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Shadow ECB Council Pushes For Rate Cut And Monetary Easing
According to the Handelsblatt, while the majority of the members of the ECB's shadow council - an unofficial panel, independent of the ECB/Eurosystem, and comprising fifteen prominent European economists drawn from academia, financial institutions, consultancies, companies and research institute - supported an unchanged policy the bias is increasingly shifting to one of easing. This comes on the heels of Trichet's idiotic decision, just like in 2008, to start hiking rates in several months ago (ridiculed extensively on these pages and elsewhere) which not only ended up costing Europe its common currency much faster than had it merely kicked the can down the road, but could very well be the last bad decision by the ECB: should Greece be kicked out of the Eurozone as a result of this decision, the ECB is over. It is therefore not surprising that not only is the shadow council scrambling to undo 5 months of bad decision making by the ECB, but the bankers on the council, particularly RBS, PIMCO, RBS (RIP by the way), Barclays and Tudor and HSBC are either expressing an easing bias or outright pushing for a 50 bps cut. Alas, this is too little too late. And the irony is that once the Fed proceeds with QE3, and commodities surge again, the ECB will really be helpless as the continent's core redlines even as the Periphery remains terminally insolvent (ignoring for a minute the inflationary elephant in the room that is China). So will Trichet disgrace his already discredited central banker career by pushing a rate cut before he is swept out of the corner office by Mario Draghi, or will the former Goldmanite Italian become the most hated man in Germany soon, after he proceeds to ease, even as Germany still experiences Chinese inflationary re-exports. The answer will be all too clear in just a few months.
From the Handelsblatt:
At the meeting of the Shadow ECB Council on 1 September 2011, a three-fifths majority supported an unchanged policy stance of the ECB, but with a bias towards easing. Three of the 15 members favoured an immediate 50bp rate cut. There was a strong consensus that economic prospects had deteriorated markedly in the euro area. Members revised down their growth forecasts for this year and next year strongly. Many of them see a high risk of a relapse into recession. A majority of members urged the ECB not to wind down their purchases of Spanish and Italian government bonds prematurely. There was a strong consensus supporting a strong commitment by the ECB to provide ample liquidity to the banking sector and possibly providing it at longer maturities.
Members forecast much lower growth in 2012
Members’ average inflation forecast for this year remained unchanged at 2.6%. Next year, inflation is expected to decline to 1.8%.Growth forecasts for this year declined markedly to 1.7% from 2,0%. For next year growth forecasts were revised down very strongly to 1.1% from 1.6%.
Recession risks warrants easing bias
Members agreed on the diagnosis that the economic environment had deteriorated. Many saw a significant risk of a relapse into recession. Some cautioned that average forecasts implied growth at or above trend this year and slightly below trend next year.
Three members regarded the recession risk to be so acute that an immediate 0.5 percentage point cut to 1% of the ECB’s main policy rate was warranted. In addition to the three members favouring an immediate rate cut, six other members (of the fifteen) advised the ECB Governing Council to leave its policy rate unchanged at the next meeting on 8. September, but to communicate clearly that they were ready to cut rates, should the economic environment deteriorate further. Meanwhile, five other members advocated unchanged rates, while having an open mind concerning raising or lowering rates in the future, depending on further developments. One member advocated unchanged rates with a bias toward further policy tightening.
Continue to buy governments bonds as needed
There was strong and widespread support on the Shadow Council for the ECB’s decision to reactivate its Securities Market Programme (SMP) to purchase, for the first time, Spanish and Italian government bonds. Most members urged the ECB to keep up these SMP purchases as needed, rather than phasing them out rather quickly, as had been done during the summer of 2010. However, several members raised concerns that unconditional large-scale bond purchases by the ECB could undermine the incentive for the respective governments to rein in their deficits quickly and decisively.
Members agreed that the SMP bond purchases should not be considered an instrument of implementing an easier monetary policy, but rather an instrument to correct market distortions. The consensus was that if an easier stance of monetary policy was desired, this should first be implemented by rate cuts.
