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Update On The "Non-Printing" ECB's Parabolically Rising Balance Sheet
While the surge in the ECB's balance sheet has been discussed to death on these pages, with a particular emphasis on what we believe the key correlation driver-cum-pissing contest of 2012 will be - namely the relative size of the ECB vs Fed balance sheets - it is often best to see things for oneself. Such as the fact that the balance sheet of the European Central Bank, which has been accused of not printing, has grown at the fastest non-pre apocalypse pace in history for a modern central bank (the only exception is the Fed, whose balance sheet grew from under $1 trillion to over $2.2 trillion in the aftermath of the money market collapse in about a month), increasing by EUR800 billion, or over $1 trillion, in six months, to E2.73 trillion (obviously an all time record). Annualized this is an increase of over $2 trillion or more than the Fed did in all of QE1. So, just what happens next year when the banks box Draghi in a corner and the Goldmanite decides to actually... print. Perhaps this is a question, as before, left best to our German readers, who unlike their detached from reality peers in the US, know that hyperinflation is and can be all too real.
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Looks like Germany was notified it will be downgraded -- DAX has plunged the most and it is leading the selloff.
The only thing dumber than this 'market' is all the expert economists and commentators and fund managers who are reduced to declaring 'We'll just 'muddle thru' from here on out'.
Muddle thru means to stay put. I think we will muddle thru for a short time.
If you throw a rock up in the sky, there is a point where the vertical velocity hits 0. Of course, after muddling through for a brief point...
The parabola has many important applications, from automobile headlight reflectors to the design of ballistic missiles. They are frequently used in physics, engineering, and many other areas. Thanks.
Regards,
california car insurance
That's because they are not printing conventionally.
They should just quit the BS and start printing openly. Fuck this whole thing.
Print their asses out !
scary thing is they are printing and its not working
They are not really printing. If they really were printing, they would give unlimited money to every bank in Europe, with 0% interest rate loans so that anyone with a job or even no job, could get a 100k-300k loan.
That's printing.
They could never afford to actually PRINT their computer decimal shifts over the last 3 years...the earth would be bankrupted and totally barren of trees by now.
Beg to disagree with you.......
Before you say its not working you have to ask whats the end game....?
Altogether now........ Hyper inflation leading to a two class society of 99.9% poor and a ruling 0.1% class, organized for now under a caucasian one world government...... Bread and Circuses for the sheeple, while their wealth is being stolen.... Look at the price of a new car, gallon of milk, pound of meat, and tell me about deflation.....
Obama, Bernanke, Draghi, Merkle, Sarkozy, are not here, and never were here to fix it. They are here to break it beyond repair.....They are doing a damn good job of it..... the only thing is the Brits and the Greeks arent playing along......
It's always better to wear a mask when you rob a bank.
Or own the bank!
pods
consider the chart above and then re-read this from yesterday
http://www.zerohedge.com/news/why-ecbs-ltro-wont-stop-collateral-contagion
ECB balance sheet exploding. Gold dropping because of deflationary pressures. Help I'm lost.
well played
Happy new merry to you HH!
What's going on ?
Is there still such a thing as a market ?
We will always have markets, and they are no more or less manipulated now than before, in my opinion. However, technology makes it so that more people are now aware of the manipulation.
You're saying that circumstances have made the manipulation obvious but the manipulation was always there ?
Well, knowledge is power.
There is a analogy that the Europeans have about US military power, that they are too eager to use a hammer when a scewdriver would do the job perfectly well, the US retort is generally that the Europeans only say that because they don't own a hammer.
I don't know why exactly I was just reminded of that but perhaps it's because I can't look at the market these days without hearing a bloody hammer banging away.
Thanks for the reply HH, take care.
Nobody wants paper gold
so if one were so inclined to sell physical right now would a dealer be paying a premium over spot to buy it?
Yes. But dealers have been paying over spot for gold for a long time.
