LTRO #Fail 2: European Credit Supply And Demand Fading Fast

Tyler Durden's picture

While the LTRO was heralded as a success for a month or so with the implicit money-printing-and-sovereign-reacharounds involved at the cost of senior unsecured bondholders, the sad reality is that not only are the effects of LTRO now almost entirely gone in both sovereign and financial funding costs but the massive 'injection' of freshly printed encumbrance did nothing for the real economy. In fact, as Barclays notes in these charts from the ECB bank lending survey, not only is demand weaker for credit (i.e. the consumer is pulling back in classic balance sheet recessionary style) but the banks themselves are tightening credit conditions (reducing supply) - the exact opposite of what the ECB had in mind. There is one exception to this vicious cycle - German real estate loan demand picked up modestly - we assume reflecting their flat housing market for the last 15 years and extremely low rates). Oh well, we are sure the next ECB action will be different in its banking reaction.

Credit conditions, for enterprises and during the past three months, continued to tighten appreciably in Cyprus, Italy and Portugal. Weakness in demand for enterprise loans was quite broadly based in April, in Austria, Cyprus, Germany, Spain, the Netherlands and especially Italy (-38% net diffusion balance). As well, weakness in demand for housing loans was also apparent in Austria, Cyprus, Spain, and particularly in Italy (-44%), the Netherlands (-42%) and Portugal (-70%)

Demand is dropping rapidly for Euro (ex Germany)...

and Supply is contracting too for Euro (ex Germany)...


Yet more gaping differences between the German cycle and the rest of Europe.

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GetZeeGold's picture




3rd time should be a charm.


BKbroiler's picture

the exact opposite of what the ECB had in mind

And they can't exactly reverse course.  If austerity doesn't work, and printing money doesn't work, all that's left is the reckoning.  

GMadScientist's picture

You underestimate their ability to waffle between the two known failing strategies ad infinitum.


Quintus's picture

I'm sure that the plan, but reality always kicks such people in the arse eventually.

GMadScientist's picture

Only after it kicks every other arse in the pyramid first.


SheepDog-One's picture

Wow more good news as I'm sure this all fell less than expected. 

CrashisOptimistic's picture

Utterly rampant on ZH is a truly sad refusal to accept the Great Lesson of 2011.

Governments will keep the ball rolling.  No matter what.  They will lie, cheat, steal and kill to keep the ball rolling.

They FORCED people to lend money to Greece for 30 years and turn in their shorter termed bonds in exchange for that new longer term debt.  They framed a man for rape to get him out of his position at the IMF.  They removed a man from his Prime Minister office in Greece and replaced him with an appontee because he had the audacity to suggest that the Greek people might be offered a chance to vote on policy.

They'll Do Anything.

If these issues being presented in these ZH articles threaten anything significant, the relevant people will be jailed and money will be printed.  Germany won't stop it.  Merkel will make reluctant noises here and there but Germany won't stop it. 

NEVER LET YOURSELF FORGET that Merkel's opposition parties in Germany are MORE willing, not LESS willing, then she is to print money and hand it out.  She is the most conservative of the alternatives in Germany, and she's going to cave every time they need the ECB to print.

She said no over and over but the ECB still did LTRO.  What was her response?  Nothing.

So stop looking for doom out of all this.  If Spanish bond yields go to 7%, the ECB will buy those bonds and force the yields down.


SheepDog-One's picture

You assume the objective is to just keep things going as long as possible in total desperation that they'll just do ANYTHING to 'keep the ball rolling' but I see a far bigger picture than 'the Great Lesson of 2011'. They could have this all set to go down with a big set of false flags at any day now, you dont have any idea what the Big Plan is. The 'Great Fact' is that this was all about monetizing the debt, since 2008, and theyve basically accomplished that now by any measure so anything can, nor any of us has any idea what they have plotted next but 'keeping the ball rolling at any cost' we will see was not the plan, I guarantee it.

kridkrid's picture

There is only one alternative to what you have written, which is: "they are so dumb that they don't understand the inevitable conclusion to current system".  While I can understand the psychology around that belief... it fairly short-sighted, I believe.  

SheepDog-One's picture

Right, I dont buy the line that theyre 'dumb' at all theyre just glorified gangsters, and when theres nothing left to steal, when youve run thru every bottle of heisted whiskey you can, you bust out the joint.


CrashisOptimistic's picture

That's solid thinking, dog-dood, but I disagree.

I don't sign onto conspiracies that big.  They can't be kept secret.  

There are no agendas beyond this or that.  What's going on is they will do anything to keep the ball rolling because they have persuaded themselves that if they keep it going long enough, it will all fix itself "and get back to normal".  They are all in a "hang on and weather the storm" mode.

So yeah, the agenda is more than keep the ball rolling, but it's not "beyond" keep the ball rolling.  They are just buying time.

What they have not considered is that they are buying time not for a miracle to arrive, but for a disaster to arrive.

SheepDog-One's picture

Huh? WHAT 'conspiracy'? You think all this was just a SURPRISE to the world bankers?

