which will most likely lead to a balance sheet recession such as Japan did during the "Lost Decades". Economic theory hybridization is needed in order to implement a stable international monetary system that is not just based on leverage but on growth of real GDP, meaning the production of real goods, rather from financial gambling with derivatives.
Check out the latest from the Capital Research Institute (CRI):
Deleveraging - A Balance Sheet Recession