ECB Watch

[Daniel_Plainview]

A far better idea than QE and other monetarist nonsense. Of course, the simplest way to “helicopter drop” money into the real economy, and without resorting to e-money or the like, is just to use the fiscal route … though that is less simple in the Eurozone than other currency issuing nations, again due to the lack of a common Treasury.

Are you suggesting that printing money to fund European, UK and to a lesser extent US, government deficit spending is a monetarist construct

It doesn’t fund it - you print the money, you unprint the bond; it’s an asset swap; the Monetarists think Reserves have some sort of magic property that induces lending, which is nonsense of course.

[the_liquidator]

How can it be one for one. There is more govt. debt in issue now than ever before. Ireland’s problems continue no matter what the Noonan spin. The UK actually has a bigger deficit than France. It can’t be one for one while govt. debt spirals. I can’t believe that we could be arguing that monetarists don’t believe in pump priming economies through deficit spends, or that monetarists abhor money printing. Milton Friedman come on down.

[BoyRacer]

Europe’s Monetary Madhouse - David Stockman -> davidstockmanscontracorner.com/e … -madhouse/

If you want to know where the global experiment in massive money printing is heading—-just take a look at the monetary madhouse in Europe. And that particular phrase has full resonance once again as it becomes more apparent by the hour that Europe and the Euro were not fixed at all. Indeed, beneath the surface of Draghi’s “whatever it takes” time out, the crisis has been metastasizing into ever more virulent deformations.

The coming European monetary crack-up is rooted in the fact that the ECB’s financial repression and ZIRP policies have—like everywhere else—-destroyed honest price discovery in Europe’s massive sovereign debt market. There is no other way to explain the preposterously low 10-year bond yields prevailing this morning for the various and sundry fiscal cripples that comprise the EU-19.

there is more

[BoyRacer]

Draghi predicts continued low interest rates - [google translate] -> handelsblatt.com/politik/kon … 76464.html

Specifically, he demanded to increase spending on investment, particularly in research, education and the digital agenda. “Other expenses and taxes should be reduced,” warned Draghi.
Persists the danger of falling into a downward spiral of falling prices, which hinders the reduction of debt affects the buying power of consumers and inhibits business investment for the euro area.

ECB President Draghi hinted in the Handelsblatt newspaper interview that the central bank could therefore start with the purchase of government bonds soon. “The risk that we do not fulfill our mandate of price stability is higher than six months ago,” Draghi said. The ECB is therefore in the technical preparations “to scope, pace and composition of our measures to change the start of 2015, this should be necessary to respond to a long period to low inflation”.

[google translate]

It’s not deflation any more, it’s negative inflation -> ec.europa.eu/eurostat/documents/ … bde719ee44

[Daniel_Plainview]

Europe’s Monetary Madhouse - David Stockman -> davidstockmanscontracorner.com/e … -madhouse/

If you want to know where the global experiment in massive money printing is heading—-just take a look at the monetary madhouse in Europe. And that particular phrase has full resonance once again as it becomes more apparent by the hour that Europe and the Euro were not fixed at all. Indeed, beneath the surface of Draghi’s “whatever it takes” time out, the crisis has been metastasizing into ever more virulent deformations.

The coming European monetary crack-up is rooted in the fact that the ECB’s financial repression and ZIRP policies have—like everywhere else—-destroyed honest price discovery in Europe’s massive sovereign debt market

. There is no other way to explain the preposterously low 10-year bond yields prevailing this morning for the various and sundry fiscal cripples that comprise the EU-19.

there is more

Stockman is, usually, a complete moron who doesn’t understand fiat currency, However, this time, he is correct, because, of course the individual states do not share a common treasury meaning they are at risk of default unlike the US, UK, Japan, Oz, Canada et al.

[fungus]

Who said the main ECB refinance rate cannot go into negative territory?

Dainsh Central Bank Cuts Lending rate to -0.20%, Deposit rate to -0.20%

bloomberg.com/news/2015-01-1 … rkets.html

Meanwhile, BNP expect another Danish base rate cut to -.0.40%, expect another 50 bps SNB cut from -0.75% to -1.25%. One commentator today said that the ECB will cut by 10 bps on Thursday. Seems unlikely.

[Daniel_Plainview]

Who said the main ECB refinance rate cannot go into negative territory?