Right now Tulving sells gold (dates their choice) at $64.95 over spot, and buys gold at $38 over spot.
good to know thanks
Tulving has 300,000+ ounces of silver available, usually it has 450,000+ and 400,000+ listed. So 300,000 is only $9 million with premium and they are one of the largest sellers. Thanks for the sale morgue and MF
Got me some of that today. Next buy @ $25 if it gets that low. Gold is on sale too.
well played, I will stack another 1000 if price breaks 25/oz
ah silverbugz...they love getting blowtorched repeatedly
SILVA GON BE WORTH MORE DAN GOLD!!1!1111
GLD 120, SPY 99 this spring
strap in bitchez
..yet still a long term bullish trend:
http://fiatflaws.blogspot.com/2011/12/1200-gold-this-spring.html
Few here get that you can print more gold, or sell more UGL at will..................
even fewer get that they can print more GLD/UGL/SLV or what ever you choose causing scared money to flee out of the underlying physical market *temporarily* try not swim against the current if you can help it.
Yeah. You see the problem is the 'Gold dropping due to deflationary pressures' part.
There's only one main reason why gold is dropping, and it has nothing to do with deflation and everything to do with policy intervention.
Optics...
There has to be a point at which the producers refuse to sell at the paper market price. But of couse they are no-doubt controlled also. Is there anything these control freaks don't control?
oh yeah, their selves.
this price IS the price. Get it through your head.
Gold's going down is not part of some conspiracy. Silver's massive price drop was not part of some conspiracy to make fools of silverbugz and make tmosely-claven appear to be a retard.
If it's being paper shorted, eventually, those shorts will unwind. So just chill out if you think this is a temporary intervention.
The reality is that as industrial activity collapses, demand for things like silver will collapse, and along with that, the price of silver.
The Greater Deflationary Depression rolls on with Private Federal Reserves notes and bonds demoninated in them rising and equities and commodities falling as they are liquidated to pay down debt.
De-leveraging continues...
www.elliottwave.com
Gold dropping against what, the dollar?? Euro?? ___???______ other paper currency? Gold's value is intrinsic, and cannot be compared to fiat. It is assigned a fiat price so it can be controlled. That's what Ben thinks anyway. He He, controlled.. Whateva.
Gold is dropping because there is still plenty of paper gold to sell.
The ECB may not have a printing press but they sure can do a lot with an 'Etch-a-Sketch'
Yes A Bizzaro world where gold and silver drop with trillions being printed. Print more to drop PMs more. This will work until it doesn't.
BTW, all the silver bullion available is only 1 billion ounces or $27.6 billion worth. Nothing computes anymore. It must be a manipulated market.
A world based upon 'suspension of disbelief' only lasts a very short while.
time is a very relative phenomenon, however. I thought the "very short while" would have been over by now.
We're just early adopters.
"This will work until it doesn't."
And that should be the phrase of the year 2011.
It'll work until it doesn't... then look the fock out. This is true of most things.
We're at the point where every minute of the day requires all-out emergency intervention damage control in markets to keep the whole thing from blowing up. Just great.
ECB will vaporize on command from Bb.
Do we really get hyperinflation if we have central banks printing into a massive deleveraging economy? one in which we clearly have deflationary pressures?
It seems to me that hyperinflation is not assured.
The central banks are playing an impossible game. They are trying to inflate about as much as the economy deflates, to keep everything in "balance". Notice I said impossible.
If they over do it just a bit, we get a rapid positve feedback loop and end up in hyperinflation, as we saw in Weimar Germany.
If they under do it just a bit, we get massive deflation as we saw in the GD1 and GD2.
Hyperinflation is a very real risk. But long term bond yields don't show any sign of it YET.
I think it's time that some people re-evaluate their beliefs. If we had been told even 1 year ago that the Fed and ECB balance sheets would be as large as they are today my guess is that many people would have said that we'd be in hyperinflationary times NOW. But we aren't. we need to figure out why that is.