Its what theyre doing OBVIOUSLY to anyone with a brain, theyre monetizing the fucking debt!

You SERIOUSLY believe they just 'experienced a banking crisis' in 2008 and all this is to just get things back to normal by printing $trillions at 0% which they admit they can never abandon ZIRP and thats just some kind of well-intentioned POLICY now? Nothing could be further from the truth its historically OBVIOUS theyre just monetizing the debt! Seriously you need to abandon this aversion to looking at 'conspiracy theories' and see the big picture its fucking OBVIOUS! 'Hang on, and weather the storm? Hell THEY DESIGNED the storm! Anyone buying this GARBAGE that they just ran into troubles and all this is just 'rescue measures' to 'weather a storm' and then we're all back to okey dokey is seriously in need of waking the hell up!

kridkrid's picture

Harsh, but fair.

Here's a conspiracy for you... I think the use of the label "conspiracy theory" is a conspiracy.  Nobody really wants to be lumped in with the tin foil hat wearing crowd.  It's a device employed to provide cover for those who don't want to consider uncomfortable realities.  Another similar “conspiracy”… Occam’s Razor.  Similar device – cover for those who don’t want to consider uncomfortable realities (or possibilities). 

SheepDog-One's picture

'It couldnt be kept secret if it was a 'conspiracy'? WTF the evidence of it is BLATANT its everywhere! 'Keep it a secret'? Hell its OBVIOUS and it doesnt take much to fool the fuktard sheeple! Just look at TODAYS facts alone, unemployment its climbing yet all the media has to do is say 'its getting better' and most all people just believe what theyre told! WTF people wake the fuck up or youre DEAD! They are NOT trying to make things better for you! And if people still refuse to get it, well thats their ass, not mine.

Saro's picture

They can fake reality for a long while, but not forever.  Printing may push off a banking collapse for another day, but it brings an inflationary collapse one day closer at the same time.

At this point, they are basically trying to balance trust in banks against trust in currency, and as the real economy (production) continues to deteriorate, the tight rope they are walking gets thinner and thinner.

john39's picture

when they lose the ability to kick the can, that is when the masks come off and the true ugly face of the elite control system comes fully out in the open.   it can't be far off now.

SheepDog-One's picture

Exactly, the faster they print the faster the innevitable collapse becomes. 

COnsidering that Yurip was just bailed out and fixed with a $trillion bucks only a few weeks ago, and its already back to implosion, that clearly shows the event horizon draws very near.

mayhem_korner's picture

Governments will keep the ball rolling.  No matter what.  They will lie, cheat, steal and kill to keep the ball rolling.


They will do all of those things.  But ultimately the only thing they can do is print more money.  Because the obligations of those ball-rolling tactics must be fed, and there isn't enough produce in the "markets" to feed the beast.

...and eventually, the game will be over.  The only difference between where we now sit and GAME OVER is awareness.  And the awareness flywheel never slows down.  It is just a matter of time and the effectiveness of the stall/misdirection tactics.



SheepDog-One's picture

They will 'keep the ball rolling', until they don't, and that can be months, weeks, or days away. But its definitely NOT 'forever'.

CrashisOptimistic's picture

No, I disagree.

There IS a game over point, but it doesn't arrive via anything monetary.  

Never forget, money is an artificial construct.  Money was invented.  It doesn't exist in nature.  And no, don't wave hands over heads about gold and value.  Anything other than barter is an artifical construct.

Goverments can dictate by decree that anything they want to be true about money . . . is true.  If you claim printing will cause inflation, they'll decree no price increases.  If you think that will cause shortages, governments will confiscate goods from producers and distribute them and eliminate shortages.

Money is not how it all stops.  Governments have lost all desire to "respect" markets and money.  There's nothing sacred about them.  They'll just create reality by decree for things having to do with money.

So forget this as the mechanism of doom.  It's not the mechanism.

Oil is.

SheepDog-One's picture

So you think now they just keep printing trillions at 0% at an ever increasing pace, and that just goes on 'forever'? Utterly ridiculous.

CrashisOptimistic's picture

They keep printing to buy time.  Forever is not available to them because of oil.

But nothing else will stop them.  Nothing monetary.  All things monetary can be defined by decree.

SheepDog-One's picture

Your assumption is the had a problem a few years ago, them teams of Mr Fixit's were assigned to solve the problem. Im sorry, but that is just incorrect. It was designed 'banking crisis' in order to set up debt monetization, 'If you do not hand over the checkbook to us....tanks will be rolling thru the streets'...which they are CLEARLY doing right now, AND are likely done with it now considering diminishing returns and sums so far. They are not trying to fix anything, they are just keeping the dumbed down masses placated while theyre set up for the big kill. 'Buying time', hell thats EASY with this nation of absolute fuktards!

GMadScientist's picture

The stalling and misdirection have held for decades so far; entire generations see debt as money, civil liberties as frills, and government largesse as due course.

The "game will be over" when you've successfully awkened those sheeple and they cause the currency to (rightfully) fail, but that's an uphill PR battle against the megaphone of the MSM.

