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Germany Steals Draghi's Bazooka Before The Main Event As Monetization Mutiny Grows

Tyler Durden's picture





 

With one day to go until the European soap opera hits its peak, and with the ECB doing all it can to spread disinformation and sow discord and disunity between Germany and everyone else on both the ECB governing council and everywhere else, Germany has decided to again make it clear just where it stands on the topic of hyperinflation and other printing matters:

  • FUCHS WARNS THAT ECB BOND PURCHASING COULD LEAD TO INFLATION 
  • GERMAN LAWMAKER FUCHS, MERKEL ALLY, SPEAKS WITH BLOOMBERG TV 
  • CDU'S FUCHS SAYS AGAINST EXCESSIVE ECB BOND PURCHASING 
  • FUCHS WARNS THAT ECB BOND PURCHASING COULD LEAD TO INFLATION
  • CDU'S FUCHS SAYS 'QUITE POSITIVE' SPAIN, ITALY WILL IMPROVE
  • GERMAN COURT LIKELY TO BACK ESM, CDU'S FUCHS SAYS

And the punchline:

  • ECB'S DRAGHI DOESN'T HAVE 'TOO MUCH' SUPPORT FROM MERKEL, MERKEL BACKS WEIDMANN
  • ECB CAN ONLY BUY BONDS ATTACHED TO CONDITIONALITY

Which once again goes back to the simple argument: unless Draghi has the full explicit support of Europe's paymaster, anyone hoping for anything definitive, and bazooka-like, will be certainly disappointed.

But wait, there is much more. Readers may recall that yesterday one of the articles we pointed out came from Dutch Dagblad which suggested that it was Weidmann who was isolated on the ECB governing council, and that the Dutch member of the ECB council Klass Knot as well as all other members was "for buying government bonds of Southern European countries." Well, prepare to be shocked, because what kind of soap opera would it be if it wasn't for unexpected narrative plot lines. Today, Frankfurt-based Market News reported precisely the opposite, and not only is Knot on the same side as the Germans, but so are virtually all the other "virtuous" European countries, aka the non-beggars.

From Market News:

The primary divide on the Governing Council of the European Central Bank is not between Bundesbank President Jens Weidmann and ECB President Mario Draghi, as the public supposes, but rather between the heads of the Dutch National Bank and the Bank of Spain, according to an article in the Financial Times Deutschland on Wednesday.

 

The FTD reported that while Weidmann, in the words of unnamed sources, will vote against bond buys “in any case,” it is Klaas Knot from the Netherlands who is marshalling other skeptics to attach as many conditions as possible to the purchases.

 

Bank of Finland Governor Erkki Liikanen and Belgian National Bank chief Luc Coene are among those in his camp, the paper said.

 

Meanwhile, Spain’s Luis Linde leads a majority of Council members in favor of implementing a sovereign debt purchasing program quickly and with as few conditions as possible, the FTD reported.

 

Italy is clearly on Spain’s side, while France also harbours sympathy for their position, the paper said.

 

Draghi himself is in the middle, determined to keep the Eurozone intact at almost any price but unwilling to intervene in markets in a way that would lead to what the paper called “systematic government financing.”

How droll: when stripped of its apolitical mask, the ECB is split along the lines in the same way as Europe's politicians: the broke and the solvent, and to nobody's surprise the broke want endless bailouts from the solvent, i.e., unconditional money printing which will result in inflation hitting the solvent, while the solvent won't hear about it unless the broke subject themselves to being controlled by the solvent.

And so we are back to square one.

 


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Wed, 09/05/2012 - 07:35 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Before The Main Event

 

Have the front desk give me a wakeup call when it's time for the Main Event....wouldn't want to miss that.

 

Wed, 09/05/2012 - 07:54 | Link to Comment stocktivity
stocktivity's picture

Draghi will print....Germany will cave....Unemployment bad news on Friday will be good news with Benny's printing presses getting warmed up...more of the same....It's all Bullshit!

Wed, 09/05/2012 - 09:19 | Link to Comment saturn
saturn's picture

Conditionality, bitches!

Wed, 09/05/2012 - 09:40 | Link to Comment Eireann go Brach
Eireann go Brach's picture

There is 24 hours left for some hero to step up and whack Monti and Draghi over the back of the head with a shovel!

Wed, 09/05/2012 - 07:35 | Link to Comment Wm the Shrubber
Wm the Shrubber's picture

I've got my popcorn and my slurpee, cash, fixed income and PMs, and I'm on the sidelines watching this charade!  Trying to trade this nonsense is pure masochism!

Wed, 09/05/2012 - 07:40 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

pure masochism

 

Some people pay good money for that. I've never understood it but.....whatever.

 

Wed, 09/05/2012 - 07:42 | Link to Comment Wm the Shrubber
Wm the Shrubber's picture

Increasingly, there is no such thing as "good money" - aside from PMs!