IMO one of the reasons is that the transmission mechanism from Central Banks to financial houses to the plebes is broken... thus it reduces the velocity of money. The money is "printed" and goes to the big banks and dies there.
IMO the real "printing" (ok, massive "money" creation) happened from 1995 to 2007 when the Shadow Banking System took off. Deleveraging has destroyed some of that credit creation... and the Central Bank printing is simply replacing that. thus, we see no hyperinflationary pressures.
Hyperinflation or Deflation... both very much possible. One major central bank prefers the former, the other the latter.
Do not underestimate the German Fear of hyperinflation, nor the German control over the ECB. They are as afraid of hyperinflation as we are of deflation. We can't imaging the Fed allowing deflation again for obvious reasons. The Germans can't imagine the ECB allowing hyperinflation for the same reason. (history).
Beginning to look as though Steve Keen was right all along. Huge CB "printing" just a fleabite on the rump of the deleveraging insolvent deflationary beast.
I think he is right on that. It would take printing on an unprecidented level to really counteract the deflationary beast that has been created. What we see right now is just extraordinary measures to simply avoid the beast from getting loose... the "tributes" being made not even covering the demand for yield - let along reducing the burden. Therefore, the beast continues to grow.
they are printing the coupon...I have been saying that for years
All the CBs can do (in these best of times) is keep pace w/ redemption demands and keep markets from panicking.
CBs would have to replace ALL outstanding debt €30 trillion or so, with currency THEN there would be hyperinflation in the EU.
Since PMs are collateral or held on margin, as deleveraging takes place -- watch now in China -- metals' prices will fall.
Are metals good deals? Maybe if price falls further, but you can't buy anything if you are flat broke.
Kind of. Keen channeling Hyman Minsky. Minsky Moment beckons.
I am right there with you on the fact that real "printing" occurred when the shadow banking system took off.
Overall, we have shifted primarily to a credit money economy where classical economic theory no longer applies so well. This was clearly done to avoid the collapse from happening back then. "Creative" leverage was needed.
Since then, enough credit money was generated in the shadows to cause a hyperinflation several times over. Should it somehow be dragged into the light and implode, we get instant hyperdeflation. Should the central banks outright print to avoid this hyperdeflation, we likely will get hyperinflation. So, every attempt is being made to keep the shadow banking system in the shadows.
Funny enough though is that the mathematics are such that eventually they will not be able to hide it anymore. The beast is based on perpetual growth and I wager we are further into the exponetial phase than most folks realize.
hyperdeflation will vaporize the entire financial system, including the Fed. The FRN will cease to exist.
At some point, NOBODY is going to care about liquidating anything to make the payments on a system in obvious implosion. This is the tipping point. Hyperinflation has a similar tipping point, where nobody wants to hold the paper. In hyperdeflation, nobody will want to hold paper either because that paper will default in 5 minutes like all other paper.
Only real things will be worth anything at that point, just as "homeowners" and "banks" pretend that mortgages that defaulted 2 years ago are still current. The homeowners still live there and the banks still pretend to get paid.
"many people would have said that we'd be in hyperinflationary times NOW. But we aren't. we need to figure out why that is"
IMO it's because the "money" is being kept by the banks (or the financial system) themselves. Are they not severely undercapitalized and over-leveraged? If most of the capital doesn't "escape into the real economy" it can't have a hyperinflationary effect, can it?
It can technically... if the hyperinflationary death of a currency is merely a measure of the trust in the currency, then the mere act of stuffing banks full of e-cash could cause a decrease in faith. I'll posit that there are more than a few who have contemplated this action and lost faith in the currency already... but obviously not enough to reach critical mass, yet.
These are the discussions that give me some serious wood and scare the shit out of me at the same time. And why I love ZH, thanks guys.
