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Guest Post: Europe, A Sterile Landscape...
Submitted by Clive Hale of A View From The Bridge blog,
A place incapable of supporting life as we know it – a good description of where ECB monetary policy is leading us. Currency debasement is almost certainly where we are headed because of Dr. Aghi’s assertion that the euro is irreversible, not despite it. He bravely assumes that in making such a statement he is creating an aura of consensus and strength. In its current form the euro is a busted flush and is being held together solely by political intransigence and ECB connivance. From the very beginning the rules of engagement were ignored because without political and fiscal centralisation they weren’t going to work anyway.
But did this stop most of the eurozone countries – and the Southern “Methadone” Zone in particular – from getting on board the gravy train and going on one hell of a trip courtesy of German style interest rates. It would have been rude not to! And no worries about the lack of a long term structure to keep this thing on the rails; we can deal with that later. Well later is now and guess what? They all want to stay on the train but can no longer afford the fare; ignoring the fact that they never could in the first place.
One of the many problems the eurozone faces, along with the US, UK, Japan et al, is how to service their massive debt burden. They can’t, but insist on reapplying the band aid to create the illusion of progress. As Einstein put it, “insanity is doing the same thing over and over again and expecting different results.” We now have OMT to ponder upon – Outright Monetary Transactions. My reaction thus far has been “OMG!” Typical of an ill conceived contrivance, the press release on the “technical” features of OMT comprises 17 short sentences; one of which says, “the liquidity created through Outright Monetary Transactions will be fully sterilised,” but doesn’t say how – that would just be too technical!
Money “printing” involves a central bank buying “assets”, usually sovereign debt, and crediting the seller with money that it has created electronically. The theory being that this money is used to encourage spending by way of loans to consumers and corporates, but which has the potential outcome of higher inflation. It should also drive short term rates down if, like with the OMT operation, the ECB is buying at the short end of the curve – the complete reverse of the Fed’s Operation Twist by the way. The announcement of OMT has had the desired effect on rates, especially Spanish and Italian, where the cost of new issuance was creating the debt servicing issue mentioned earlier. However with more than a nod to the Bundesbank, the ECB has declared that it will sterilise the purchases so that there will be no inflationary effect. They can do this either by selling other assets, for example long dated issues or attract deposits at the ECB both of which remove the newly created money from circulation. The first option is unlikely as they really don’t want to drive longer term rates upwards, so they are left with the second or they could instead sell some of their gold reserves, but that would be akin to selling the family “silver”. They wouldn’t do that would they? Well they might! Thinking that politicians and central bankers would be so crass is another example of one of life’s “heroic” assumptions. The Chinese would have it off them in a trice and how would that help the cause?
Currently, such is the lack of trust in the interbank market that attracting money into ECB deposits is not a short term problem, but by such sterilisation the benefit of loan growth on spending is lost. So this is just another short term breathing space to allow the PIIGS to refinance their maturing debt at less penal rates, but does absolutely nothing to solve the longer term problems of creating growth in economies stifled by ECB “conditionality”; a very sterile landscape indeed. But cheer up! QE3 will be along any day now to help the banks remain solvent for a while longer. Can exits stage right after another good kicking…
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as if they had any choices... in an 'interesting' phase of ponzi fiat money compound growth function... without creating ever more debt faster and faster, TPTB would go poof and leave the field to even bigger assholes. It goes as long as it goes.
The cartoon on the intro makes me think of "DUCK AND COVER!"
The *poof* will probably be pretty big...
This is it, folks! We have reached the Keynesian singularity. There is no predictive ability beyond the event horizon of unlimited easing. What lies on the other side?
O brave new world, that has such morons in it.
Money printing and QE is now such standard procedure we need to look beyond at the problems that creates
I doubt the ECB would sell its 500 tons nor any of the 10,000 tons in the EZ. I believe they have other plans for zee gold...a physical only market at a price, determined by the market, at a price high enough to 'solve' the worlds problems with disappearing assets.
The author has never done his homework. Hasn't he read th ECB's The implementation of monetary policy in the euro area?? The ECB can sterilise the purchase through issuing debt certificates, without selling its gold reserve!
eigenvalue
but does not any process that pulls money out of the economy cause the same problem that any sterilization causes? They need a magic process that supplies money where needed but does not cause inflation in food and energy. The only process that could pull this off seems to be inflation of the currency in gold.
Gold at a high enough price solves a lot of problems for the Euro as the Euro (but not the Fed) carries its gold marked to market.
The euro is strengthened as gold rises in price, while the dollar is damaged.
At say 30,000 dollars per ounce the dollar appears weak but the Euro's balance sheet still shows gold in the same quantity even as their dollar reserves turn to dust. No sweat for them but a huge blow to the dollar. The same would be true for any CB with a good bit of gold. I believe this is what drives the recent Chinese and Thai and Korean and Venzuelan and Russian and...well alot of recent CB purchases. Reserves are needed. Why continue on in using dollars if there is a reserve that is looking sooooomuch better?