Provide ample liqudity
There was unanimity in the judgement that the fragile situation of the banking system required the ECB to continue providing very generous liquidity to banks. Members advised the ECB Governing Council to issue a strong commitment toward providing unlimited liquidity for as long as needed and to consider offering longer-term liquidity instruments than currently.
Members’ individual votes:
|
Member |
Affiliation |
Rate recommendation |
Bias |
|
José Alzola |
The Observatory Group |
unchanged |
down |
|
Marco Annunziata |
General Electric |
unchanged |
|
|
Manuel Balmaseda |
CEMEX |
unchanged |
|
|
Elga Bartsch |
Morgan Stanley |
unchanged |
down |
|
Andrew Bosomworth |
Pimco |
unchanged |
down |
|
Jacques Cailloux |
RBS |
unchanged |
down |
|
Julian Callow |
Barclays Capital |
cut 0.5% |
|
|
Marie Diron |
OxfordEconomics |
unchanged |
down |
|
Janet Henry |
HSBC |
unchanged |
down |
|
Gustav Horn |
IMK, Düsseldorf |
cut 0.5% |
|
|
Jörg Krämer |
Commerzbank |
unchanged |
up |
|
Thomas Mayer |
Deutsche Bank |
unchanged |
|
|
Erik Nielsen |
Unicredit |
unchanged |
|
|
Jean-Michel Six |
Standard & Poor's |
unchanged |
|
|
Angel Ubide |
Tudor |
cut 0.5% |
|
As to who or what is the Shadow Council, which just happens to consist primarily of Bankers including such former uber optimistic Goldmanites as Erik Nielsen:
Background information
The ECB Shadow Council was founded in 2002 upon an initiative of Handelsblatt, the German business and financial daily. It is an unofficial panel, independent of the ECB/Eurosystem, and comprising fifteen prominent European economists drawn from academia, financial institutions, consultancies, companies and research institutes.
The Shadow Council usually convenes by telephone conference on a monthly basis (though in November it holds a physical meeting). Its discussions take place a week before the monthly official ECB Governing Council "policy" meetings, and are intended to formulate an opinion as to what monetary policy decision its members believe that the ECB's Governing Council ought to undertake, both at its forthcoming meeting and also on a three month horizon. Shadow Council members are encouraged to submit their own economic projections for euro area activity and inflation on a monthly basis, which constitutes the panel's forecast consensus as published each month.
The Shadow Council's discussions and recommendations differ from surveys of economists concerning the outlook for ECB interest rates because the Shadow Council recommendation expresses the majority view of its' members opinion about what the ECB should do, rather than what they forecast it to do (and hence the "normative" views as expressed by Shadow Council members on what they consider the ECB ought to do can and often do differ from what they might say they expect the ECB to do). This "normative perspective can, however, give an early indication of shifts in the balance of opinion in the expert community, as can be seen by comparing the historic recommendations of the Shadow Council against subsequent decisions undertaken by the ECB Governing Council.
Members of the Shadow Council base their recommendations on the ECB's objectives as defined under the EU Treaty, though Shadow Council members do not necessarily adopt exactly the ECB's specific interpretation of its mandate: most Shadow Council members consider that a medium term inflation objective of two percent with a symmetric tolerance band around it would be clearer, more realistic and more appropriate than the definition adopted by the Governing Council, which defines price stability as an inflation rate of "below, but close to, two percent", in the medium term
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GOLD : The New World Order.
Contrary to expectations, it will be the Netherlands that will be the first to abort the euro and go back to the gulden.
why do you say it will be the Netherlands?
because he like dutch cheese.
Well, that wouldn't surprise me at all. Ever since the birth of the Euro the Dutch have seen prices explode in terms of € to Gulden. The rate at the inception was about Fl. 2,20 / 1 € if I'm not mistaken.
The older generations still relate to the Gulden and even do their calculations to the old exchange rate of 2,20. The general feeling amongst the Dutch is that ever since the € was introduced their personal economy went downhill rather fast.
Other than that, do you have any links to articles confirming your thesis?