Spot on. Transmission mechanism is totally not working. Fed thought it would work by propping up the stock market so that 401Ks would benefit, thus instilling consumer "confidence." Instead, what they've managed to do is create a stock market that is so volatile that outflows from mutual funds and 401Ks are near all-time highs.
I am a proponent of wide-scale debt forgiveness for borrowers in default on their mortgages. Stop giving money to the banks thinking it will trickle down. Let's take the pain now and get it over with.
So does that mean I stop paying my mortgage now or later? What do I get in return for being current on my mortgage? The privledge of paying for those that were forgiven?
What if the Fed thought this: prop up stock market, boomers feel safe to retire, new positions for unemployed, employment goes down, stabilized stock market encourages a new line of suckers to buy stocks. Ultimately, it is like you are doubling the payroll while keeping the same number of staff and the Fed picks up the difference. No wage inflation but definitely inflationary.
baby boomers are retiring...there SHOULD be stock outflows.
Funny how they hit retirement square into the face of peak oil...LOL
Yes , Unless you are selling an old refrigerator ,(black Amana) ,Deflation is Very Verrrrry Real. Try selling something that isn't needed for survival right now..!!!!!
That isn't deflation. That is price discovery of junk. It was worthless to begin with.
I think your are spot on when addressing the replacement of leverage in the system with printing, but doesn't that replace money that "dissapears" when deleveraged with money that can be leveraged? I wonder what happens if/when that newly printed money becomes massively leveraged. I would think that at some point banks will lend again.
Junk if you will, I am just asking the questions.
I could be all wrong of course.... but I look at it like real money (productive efforts, real assets) and anti-money (debt). So, it seems that one does in fact cancel the other out. But, enough anti-money has been created already to vaporize real money many times over. And anti-money is what the economy now runs primarily on - demands more and more of it.
If the anti-money hits the real world, it is instant deflation. If the CBs attempt to counteract it all at once, the money printing would be something to behold for sure. Hyperinflation would be an understatement.
So, I think governments are doing whatever they can to keep the credit bubble from popping. They cannot win though. Modern economics has lied to them. I think they know it too. So, they have a choice between kicking the can a little longer at any cost, or pulling the rug out now. I dare to say that no politician wants to be the one who pulls the rug out.
So, governments are forced into a game that is sort of like financial Kerplunk. Each move requires another straw to be pulled out. Each move gets them closer to instability. And putting straws back in is not possible. The only real questions are "how many straws are there?" and "will the players make good choices, individually and/or collectively?" As the game gets closer to the end, someone is bound to screw someone else!
Thus, you are saying that the game is one of counterbalance? The key is equalibrium achievement, because to do otherwise would be sucide for all. Or monetary reset?
On a long enough timeline, the survival rate of all debt based money is zero. The cause of death (deflationary destruction or inflationary destruction) is yet to be determined and doesn't really matter. The questions that should concern us... how to survive the time between this system and the next... and who gets to decide what the next system is. Of course the answer to the second question will impact the first.
Where do you see deflationary pressure pray tell?
Americans that wont work for $10 an hour arent any more likely to work for $8 an hour............
Do you see the prices of Air Jordans comming down?
Get real.... What you percieve as deflation is a wealth transfer from the people to the banksters......
Why do you think of all things the fed is going to buy Mortgage backed securities from the (european) banks in the spring.....????? Does that in anyway help the homeowner......
I think you're right about everything, but the inflation you're trying to find... the one that affects the "plebes", will only appear once oil and food begins to be bid upwards. Otherwise you're just watching the paper debt sideshow, the REAL show is oil and that's yet to begin.
[Apples] Taking paper manufactured from tree pulp, putting it through a press and adding ink to it.
[Oranges] Adding a bunch of zeroes to a computer screen in whatever currency denomination you prefer.
Until it becomes physical paper money, it's not printing.
Well thats certainly true, just shifting the decimal point to the right daily is even more meaningless than actual money printing. Its now just a virtual hypothetical digital based world economy.