The insanity of this stupid project. Germany is going to end up paying for everyone else, and unlike EVERY OTHER EMU nation, Germany has no anti-EMU party. If you oppose the EU you are a Nazi, and that is aking to being a racist in the states, and politicially you get crucified upside down. Very sad that a new generations of Germans are having to pay for their grandfathers sins by accepting fiscal slavery.
The bit about no anti-EMU will change after this parade is over
The ECB could sterilize by importing smack and taking the cash out, they have the legal's sussed.
Goods imported by the ESM and necessary for the exercise of its official activities shall be exempt from all import duties and taxes and from all import prohibitions and restrictions. (ARTICLE 36:4. TREATY ESTABLISHING THE EUROPEAN STABILITY MECHANISM (ESM))
http://europa.eu/rapid/pressReleasesAction.do?reference=DOC/12/3&format=...
Spoken like a true bankster....
Don't forget about Wednesday's important ruling by the German constitutional court. The risk for a major breakdown in the markets, should they not rule in favor of the ESM, is perhaps not big, but still present.
The constitutional court is under international pressure to rule in favour of the European stability mechanism and fiscal pact. A dissenting ruling from the court, based in Karlsruhe, southwestern Germany, would probably cause havoc on money markets and cast doubt on the future of Europe's single currency. https://miningstockvaluator.com/news.php?id=88
What happens if/when fiat dies and everyone declares how much gold they really have?
Does that then get checked and certified and we declare who has the most gold reserves, and thus the biggest economy, and the most economic power?
Of course not, it doesn't work like that, never has, and it never will.
As always, the people with established possession of hard-assets, lots of productive land and lots of tradeable stuff in demand, that they can supply, will be and will remain relatively powerful and rich.
And the amount of reserves in gold held will be just one facet in that NET-worth, trade and economic potential calculus.
Who's gonna believe anybody anymore about how much gold they've got? Trust has broken down everywhere and fraud is rampant at all levels. It is all lies, lies, lies. Counting the phyzz is a problem. Wonder how they'll handle this? Who are you wllling to believe these days?
to paraphrase fofoa: you will know how much gold one has in the same way we know about black holes, not by direct observation but by the effect on the world around them. Wealth parties will attract oil and imports, those without will have none.
At least Hungary wants to get rid of the IMF and Monsanto and "sterile" seed:
http://www.infowars.com/hungary-is-in-trouble-after-throwing-out-monsant...
Full article (offsite from infowars): http://theautomaticearth.com/Finance/hungary-throws-out-monsanto-and-the...
A bit from the piece (after infowars cuts):
There was more international reporting earlier this year, when Orbán again faced up to two other major forces, in this instance the IMF and the EU. On January 1, the Hungarian parliament and president signed a new constitution into law. And it contains a number of things that the Troika members don't like. In particular, they are probably at odds with taxes levied on bank transactions, and especially central bank transactions. Not the kind of thing the IMF is likely to ever agree with. It all gets clad in protesting (the EU even threatens with courts) the independence under fire of the central bank, the media and other parts of Hungarian society.
The IMF and EU, like the tandem team of Monsanto and Washington before them, act like schoolyard bullies. It's become their standard MO, and it usually works. Portraits of Orbán as a fool, a reckless idiot and a dangerous populist, on par with that of Hugo Chavez or newly found international enemy Rafael Correa, are much easier to find than those links to Wikileaks Monsanto cables. It would be good to see Orbán continue to stand up to the IMF bullies, but he may not have that choice. They can simply financially bleed him dry, like they have so many other countries and their leaders. It's a time tested model.
And this:
Hungary threw hopes for a new loan to prop up its sagging economy into disarray on Thursday as Hungarian Prime Minister Viktor Orban rejected what he called unacceptable IMF conditions, crushing prospects for a fast agreement. Orban, in a video posted on his Facebook page, cited demands from the International Monetary Fund (IMF) for a raft of changes that he said were too high a price for Hungary to pay.
"From cutting pensions to reducing bureaucracy to scrapping the bank tax and the funds to be made available to banks, everything is in there that's not in Hungary's interest," Orban said. "The parliamentary group meeting (of the ruling Fidesz party) took the view, and I personally agree with it, that at this price, this will not work," he added. [..]
There is nothing 'sterile' about anything these people touch.
How about infectious and fatal ?
my only quarrel with these posts is that all the finger pointing is done by the Anglo clique at Euroclique; whereas the real creator of this financialised fiat hell is the Anglo NWO of Ronnie/Maggie-Bush-Clinton days. Thirty year explosive time line!
Thieves when they fall out are a disgusting sight to watch. Its a first world soup of ponzi fiat, and we are all eating it, swimming in it and defecating in it.
Not a very wholesome menu for future generations.
Let Monsanto eat GMO! I'll be sure to boycotte all their products. Guess that makes me Hungary.
I wouldnt say things are sterile there.
the islamic birth rate is exponential...
Dont worry, muslims are good 'American' material.
'Americanism' all the way...
I came to the article because of the thumbnail. Where can I buy this game?
So...immediate term - Germany supports "sterilized" printing, PMs race, if Germany rejects proposal, EUR is finished and PMs go bid.
Hmmm...what could change that scenario...?