When Unlimited Has Limits

Tyler Durden's picture

From Mark Grant, author of Out Of The Box

When Unlimited Has Limits


Everytime we get the next round of the “Great Cure” for Europe we get the same reaction which is a massive rally based upon the next new drug offered up by the Continent. Reality is reality and there is no denying the initial surge and hope springs eternal from the human breast and the jawboning done by Mr. Draghi has been quite effective and I acknowledge his performance. I also nod to the Southern countries in Europe that have ostensibly won this round and overcome and outvoted their neighbors that will have to fund if it gets to that. I continue to point out that under Mr. Draghi’s plan nothing will be done unless the Stabilization Funds are utilized which means that the ECB will do nothing unless the European Union agrees to it first so that the EU has a veto over any ECB action in effect but no one is paying any attention to that fact at present.

The ECB has shifted any move on their part to an approval process at the EU which will take months to be agreed upon while the ECB has tied their own hands and subjugated themselves to the EU as part of their stratagem but the markets obviously consider this to be a trivial fact. Perhaps this is why Germany has responded in such a benign manner; they know with certainty now that the ECB will do nothing unless the European Union agrees in advance and Germany can veto the entire process if it gets down to it and Germany actually now has more control over the ECB than they did in the past so that the Germans may secretly be quite pleased with the outcome. It is all games within games, a charade for the exhilarated crowd but that is Europe these days.

Nothing that has occurred has changed the financial positions of Greece, Portugal, Spain and Italy one whit but that is also not the focus of the moment. However I think it will be the focus again soon as the recession in Europe deepens and broadens and Spain and Italy both show up begging cups in hand. Then there is the German Constitutional court decision on September 12 and the decision whether to hand Greece another $50 billion or so or not. At some point the markets will figure out that the ECB just bound themselves in steel wire and that they can now do nothing without the reluctant agreement of the entire European Union where vetoes are possible and where Germany has a much greater sway but it often takes the markets awhile to figure things out and so be it. I have been here before a number of times during the European crisis and I always smile politely, nod my head and wait until the dawning of reality commences.

The Loss of Independence

In very real terms the ECB is now no longer an independent institution. The ECB has promised not to act unless the EU assents. The ECB is now totally subject to the whims of the politicians in Europe and whether the markets ignore this for the moment or not that is the truth of it. In promising redemption the ECB has also traded away its ability to act on its own and it will be interesting to see how this plays out.

The ECB Window

Maturities of 1-3 years for sovereign debt will now be viewed differently no doubt and a lot of money will be invested in the upfront years. They will be viewed as “protected maturities” with not only the backing of the sovereign nation but of the ECB as part of the credit considerations. Funding will also shift to these maturities to get a better rate but this will also cause a massive amount of roll-over in short maturities and failed auctions may occur because of the size of the short funding and the ostensibly lower interest rates that will append to these short maturities for a time. The Firewall concept obviously failed and here is the new, new plan and “unlimited” and “no cap” is only applicable if the EU agrees; otherwise it is a promise that may never be carried out or utilized but tell no one; it might upset them.

“Things are not always what they seem; the first appearance deceives many; the intelligence of a few perceives what has been carefully hidden.”

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LawsofPhysics's picture

Banks and financial houses (families) win again.  Any questions?  Here is mine, where is your collateral bitchez?

GetZeeGold's picture



Too big to lose.....sucks....but that's the way it is.


CDSMonkey's picture

The ECB also waived various collateral requirements - Draghi is not dumb.  He also didn't rise at Goldman by being naive or nice.

jekyll island's picture

Since when can a parasite function without a host?  This article is kinda stupid, just pointing out the obvious.  What you are seeing is the positioning for the endgame.  ECB will be dissolved by EU and take the fall the currency crisis, only to be replaced by ECB II with new "management" and a big haircut for the sheeple. New boss = Old boss.

LongSoupLine's picture

As long as there are fleeceable middle class and corrupt politicians/governments, there will be "collateral"

bank guy in Brussels's picture

Collateral ... here to the absolute max, fabulous 35 seconds of cinema -

Tom Cruise getting his 'Collateral' briefcase back with a semi-automatic pistol

For those who have never heard gunfire on real city streets (Long ago, I lived for a time in a couple of rough cities of the United States) ... this is what gunshots in the streets are REALLY like ... LOUD:


poor fella's picture

Sadly though, running out of the fleeceable middle-class right quick.

hugovanderbubble's picture

Bank= Casinos= always rigged win

GetZeeGold's picture




Jon Corzine cleans up on the blackjack tables..........again!


trebuchet's picture

ECB signed up to Deutche Rebulic of Euroland with political - financial commitments, more banking supervisioins and conditionality and probably positive for longer term REAL economy investment IIF  Germany can hold the EU together. 


Big issues are conditionality, SUBORDINATION, effectiveness of ESM


Yes ECB lost its "independence". 


Did you expect something different from the EX-Squid Club?



LongSoupLine's picture

not quite...prostitution has "willing" customers, whom seek the service, and truly get something in return.

If you want to stay in the same analogy, perhaps it's better to compare the Fed/ECB, etc to serial rapers.

Dr Benway's picture

How about pimping human traffickers?

monad's picture

You best hab ma monay bitch!