Right.
In layman's terms, the Central Banks are writing digital checks that their physical asses do not possess the ability to pay.
Regarding the ECB balance sheet, I have never seen a more meaningless 3.5 trillion of anything in my life.
Show me the money!
So when your paycheck is set up on auto-deposit, those (digital) dollars added to your (digital) bank account are meaningless, they won't buy anything, you basically worked for free.
Moron.
careful with the name calling. that moron is describing a relatively new phenomenon, no? So who has all of the answers? Digital "money" is being created to buy digital debt. Of course debt is money when it's created, so it's a little bit like that game with one ball and three cups (different from two girls and a cup... google is your friend). At some point this pretend world of pretend money will come to an end. No matter how sure you are than you can pick the cup that contains the red ball, please tell me which cup you'll be selecting... that way I'll be no worse than 50/50.
And the best economists are reduced to saying 'Well, I think we just 'muddle thru' from here on out'.
What a load of crap, NEVER have world markets and economies just hovered, economies are either expanding or contracting.
reduced to saying, or forced to say if they want a seat at the table???????? Do you think for a second they believe what they are forced to read?
Listen to Bloomberg for a half hour, I dare you...... Herman Goebel would be proud........
Sooo all those PIIGS bonds were bought with IOU to print at a later day?
Well, Robo these days is in total love with bonds, and seeing how Robo is the ultimate fade I give 'safety in bonds' a few weeks lifespan tops.
We won't have hyperinflation and for one simple reason : the rich don't get richer in an hyperinflation scenario. They get richer in a deflation scenario since they've got all the money.
Deflation and Hyperinflation aren't opposites, except in linear sense. They are actually 3 points on the perimeter of the circle/cycle. The reaction to the first deflation event/point is the trigger for the hyperinflation event/period, and then a second deflation (this time a period of time as opposed to a point in time) would signal the commencement of mean reversion. The rich actually need both deflation points and intervening hyperinflation, first to set the table, then to run it, and in the process clean up and clean out the losers, and Bernanke has explicitly promised as much since his infamous speech many years ago.
Sure they do, they have most of the gold too.
http://confoundedinterest.wordpress.com/2011/12/28/ecbs-balance-sheet-go...
Of course, the Fed is no slouch either.
Wait until they try to unwind these puppies. ziiiinnnnggggggg!!!!!!!!!!!!!!!!!!!! crash!!!!!!!!!!!!!!!!!!!!!
This bitch is blowing fast.
Many businesses are operated through a separate entity such as a corporation or a partnership. Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. Thanks.
Regards,
Desert Ridge Real Estate AZ
Wille E. Bernanke just churning his legs faster over the cliff.
How long will the collapse in gold and silver last until all the printed cash kicks in? The million dollar question for the really, really, good hedge fund managers. I say the end of January.
I just don´t get it..the 10 year is getting stronger...and gold and silver is getting cheaper.....wierd just WTF wierd...
Who cares just buy it. If you don't think that the U.S. fiat is next after the Euro implodes then you're living a dream.
Accounting is a bitch:
Lesson 1: Balance sheets balance out and total assets=total liabilities.
ECB is no exception. Nothing sinister in this fact alone, just basic accounting.
Lesson 2: Secured (collateralised) lending is less risky than unsecured lending / naked market purchases
Now, ECB shouldn't do naked market purchases, but they do, to the tune of €210 billion via their secondary market purchase program, which is a mistake. At least they sterilise this amount, but it would still be better if they would demand collateral from Italy, Greece and Spain against this stuff. Why should they do even more of that kind of mistakes with QE?
perhaps one thing to note: the primary central bank liability is "currency in circulation."
Thanks for the note. Has this balance sheet item been growing "exponentionally" recently? Although I am still at holiday, I cannot be arsed to do too much googling.