This feeling is common among all Europeans inside the Eurozone. The purchasing power of the French, the German, the Italian, the Spanish, the Czech, etc., dropped significally with the euro.
It's Naïve thought not supported by any facts, it will be a disaster if the dutch steer away from the Euro, 75 to 80% is export related GDP thriving on the Euro
I honestly think it's going to take a BSC/LEH/WM/WB/C type set of moments for the ECB to get onto the QE parade. Consequently, I am shorting euro banks
During a short ban. ?!
Gold investment is for dummies, it doesn't pay dividend, doesn't create jobs, it's good only till it doesn't,
wait and see, and learn..
Ok Ben ...
Gold does create plenty of jobs in the mining and jewelry businesses.
However, you left out the part about gold not being edible. Now if you can only convince the central banks around the world to get rid of their worthless gold. They can dump it all in my backyard.
@MoneyWise
You're the one who should learn. Go to Europe to see what the Europeans have build under gold standards.
I really don't approve of name calling, but what the hell--you're an idiot
first, no, wait! second!
So far, this announcement is having no effect whatsoever.
Bond futures closed going straight up, 10-yr. about to break 131.
Massive gap up in TLT, FAZ, VXX tomorrow morning.
Gold going totally parabolic in foreign currencies.
I call for easing them of their duties. Permanently.
OT: Something really bothers me about the "look" of the $SPX long term chart. Can any statisticians out there confirm: from the recent weekly closing high on $SPX to last week's closing low was the largest % move since ?
edit: I meant if we try to assume this is a correction and not a new bear market primary trend. I'm thinking we've never dipped this far in an uptrend going back decades. 2000/2002 and 2008/2009 don't count as they were obviously bear markets.
The rally was a bounce due to oversold conditions. The markets broke through the lower bollinger band and the reaction was to rally. Most likely it began with shorts taking profits then the momo traders joined. Once the markets bounced back and hit the upper bollinger, it immediately retreated. Tomorrow the markets will drop below the 20-DMA and resume the crash until QE3 temporarily props up the market.
So your avatar implies u pack the fudge?
Hahahahaa! ECB is THE ONE making the distortions.
Hahahaaa! Aaahahahaaa! Oh crap, i need to change my diaper again. But still: Aaahahahaaa!
I am not sure about the opinion presented in this piece. Easing by the ECB would just be another Keynsian kick-the-can approach. Rising interest rates hurt borrowers and profligate spenders (including governments). Rising rates reward prudent investors and savers. Why is anyone (besides bankers and politicians) advocating more moral hazard and ultimate currency debasement through "easing"?
Relax Robo.. Totally parabolic only because USD is finally getting
attention.. Those guys clearly forgot 2008 lesson.. $USD still the
King! "We are the Champions, my Friend!!!!!" F* Europe, F* GOLD,
F* ASIA!!!.. In fact, I have a trigger to sell my gold at $2k
(Please pump it some more, Silver still the major of my holdings,
will wait to sell, $50
probably too cheap, while gold already over hyped)
in exchange for few properties down in Florida,
gonna smoke cigars and collect rent..
Buy low, sell high, I'm going to invest in Real Estate, Scotch,
Lead and Cuban Cigars and who the f*ck cares about Crisis..
Crisis my A##.. Those guys are making money of you, doomsters..
"Those guys are making money of you, doomsters.."
And they're making money off you Pollyannas...
What else is new?
Short-term thinking will eventually get crushed by the long-term. And the long-term says that growth will collapse, unless, that is, the world really is filled with unicorns and skittles...
NOTE: In the future I won't be taking USD/fiat for the food I produce.
200bps cut this week!!!!! :)
on an aside, any brits wanna comment on nigel farage...who is this guy? wackjob or sane?
this is a VERY good vid...http://www.youtube.com/watch?v=2YcgACl1Sr8&feature=youtu.be
Nigel Farage- member of the Euro parliament- party UKIP (UK independance party) which is a bit of a one policy outfit. They want the UK to leave the EU (we are big net contributors to the budget) they have been very good at getting stupid EU policy lampooned in the media and have kept the debate about joining the Euro on hold. Farage is an entertaining speaker and does seem to tackle the big issues in a way that is understandable by the masses. I was mildly suprised to hear he used to trade metals for the house of Rothschild and some are suspicious of him because of that. Unfortunately he is the only UKIP politician that is a household name in the UK, and is a `one trick pony`
I like him.
thanks
you're late to the party, this is old news... but 100% truth
Completely sane.