Wed, 09/05/2012 - 08:28 | Link to Comment Zero Govt
Zero Govt's picture

there is good money, although the world is awash with national monopolies you still get to choose from a global basket of 300+ variants of monopoly money

grab a basket and go shopping, there's a special offer in aisle 4b for Swiss Francs which is seriously discounted at the moment  

Wed, 09/05/2012 - 07:37 | Link to Comment A Man without Q...
A Man without Qualities's picture

One thing the Dutch have known for centuries is that Spanish rulers are not very good at managing their economy....

Wed, 09/05/2012 - 07:39 | Link to Comment disabledvet
disabledvet's picture

but how good are the Dutch at managing the Spanish one?

Wed, 09/05/2012 - 08:54 | Link to Comment falak pema
falak pema's picture

dutch girls love going to spain in the summer. Maybe now they sing : I love Barca in the summer, spring and fall. I love Seville in the winter, when the bulls gore me and all. 

Wed, 09/05/2012 - 07:38 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

German newspaper Die Welt says, "Der ESM ist eindeutig rechtswidrig" ("The ESM is clearly illegal").

 

http://www.welt.de/debatte/article108947819/ESM-verstoesst-gegen-Gesetz-...

Wed, 09/05/2012 - 07:43 | Link to Comment Sandmann
Sandmann's picture

Europe is built on ignoring Constitutional Legalities - it is an illusion to believe you can curb the Power of the Hegelian State with anything other than guns.  The soppy narrative of 'human rights' and 'constitutional provisions' ignores that fact that they are only workable so long as the memory of the last casualties remains vivid. When that fades you need to use guns again.

Wed, 09/05/2012 - 07:52 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Europe is built on ignoring Constitutional Legalities

 

That's pretty much a universal thing these days.

 

Wed, 09/05/2012 - 07:56 | Link to Comment LongSoupLine
LongSoupLine's picture

yep...just ask Ron Paul

Wed, 09/05/2012 - 08:52 | Link to Comment falak pema
falak pema's picture

or the Japs; no point asking the Chinese or the Ruskis! 

Wed, 09/05/2012 - 07:37 | Link to Comment disabledvet
disabledvet's picture

massive fiscal stimulus it is then....for those that can of course.

Wed, 09/05/2012 - 07:39 | Link to Comment Archetype
Archetype's picture

Mr Fuch Fuck started the algos allraight... Probably ends up with a short squeeze as usual.

Wed, 09/05/2012 - 07:40 | Link to Comment Archetype
Archetype's picture

Fuch was supposed to be stroke through.

Wed, 09/05/2012 - 07:42 | Link to Comment DannyTX
DannyTX's picture

The bonds will be bought.  Conditions will be violated.  Nothing will come of that.  Years later, instead of now, it all implodes. 

Wed, 09/05/2012 - 07:46 | Link to Comment LongSoupLine
LongSoupLine's picture

 

 

it's allll about the algos.  these headlines are in no way intended to stir debate from organic life forms.

Wed, 09/05/2012 - 07:49 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

It's funny because there is truth in that. I've noticed that organic life forms are easily distracted and tend to gravitate towards dead pop star stories, but more than that ... oh look, kitty!

Wed, 09/05/2012 - 07:46 | Link to Comment AynRandFan
AynRandFan's picture

Talk is just talk.  So far, we haven't seen a single example of Germany refusing to go along with bailouts.

Wed, 09/05/2012 - 07:52 | Link to Comment Cdad
Cdad's picture

This has been the case all along.  Square one, indeed...for we never left it save for the rhetorical efforts of certain Goldman installed figures.  

Four years later, and the putrified status quo continues on with lies, deceit, the destruction of the peoples' currencies, and the plundering of various treasuries.  Four years later and these guys are still not in jail.  Sometimes, it is hard to believe that this is not just a nightmare that I am about to wake up from.  

More banker pink slips, please.

Wed, 09/05/2012 - 08:00 | Link to Comment LongSoupLine
LongSoupLine's picture

Exactly, I've said several times Cdad...

 

Madoff is in his cell, scratching his head, saying, "WTF, am I doing here by myself?!"

Wed, 09/05/2012 - 08:19 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Totally got screwed.....should be grounds for an appeal at least.

 

Wed, 09/05/2012 - 08:20 | Link to Comment youngman
youngman's picture

On the other hand...when we finally see all the EX Goldman´s leaving their posts...quiting...retiring...being replaced..whatever...that is probably the very end of the charade...

Wed, 09/05/2012 - 07:53 | Link to Comment asteroids
asteroids's picture

The choice is simple, print or don't print. If you print things will be better for a few months and then will be much worse. Don't print and things will get worse immediately, but maybe not as bad. It's time to pay the bill folks.

Wed, 09/05/2012 - 07:55 | Link to Comment apberusdisvet
apberusdisvet's picture

Ah!  The whole "conditionality" thingey.  Give us your sovereignty so you can be just another nation of debt slaves feeding the coffers of the cartel.  Not too transparent, is it?