However, looks like M1, M2 and M3 have not been growing much at all:
http://www.ecb.int/press/pdf/md/md1110.pdf
This is the latest one I found on ECB web site, published on November 28, 2011, and states e.g.
"MONETARY DEVELOPMENTS IN THE EURO AREA: OCTOBER 2011
The annual growth rate of the broad monetary aggregate M3 decreased to 2.6% in October 2011, from 3.0% in September 2011.1
The three-month average of the annual growth rates of M3 in the period from August 2011 to October 2011 increased to 2.8%, from 2.6% in the period from July 2011 to September 2011"
Does not sound very expansionary to me, but I could be looking at the wrong thing.
Update: this appears to be table for the ECB balance sheet change rates, but it seems to be missing item "2.1. Currency in circulation"
http://www.ecb.int/stats/money/aggregates/bsheets/html/growth_rates_U2_2011.en.html
Weird. Plus the 28.12.2011 update data is still missing.
"The three-month average of the annual growth rates of M3 in the period from August 2011 to October 2011 increased to 2.8%, from 2.6% in the period from July 2011 to September 2011"
2.8% for three months = 11.2% per year. At that rate M3 would double every 6.4 years...
"Does not sound very expansionary to me"
Hmmm, does to me...
"annual growth rates" do not need to be annualised, if I am not mistaken.
Ah I see. Apologies for not reading more carefully. So the rate is 2.x% per year then? Still considerable against trillon dollar M3 numbers...
"Lesson 2: Secured (collateralised) lending is less risky than unsecured lending"
Well, it's all relative; just ask the customers at MFG.
True. ;-)
My Lesson 1 on relatives is this Q&A:
Q: What is the difference between outlaws and inlaws?
A: Outlaws are wanted.
The Fed and ECB are clearly not printing fast enough.
Otherwise, gold would be going up $30/day, not crashing by $30/day.
What's wrong with a little bit of inflation?
These Central Banks are totally clueless. They should be issuing trillions of new debt per month with rates so low.
You really do not get it do you?
Dat Balance Sheet!
Going to be at the Euro 1.28 handle in no time at this rate. With downgrade rumors swirling I wonder how low she can go once that hits.
Yeah, but "don’t" worry, they have more "tricks" up there sleeve.. haha!
Print, Print, Print....
Does Ronaldo's worn out soccar kit count as collateral to the ECB?
If not, then it should.
Incredible how GOLD is surging... no??? Errrrr, I don't here anybody on the topic...
Funny to see how people can stick the "the safe heaven" concept
Gold protects against inflation and more importantly these days against defaults and banks going bust. Just ask MFG customers. So yes, Gold is a Safe haven.
I’ve not bought the spike(s) I’ve actually sold into them (a bit) and now I’m happily buying every two dollars per gram. That’s what I call dollar averaging.
Happy shopping.
I was talking about it. I am trying to get the hedge guys to predict how long it will implode before it explodes.
You don't need hyperinflation to feel the negative effects of printing. Our societies and economies are being destroyed without rampant hyperinflation through a feedback loop. Printing destroys in so many ways:
We all need to be able to counter the argument that Krugman and other free money proponents put out there, that excess debt and free money are OK because there is no hyperinflation. Warnings about how we will see Weimar Germany will not cut it. We need to argue that we are being destroyed, here and now, by these policies, not by some feared future hyperinflationary event.
Here's a start
The ZIRP Song
Silver on Kitco down 4.3% in 3 hours.
Even Bullionvault participants are capitulating: spread now less than 1% (Kitco spot 27.26 at 11:45; BV silver London vault offer USD27.53 at 11:50)
Deleveraging wins. Liquidity is dying. Cash is King for a day.
Cash is King for a day!
Then the next day, you go to get some of your lovely cash to enjoy spending it on deflated goods, only to find that your bank is shuttered up because in a deflationary scenario there isn't enough money for your bank's borrowers to repay the loans it has issued and so, sadly, it's gone bust. Bye bye cash - King for a day.