Dainsh Central Bank Cuts Lending rate to -0.20%, Deposit rate to -0.20%

bloomberg.com/news/2015-01-1 … rkets.html

Meanwhile, BNP expect another Danish base rate cut to -.0.40%, expect another 50 bps SNB cut from -0.75% to -1.25%. One commentator today said that the ECB will cut by 10 bps on Thursday. Seems unlikely.

Surely, at some point, people are going to realise that Monetarist based policies are fundamentally flawed; that controlling the price of one interest rate in the economy has very little widespread impact.

[BoyRacer]

Why the Hell Does Mario Draghi Want to Leave the ECB Now!? -> thefiscaltimes.com/Columns/2 … ve-ECB-Now

Even a week ago there seemed little reason to ask such questions. Not anymore. Draghi appears set to leave Frankfurt and return to his native Italy the first chance he gets.
This could be as soon as January, depending on a variety of circumstances in Frankfurt and Rome, according to well-placed sources who include a prominent private investor and a senior journalist in Rome. “Draghi wants out, fed up and stymied by Berlin,” one of these sources wrote in a note just before the weekend. In a subsequent message: “I am hearing from several [official] sources that he is entirely fed up with the monetary politics he confronts.”

there is more

ECB president Draghi hits out at German critics - -> irishtimes.com/business/econ … -1.2065437

ECB president Mario Draghi has hit out at the many German critics of his bank’s monetary policy and denied rumours he will depart Frankfurt to become Italy’s next president.
A week before the ECB is expected to launch a programme of quantitative easing, Mr Draghi told “Die Zeit” that it was time for Germans to understand that they were not the only ones in the eurozone.

there is more

[BoyRacer]

None Dare Call It Fraud—–Its Just A “Savings Glut” - -> davidstockmanscontracorner.com/n … -it-fraud/

But the real dope is surely Mario Draghi. Since the day of his “whatever it takes” ukase 32 months ago, European government bond prices have climbed straight up without respite. Indeed, in the past week, quasi-bankrupt Spain issued two-year notes with negative yields and punters fleeing Draghi’s destruction of the Euro brought 10-year Swiss government debt that is guaranteed to cause investors losses if held to term.

In that context, the path of the Italian 10-year bond shown below would be considered forensic evidence in a fraud trial. The relentless bid of the front-runners and repo gamblers is written all over the graph because there was not a single fiscal or economic fact from the real world that could have caused the Italian bond to soar in this manner.

https://www.tradingeconomics.com/charts/italy-government-bond-yield.png?s=gbtpgr10&d1=20120101&d2=20151231

Indeed, the Italian economy remains mired in no growth stagnation, its public debt ratio continues soar and for all practical purpose its government has ceased functioning. Nevertheless, there has been a frenzy of Italian bond-buying during the last 30 months because Mario has promised to prop-up the market with his own massive bid during the next 20 months.

So the question recurs. Where is the savings glut in all this? Yes, the economy of Europe has been stagnant for 7 years but not because there has been an outbreak of thrift. In virtually every Eurozone country the household savings rate has actually fallen since the 2008 crisis. In the case of Italy, for example, it has plunged from 8.5% in 2008 to 4.6% last year, according to OECD data.

Likewise, the savings rate in Spain has dropped from 11.5% before the crisis to 4.3% last year; in Belgium it has fallen from 11.5% to 6.1% over the same period; and even in Germany the household savings rate is down from 11.5% to 9.2% during the last six years.

No, there isn’t a savings glut in the world; there is an outbreak of destructive central bank bond buying and money market price pegging that is virtually destroying the world’s bond market.

there is more

[slasher]

Drahgi presser interrupted!! Female protester

"ECB Dictatorship!! ECB Dictatorship!!

on.ft.com/1FK7hpn

[dolanbaker]

independent.ie/business/iris … 43622.html
To boost the Eurozone economy and prevent deflation from setting in, the ECB announced in January it would buy €60bn of assets a month, focusing mainly on sovereign bonds. Purchases began last month.

One of the conditions of the so-called quantitative easing plan is that the yields on eligible bonds can’t fall below -0.2pc.

But ironically, as a consequence of the programme’s announcement, that is already happening and a number of government bonds have become ineligible, Moody’s noted in a report published yesterday.