Wed, 09/05/2012 - 07:59 | Link to Comment luckylongshot
luckylongshot's picture

What is going on with the ESM right now is simply shifting the deck chairs on the Titanic.  

Wed, 09/05/2012 - 08:10 | Link to Comment WaEver
WaEver's picture

Great Timing. ECB announced it will buy. Period. Weidemann's position is irrelevant

Wed, 09/05/2012 - 08:18 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

ECB announced it will buy

 

They'll reap the wind....and stick it in a bottle. It's not empty......it's totally chocked full of air.

 

Wed, 09/05/2012 - 08:20 | Link to Comment paint it red ca...
paint it red call it hell's picture

W.W.G.D

 

what would goldman do?

Wed, 09/05/2012 - 08:35 | Link to Comment Zero Govt
Zero Govt's picture

what would Goldman not do?

there isn't much left in the criminal code they haven't pissed on

Wed, 09/05/2012 - 08:40 | Link to Comment dingoj
dingoj's picture

Markets all the merrier: austerity to the people, cash to the banks, stocks are up, lets all have a big party.

The slime, the sleaze, the filth, the grease-oozing central banker Draghi will flood the markets with tax-payers money until there's nothing left.

This is the end-game, boys. Join the party while you can and enjoy the ass-rape of your wives and children in your drunken dreams of brighter tomorrows.

Dance and rejoice - there will be nothing left after this giant banquet.

 

Wed, 09/05/2012 - 09:37 | Link to Comment Nussi34
Nussi34's picture

Bomb the PIIGS!

Wed, 09/05/2012 - 12:00 | Link to Comment Dareconomics
Dareconomics's picture
Basics of the ECB Plan

The peripheral economies of the Eurozone continue to deteriorate despite all political and financial efforts so far. The new magic bullet is the Monetary Outright Transactions. This is basically the same as the Securities Market Plan from one year ago. The name has changed to appease the opposition; by including the word “monetary” the ECB can be said to be executing monetary policy rather than financing its failing countries.

The plan is structured like so. The ECB will purchase sovereign debt under three years in maturity and “sterilize” these purchases by withdrawing an equal amount of money from the financial system. The ECB claims that it will not have a preference on the bonds it purchases to make the program more palatable to foreign investors. Of course, there are strings attached for the aided countries. They will be required to formally request aid and agree to a “memorandum of understanding.”

This plan is full of problems. First, the ECB is not permitted to finance countries. Even though these purchases will be executed under the guise of monetary policy, the PIIGS are out of money. Buying their bonds is financing their governments no matter which way you slice it. The reason for this rule is to prevent the European taxpayers from being responsible for other countries’ debts. This is exactly the result of this program.

Second, it is doubtful that the ECB can buy bonds in unlimited quantities without increasing the money supply. Sterilization requires that the ECB withdraw a euro from the financial system for each euro it places there through its bond purchases. If the ECB does this, it risks shrinking the money supply.

With the turmoil in Europe, people are not investing in the Continent. The euros that the ECB exchanges for the bonds will find their way back to safer jurisdictions. Some of the money will flow to Germany, but some of the money is going to be used to buy dollars, francs and yen and leave the system. Italy and Spain have a combined €900bn in debt held by foreigners. Just think of the massive sums that could leave Europe after these foreign investors wisely exit the Eurozone.

Third, using the ECB program as a stick to coerce the peripheral countries into reforming their economies is dangerous. The Eurozone is not the Warsaw Pact; it is a group of democratic countries with duly elected parliaments. It is up to these parliaments to create solutions to these problems. Dictating terms to the Greeks is not working and is creating resentment that will persist for decades, just like the scars from World War II.

Last, this program is not happening in a bubble. The Eurozone is in a recession and heading for a depression. The money to bail out these countries is simply not there. The core cannot afford a Spanish failure now with lackluster growth let alone with the economic shrinkage that is coming.

This program is no game changer. There will some initial exuberance, but ultimately the economic fundamental do not support the turnaround narrative in the future.

dareconomics.wordpress.com

Wed, 09/05/2012 - 13:40 | Link to Comment RiskAverseAlertBlog
RiskAverseAlertBlog's picture

And they'll get unconditional bailout, because if so-called beggars but threeaten to leave EMU, the euro, as well as the trans-Atlantic banking system, falls. The only question right now is whether Germany will choose to remain in the EMU, or rather exit, take their losses and move on. I'm guessing if Germany can be blackmailed to join the EMU (which I understand they were), then they can be blackmailed to not only stay, but swallow hyperinflatoin.

Wed, 09/05/2012 - 23:48 | Link to Comment This is the end
This is the end's picture

I am still surprised that the Tylers fall for Merkel talking tough. When has she held to any of her tough talk over the last 3 years? She has broken every promise not to finance, lend, print money to the broke. She is all in on the Euro. She will print until she cannot no matter what she says. Watch what she does. Print aka devalue and steal money from the people.

Thu, 09/06/2012 - 01:45 | Link to Comment agagshoes
agagshoes's picture

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