In your reply you make an assumption, and your assumption is wrong. I aint that stoopid.
And what would be my mistaken assumption?
That you don't keep your money in a bank? Good for you, but not a practical option for everyone, since there isn't that much physical cash.
That banks can survive when people can't repay their loans? Check out the 1930's.
That people can pay back their loans when, due to 'Deflation' there is less and less money available to do so? I think you may misunderstand the principles of fractional reserve banking.
That the Fed will keep printing so that the banks stay open? The path to hyperinflation.
So - do tell; how does a hyper-leveraged financial system survive in a deflationary episode, and ensure that depositors cash is safe. I'm all ears.
If you are a BV user you better have PMs in your hands not all in BV. BV is a good service but not 100% safe. Assuming they have the Gold and Silver they are keeping for the customers you are exposed to bank failures, in which case you can’t sell and get your money back and you are exposed to failure of their system or the internet or the authorities confiscating the PMs or simply those who run it committing fraud.
All investment involves risk. here is my assessment of the risks you list:
1. "Assuming they have the Gold and Silver they are keeping for the customers" - Yes, I believe they do
2. "you are exposed to bank failures" - No I am not. Read any of paul Tustain's newsletters and you will see that bank failure is the specific risk he offers to hedge.
3. "in which case you can’t sell" - In my judgement there is negligible risk that I would not be able to sell (BTW I sold all my metal some months ago and am waiting to buy back in)
4. "you are exposed to failure of their system" - Oh come on. Be serious.
5. "or the internet" - well, maybe, but do you really think so?
6. "or the authorities confiscating the PMs" - Yep. That's the second biggest risk.
7. "or simply those who run it committing fraud." - No risk at all, in my considered judgement.
8. You missed the biggest risk. Massive increases in the nominal (fiat) value of PMs followed by heavy taxation of the "gains". THAT is the big risk that everyone faces if their purchases of PMs are traceable.
1. You believe but you can't be sure 100%;
2. Yes you are, if there bank or you bank goes bust you can't get you money back. You can still have PMs with them but can't get your money back if you need it.
3. Same as 2.
4. Computer systems made men. Not 100% safe.
5. Yes in exterme cases.
6.
7. Yes there is a risk. Rothchild on the board.
8.
Spoken like a trader who thinks he can make it to the exits before the casino gets slammed shut and torched. Good luck with that. Keep in mind though that many of us here do not view what we are doing now as investments for the current game. They are insurance against the game coming to an abrupt end - institutions tanking - etc. And even with insurance there are risks as well of course.
"...we believe the key correlation driver-cum-pissing contest of 2012 .."
The economic vocabulary has come a long way this year . . . .take it back from those waffling airheads in ivory towers i say
lies. printing lies. not printing lies.
Naaa everyone fear the Italian longer term emissions... It will be fine...
Here is a complete list of the the ECB's eligible assets which can be collateralized for loans.
http://www.ecb.int/paym/coll/assets/html/dla/EA/ea_all_111227.txt
The list is extensive yet some of the issuers are interesting. Many MBS issuers have a large percentage of their portfolios in ARM's. For example, the Siena Mortgages 10-7 S.r.l. has 91.88% in ARM's. And there are many, many more which are similar. Also there are many auto loan notes as well as a Belgian chocolate manufacturer.
Cool I have an old BMW maybe they will give me some cash too! It's a german car after all!
A little thought experiment: Why would a bank deposit its chunk with the ECB? What have we seen of similar vein recently? Is there a similarity in the motive/intention?
Siemens and other large corporations have been moving their deposits from commercial banks to the ECB. Obviously they are concerned with the risk of having large amounts of cash confiscated by a commercial bank going bancrupt.
Is the intention of these banks which have just drawn down billions of Euros to hedge their exposure to themselves as a collective? What would be the benefit of this?