Given the pathetic number of people that actually even bother to vote in the US, you have your hands full.


mayhem_korner's picture

The stalling and misdirection have held for decades so far


Stalling and misdirection haven't been in a ZIRP environment for decades.  That is a recent development and the best indicator around that time is running very short for these schmucks.

SheepDog-One's picture

Damn straight. People who say 'This has always been this way' or 'Theyll just keep it going forever' are just fooling themselves. Theyre monetizing the debt, thats all, and its always the last act of every failed empire in world history. 

LawsofPhysics's picture

You are correct, however this is that first time in history that everyone in the world is either monetizing debt or manipulating their currency lower.  By everyone, I mean all major world powers and governments.  I imagine there are still a few isolated tribes on islands or in remote locations that still use barter and remain happily oblivious.

mayhem_korner's picture

I imagine there are still a few isolated tribes on islands or in remote locations that still use barter and remain happily oblivious.


+1 The Gods Must Be Crazy

LawsofPhysics's picture

It is a solvency problem stupid!  

GetZeeGold's picture



Can't be that....we've got a full checkbook.


Cognitive Dissonance's picture

And plenty of checks left in that box hidden in the sock drawer under the edible underwear.

Oops, was that my out loud voice? :)

GMadScientist's picture

And, as an added bonus, it's not even my checkbook! - Timmy

SheepDog-One's picture

Is the red arrow on the first chart REALLY needed at all?

GetZeeGold's picture



It's a regulation from the Americans with Disabilities Act.


Hangfire's picture

Anyone in the ATM business won't find that so funny these days.  

GMadScientist's picture

Neither would someone with a disability who needed cash outside the three hours banks are actually open for walk-ins these days.


insanelysane's picture

When they only give you something to relieve the pain but nothing to cure the illness, you just die a "painless" death.  LTRO, QE, TWIST, etc just get the cliff to be higher so that when you drop off, it results in total destruction instead of a 5 year depression.

kridkrid's picture

The idea that this would have been solvable some time back had we only taken our medicine vs. kicking the can down the road is fundamentally flawed, I believe.  Credit/debt money, loaned into existence, with interest that begins to accumulate at its creation... an unholy combination of fiat money, usury and fractional reserve banking... There was NEVER a moment where any sort of medicine was or is anything short of creating an entirely new monetary system.  


There isn’t a problem to solve, rather a predicament for which there is no solution (to steal from Chris Mortenson).

mayhem_korner's picture

There isn’t a problem to solve, rather a predicament for which there is no solution (to steal from Chris Mortenson).


Absolutely right.  And so any effort to try to "solve the problem" is wasted energy.  Preparing for - and trying to shape - the aftermath of the collapse is where to invest.

kridkrid's picture

and this would start with education... providing people with a basic understanding of what money is, how it works, the history of it, etc. etc. etc.  People should then be able to influence the "shaping of the aftermath post collapse".  But... this clearly isn't happening.  It's likely naive to even think that it would or could.

BigJim's picture

I'm not so sure. In the past, when they let banks fail and bondholders lose everything, they were (in effect) allowing a partial reset of the ponzi.

They seem to have gone too far this time, though. It's hard to see how they'll get out of this without printing to infinity and beyond. The alternative is deflationary collapse, and when has that ever happened in a fiat system? And why would it? The string pullers have more to lose that way.

mayhem_korner's picture

The alternative is deflationary collapse, and when has that ever happened in a fiat system? And why would it?


Huh?  A deflationary collapse is a common outcome of a currency failure, as the assets need to be reset to their real value after the bubble effect of the debt/currency is reset.  Hyperinflation (loss of faith in currency) can and does happen in tandem with asset deflation when the string-pullers decide to keep the wheel spinning via round-the-clock printing. 

mess nonster's picture

Deflation bitchez! Gold to $16! Hahahahahahahaha!

Spent fuel rods... definitely deflationary!


kridkrid's picture

People get too hung up on inflation vs. deflation, I believe.  It only matters in the short term vis a vis your ability to get stuff in exchange for this made up thing that people accept in exchange for stuff.  But as people begin to question or doubt the made up thing, death by deflation or death by inflation doesn't matter.  The system dies and you move on to the next system, I believe.

marathonman's picture

This monetary system has been tried throughout the centuries and fails for exactly the same reasons every time.  From Mises:

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against 'real' goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.

Cognitive Dissonance's picture


But this time it's different.

Really. It is.


Crash N. Burn's picture

Now, where did I watch something warning about collapsing debt? Oh yeah:

Mike Maloney – Debt collapse and $20,000 an ounce gold


With the printing since this vid, we're probably going to need 30k gold.

SheepDog-One's picture

Thats OK, Yurip apprently no longer matters as the US markets open up the usual blissful .5% or so. 

Cognitive Dissonance's picture

The poor crack addict's high just ain't as good as it once was. Time to double to dose and half the time between dosing.

Again and again and again.

Can you say "OD"?