Which is why he appears mad.
"most Shadow Council members consider that a medium term inflation objective of two percent with a symmetric tolerance band around it would be clearer, more realistic and more appropriate"
WTF? THIS is meaningful? What is "medium term?" And, "symmetric tolerance band?" What a load of crap!
If they're looking to jack up numbers inflation/and or "growth," then even a measly 2% number ends up DOUBLING in a mere 35 years!
Sorry, but growth ain't going to happen.
Cutting interested rates, yeah, like That's going to make things better!
These fuckers are only pandering to their rich, elitist friends (while baffling the masses with BS). They can't hide reality forever, best to just come clean now: and this goes for ALL govts and economists- time to start actually WORKING for a living, that or find themselves on the working end of a pike...
ZIRP and money printing on a gargantuan scale - the EZ way to solve all the world's financial problems.
"Why didn't we think of this sooner?" LOL
I'm actually thinking of scaling out of my gold coins and hold the cash to buy some more dividend stocks once this market crashes out.
I've done very well with gold, but in retrospect, if I put everything I had in dividend plays at the March 2009 lows, I would still be way ahead and would be receiving a huge income stream.
I won't miss the next opportunity.
Soooooo....for two years you've been advising everyone to buy every momo stock in existence. Now you are telling everyone that you were invested in gold all along and that they should buy good quality stocks the next time the market tanks.
Hmmmm....
Chocolate money?
Long since Christmas...
Seriously Robo; how long have you been long Gold - a week? a month even? trade it if you must, but rember - the reasons it has been going up so strongly for 3+ years are not about to go away - they are going to intensify.
how can a robomoron this shameless is while out of question call after call of bashing the gold and pumpng the AAPL n NFLX and what have you..
Now, decided to go back to your old habits? JeeBus, when are you going to post some charts??
Does anyone really give a shit what you do with your money?
More importantly what Is the name of the chick in ur avatar?
I buy
It's really too late for a rate cut in Europe and it totally misses the crux of the problem which is insolvency on a massive scale across the european economic and nation state spectrum. The only thing that is holding up the ponzi is the lie that cheap rates will do any good at this stage of the end-game.
: IT STARTED TODAY. They brought tents.
http://www.entendance.com/forums/viewtopic.php?f=6&t=784&p=19140#p19140
dontcha just love it when the financial world is run by idiotic bureaucrats who know nothing.........NOTHING......about the real world? these f**kers in charge have no real-world experience on anything..yet, they're establishing economic policies, making laws, and doing everything else in their power to totally f*ck up the world.......and they're succeeding, too........ :-(
This is the new world order, I knew it and it will come better sooner than later.. Currency exchange rates will be set by Central Banks and not by f* Speculators, same goes for other "investments".. Just
came out from Dow Jones news Wires:
"ZURICH (Dow Jones)--Swiss Economics Minister Johann Schneider-Ammann Monday reinforced his view that a euro/Swiss franc exchange rate close to purchasing power parity would be "ideal," and urged politicians and lobbyists to put partisanship aside in deciding measures to deal with the surging Swiss franc.
Last week, when the Swiss government pruned its support package for the country's beleagured exporters to CHF870 million, Schneider-Ammann referred to purchasing power parity as CHF1.35 to CHF1.40 against the euro. Monday's comments stem from remarks prepared for a business gathering in Bern.
Swiss economic growth is feared to slow in the second half of 2011 and 2012 due to the strong franc, which has hurt consumer and business sentiment. This is leading Swiss companies to urge the Swiss National Bank to extend its existing measures--such as boosting liquidity as well as cutting key interest rates close to zero--to rein in the strength of the franc. "
"This is leading Swiss companies to urge the Swiss National Bank to extend its existing measures--such as boosting liquidity as well as cutting key interest rates close to zero--to rein in the strength of the franc."