Let's assume that there are many plans in the works to "suicide" large financial organizations (BOA and Dexia come to mind) as a means of clearing the decks and starting over. The end result of such plans would be to have a core organization which shed its obligations yet retained its capital base (or most of it).
Legally a bancrupcy will allow the bancrupt to claim it can not honor obligations and so those obligations are cancelled to the detriment of the counterparties. After the bancrupcy, the organization re-emerges with a fresh face and a clean sheet.
Now, seeing what we have seen as to the confiscation of wealth and how governments and courts are unanimously fucking over individuals and small organizations to the benefit of larger TBTF ones, we have to ask the question: if a TBTF failure were planned how would that organization protect its capital from being taken to resolve claims?
The answer is: "Deposit it with the biggest, most immune entity that can brutalize the claimants should they try to pursue redress.
ECB = the Gorilla, your mob protection plan
IMO this is looking very much like a setup for the ultimate planet wide clearance of obligations and confiscation of wealth by TPTB. In Euroland it is taking on the form we are seeing in front of our eyes. The US Fed has its own approach to do the same thing (see recent BOA allowed to move $77 Trillion in derivative exposure to retail side, which seriously exposes any and all BOA depositors).
Thank you for an interesting thought experiment...allowing BoA to use retail deposits as derivatives collateral was indeed a giant, flapping red flag.
You are welcome. Not that the deposits have been so pledged, but they are encumbered due to the legal order of dispersion which puts derivatives counterparties at the top of the list/front of the line. And yes the US Fed had to approve of and did approve of the movement of these contracts.
This may illuminate the effort by European corporations to shelter their capital by moving as much of it as they can to a bank that has no derivatives exposed (so far) = ECB.
I refuse to believe for a minute that the sociopathic control freaks that inhabit the top echelon of corporate finance will just stand by with their thumbs up their asses watching to world fall apart. They will prepare for and execute strategies to position themselves for the inevitable, and possibly even foment it if it can be to their ends, IMO.
ha ha, one of Rothbards laws, "if you have the power to create money and the power to print money, you will do it."
forward to 1:00:00 mark
http://www.youtube.com/watch?v=Ta7q1amDAN4
Kudos to whomever sold the GBP @ 1.570.
This is all consistent with the "dollarization" of Europe that began to reestablish European monetary policy under the control of the U.S. Fed. The euro swap agreement allows borrower to do what they want with dollars, but restricts Fed from trading or selling euros during the swap. This is essentially re-denomination of euros into dollars as a new Bretton Woods. Last week's announcement that 26 European sovereign nations were forced to essentailly operate on constitutionaly balanced budgets, is the cost the Fed has extracted for agreeing to the continuous rollover of 90 day paper.
It is very hard to envision a senario of hyper-inflation; while wearing monetary hand-cuffs. Europe is in austerity and now it is China's bubble that is about to burst. The Shanghai index is down 38% and Beijing real estate fell 35% in the month of November. MMr. Market is about to revert to the mean!
I believe the Austrians would argue that a swift deflationary downspike liberates the inhibitions of the monetary authorities who then hyperinflate to "save the village" by burning the village.
The only problem that i have with this supposed deflation is that there isn't any. I consider deflation to mean that things cost less when I go to a store. This isn't happening. Deflation is the new codeword for the decreasing value of paper assets tied to banker bonuses; used to be what M1 and M2? What are we at now? - X12 money supply; mega-rehypothecated Uzbeki 60 year paper purchased with 100 to 1 leverage collateralized by Zimbabwean Food stamps.
In this 'deflation' that everybody is worried about, the banks go bust, and you can't pull any money out of an ATM machine. Supply chains crash and we are forced into local economies; and I assure you that anybody who has access to a food or fuel source won't be selling at a bargain basment (deflationary) price and probably not for fiat.
OMG, sad to be french, we are going Mugabe for good.
Another Zerohedge "we're all doomed" hyper-inflation story. What are the odds we'll see 217 more of these in the next 18mos?
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