Straykitty's picture

Well and simply put.  The exhaustion of humanity proceeds according to schedule.

apberusdisvet's picture

Moving towards a manipulated end game in which nations will willingly cede sovereignty to become vassals of the bankster elite.  There has to be enormous pain and suffering to reach this point, already seen in Greece and Spain, soon to be in Italy and France.  Let us not forget Ireland, the template where the pensions have been subordinated to the banksters.  Will the ECB head be the new Hitler?

defencev's picture

What a bullshit! In some sense, the article recognizes the obvious. Draghi did what he was expected to do and many people (me included) indicated that it will be done.

in the nutshell. ECB will guarantee the rollover of the debt for 1-3 year sovereign bonds. In principle, it can be done in steralized manner provided the borrowers will be able to pay interest and not expand the borrowing. The trick is that if there is insurance (that ECB provides) that there is a buyer of issued bonds on secondary market, the interest rates will go down. It may work quite well, say, for Italy that essentially does not issue new debt. It probably will not work for Greece. But it was expected. It is also not a money printing . It does buy  time (in theory an infinite one) for those borrowers who are willing to adhere to certain degree of austerity.

 Only idiots who run this website (and authors of "articles" posted here) should be surprised by this move. Others , fully expected it and indicated it many times. Try to understand what happened. It is quite easy. Crying banksters, buying new ammo and crawling into cave will not help.

samcontrol's picture

I'm glad to see zero hedge does not sensor your post. Thumbs up to both. Your insults are wayyy out of line by the way.

the eternal printing was not that expected , it is a very bad solution but the only one they can come up with, they are all in their 50 s or more , they think who gives a fuck where Euroshit will be in 20 years.

Is eternal printing THAT expected in the US. Will the sheep go with it ?

I think BB prints , and then prints and then...

JPMorgan's picture

I need a bailout, I spent all my cash on gold, booze and hookers.

Where do I apply?

Quinvarius's picture

Debt monetization is done by central bankers for their banker buddy balance sheets.  Its main purpose is to protect the banking system from collapse.  It will never stop.  No matter how much anyone kicks and screams, the currency is owned and created by bankers for bankers.  They will do whatever they have to to stay solvent first.  Once that "right" has been established it will be used to generate profits.

darteaus's picture

The only thing unlimited is the verbiage spewed by self-enriching politicians avoiding the truth.

new game's picture

what if the problems move faster than the politics/policies to extend/patch cobble and actual print...

CDSMonkey's picture

that seems like it could happen - resistance from people in the countries giving money and resistance from politicians in the countries getting the money

docj's picture


NFP: +96K (Exp. +130K)

Last month revised (negative, of course) -22K

Now we know why the TOTUS looked like someone kicked it in the jewels last night.

Yet, the rate dropped to 8.1% - man, that participation rate must have dropped like a brick.

BeetleBailey's picture

100% Proof that the markets are rigged.

Draghi announces unlimited EURO printing (because..that's what it boils down to)...

Meaning......debasing......meaning...more EUROS...should be worth less....


....and the EURO shoots up......

buzzsaw99's picture

the bots don't care about long term

LongSoupLine's picture

the bots "caring" timeframe lasts about 200 milliseconds

No Euros please we're British's picture

My prediction: Greece get the bailout, no doubt after much jawboning and fake angst from the troika. The German Constitutional Court approves ESM.


AynRandFan's picture

The ECB has its hands tied? All evidence to the contrary.

mewenz's picture

Agree w/ the author on the independence point, a good one.  I think it is much more then that though....

For all intents and purposes, Draghi, aka Goldman has effectively disbanded the ECB in terms of it's orignal basic purpose and functionality

The intent and construct of the ECB was based on a foundation of independence, with a basic mandate of price stability.

Draghi took not one, but three steps to blow up whatever was left...

1)  As pointed out, removal of independence

2)  Removal of any pretense of real collateral

3)  Removal of any pretense that the funds are ever truly intended to be fully repaid, i.e. agree to put in fresh funds and be subordinated to insolvent debtors


good or bad, the ECB experiment is over

Ungaro's picture

Potemkyn was an aspiring understudy in deceit and deception. He got away with it because his tsarina, Catherine was near-sighted.

The central banksters are the master of deceit and deception. They get away with it because our (s)elected representatives are short-sighted (and corrupt).

falak pema's picture

that's precisely the consequence of this mega crisis : loss of liberty to the nationals as to the CB. All in now, upto their short hairs and beyond. Either this game is about civilization values or it isn't. As globalisation leaves them few choices.

Either they break out into little units or they truly unite into one. Something the Continent has NEVER done. Unchartered and to many, unnatural. 

Only issue now : it may be too late this seemingly 13th hour wake up call. As it now requires, beyond the financial discipline and sacrifice, economic discipline in fiscal budgetry, social sacrifice over two generations and political sacrifices of sovereignty beyond the apparent call of duty or popular willingless. Awesome continental make or break collective conundrum.

But then, how was Greece united in ancient days? In the face of Marathon threat...We may be back there but we don't know it. 

The external threat is what unites man. The internal tyranny is what disunites empires. Where is the truth? 

We'll soon find out!