No! All it does is to distort reality. If the aim is to create bigger-looking numbers that have no substance behind them, then yes, by all means PRINT and run ZIRP until the wheels fall off (which is exactly what WILL happen).
Mother Nature is laughing... silly humans, numbers ONLY are meaningful when attached to the physical world.
Raising the interest rates was actually the right move to protect the euro, it was doomed to failure because of the fallout on the weaker EU countries and their unwillingness to implement austerity plans. US will face a tough decision in the near future, continue with QE or raise interest rate to defend the dollar. What do you think helicopter Ben will do?
"Raising the interest rates was actually the right move to protect the euro"
To protect EUR from what.. It's fair value right now no more than
1.20 to the USD$ or even less considering current EZ mess..
By rising rates Trichet basically kill EZ economic growth, especially
south part of the EZ.. Their product/services price needs to be
cut in half
to be competitive.. Greece, Spain, Portugal.. if they would have
1/2
price
for everything starting tomorrow, their GDP will explode and we would
not even talk about debt problem for those Countries. And this is because EUR valuation maybe justifying German Economy, but Greece
must have currency 1/2 at least to the German exchange rate.
You're about as far from being grounded in reality as one can get. There's ignorance, and then there's outright deceptive behavior- you fall in the later category, a troll...
EUR = freegold... hahahahaha, riiiiiiiight!
none of the countries in trouble borrow close to the official rate in the real world, so what difference would a cut make? might be shortest rally yet in this whole kick the can world
This shadow ECB is even more clueless than the official one: It's a solvency crisis, not a liquidity crisis. no one is going to pay back the debt, and instead of providing the oil in the machine of the economy, the financial system has turned into a hard glob of black inpenetrable sludge.
"no one is going to pay back the debt"
And why they should? If Greek Notes have 80% interest rates,
then, if you ever got even 1-2 interest payments, you already
get your money back (almost).. Those f*ckers wants to enjoy 80%
rate without risk??? f*ck that.. Greece should default NOW and those
m*f*ckers (EZ/US banks, whoever invest in this "double your money
overnight" schema) need to take appropriate haircut.. NOW..
or even yesterday.. If I got 80% Div on the stock, then heck, it
could (and probably will) go to ZERO, whatelse is f*cking NEW?
Does Greece sell a 60-second bond yet?
Look at the make-up of this lot! Makes you want to gag, ne?
Supercorporations rule the world. I have no doubt about that now. None. Who calls the shots on them? Even Adam Wiesphaut referred to the unseen hand.
We have to withdraw or participation from this system. This game where the rules are constantly changed.
We have to purge our-self's of the madness of the times. Less wants, needs are enough if well met.
I have a plan. feel free to get to know me.
V
http://www.youtube.com/user/Aadinaadam#p/a/u/0/0c8zg_4VRrQ
Tirchet rivals RobotTrader in his calls, serioust.
and no pun intended.
Just like RoboMoron was pumping mom stocks all along, Trichet was talking about growth prospects back at Jackson Hole whilst Europe was burning...
RoboMoron the next ECB crackhead, if only he can get out of his parent's basement
I agree that raising rates was the right move except that rates should be 10pct + . When eurogold starts to go down is when the interest rate is appropriate . of course then deadbeats like greece and italy will default, but thats the foundation of a strong economy when the bankrupt entities actually go ... bankrupt...
I wouldn't go so far as to say that raising the rates was the "right thing to do,"* but I do know that reducing them isn't.
* Since the aim is "growth" and growth is dead, all roads lead to the cliff, hence there is no "right" value that one can feed a faulty equation.
Their problem is that they can't print so easily. All they can do without being accused of breaking rules is (1) provide short-term liquidity, (2) decrease interest rates, (3) buy a little, but not too much, Greek/Italian/Irish bonds, and (4) pray to Benito for more QE. They'll do it all.