Germany’s 10-year yields dropped to a record yesterday. Benchmark German 10-year yields fell two basis points, or 0.02 percentage point, to 0.14pc.

The yield on Irish 10-year debt had fallen to 0.676pc by mid-afternoon yesterday. That compares with a year-to-date high of 1.369pc on January 8.

Moody’s predicts the ECB will run out of eligible bonds from Ireland in March, well ahead of the intended completion of the programme in September 2016, and run out of bonds from Germany by September of this year.

There’s no interest in buying them anyway.

[BoyRacer]

Anatomy of a Bail-In - -> ucd.ie/geary/static/publicat … 201405.pdf
March 4, 2014

As outlined in the BRR, a bail-in would apply to all liabilities not backed by assets or collateral, but not to deposits protected by a deposit guarantee scheme, short-term (inter-bank) lending or client assets. The ordinary allocation of losses and ranking process in the event of insolvency would be followed. Under the frame-work, equity holders would absorb initial losses in their entirety before any debt claim is subject to write-down. Next, subordinated debt holders would equally share any further losses, followed by senior debt holders. Finally, depositors not protected by a deposit guarantee scheme would absorb losses. A limited number of exempt liability holders have been proposed, including secured liabilities, trade liabilities, covered deposits, certain derivatives and short term debt with a maturity of under one month.

there is more

The Banking Regulation Review -> arthurcox.com/wp-content/upl … e-2014.pdf
May 2014

One increasingly important aspect of reform in the banking sector concerns the capital structures of banking groups. The requirement for more and higher quality loss-absorbing capital under Basel III, coupled with the introduction of bail-in as a resolution tool in a number of important banking jurisdictions, means that banking groups are having to rethink which company or companies they will use to raise capital and what form that capital will take. Particularly in Europe, the issue of additional Tier I capital and other contingent capital instruments has added complexity to banks’ capital structures and a need for banks to engage with current and potential investors to explain those structures.

there is more

[Coles2]

A great chart from TrueEconomics.

(start at 1999 and follow the line through 2000, 2001 etc to see ECB rates and q/q growth)

EuroLand - Where Growth goes to Die.

[mr_anderson]

ECB Said to Seek Million Euros of Dutch, Irish Mortgage Debt

The European Central Bank is seeking to acquire as much as 645 million euros ($725 million) of Dutch and Irish mortgage bonds as it increases efforts to buy asset-backed securities, according to three people familiar with the matter.
The central bank is asking investors to sell their holdings in 15 residential mortgage-backed securities, including bonds backed by loans originated by units of Dutch insurer Aegon NV and Irish lender Permanent TSB Group Holdings Plc …]

bloomberg.com/news/articles/2015-09-03/ecb-said-to-seek-645-million-euros-of-dutch-irish-mortgage-debt

[fungus]

10 bps cut looks to be on the cards in December according to JPM and Danske who are reading into hints by the ECB.

WSJ reports ECB will cut several rates, “Mr. Draghi said that menu of options includes further cuts in some of the central bank’s key interest rates, including the deposit rate, which is already negative, meaning banks pay to park excess deposits at the central bank.”

A 10 bps cut would bring the deposit rate to -0.30% and the repo rate to -0.05%.

Great news for tracker holders. More pressure on banks to lower SVR’s. Bad news for depositors.

[Daniel_Plainview]

10 bps cut looks to be on the cards in December according to JPM and Danske who are reading into hints by the ECB.

It’s actually embarrassing at this point. We’ve dropped what? 500bps at this stage and it hasn’t worked, maybe another 10bps will do it?
Or, gee, maybe the premise is completely wrong!

Monetarist central banking is dead & buried. It’s ugly offspring, “inflation targeting” central banking, now needs to be put down.

[Scratcher]

10 bps cut looks to be on the cards in December according to JPM and Danske who are reading into hints by the ECB.

It’s actually embarrassing at this point. We’ve dropped what? 500bps at this stage and it hasn’t worked, maybe another 10bps will do it?
Or, gee, maybe the premise is completely wrong!

Monetarist central banking is dead & buried. It’s ugly offspring, “inflation targeting” central banking, now needs to be put down.

Except they won’t stop. It’s benefitting too many people who can influence the puppets at the centre of this nonsense.

[dipole]

I’ve got a (large to me) lump sum deposit which matures in early November. It will not be going back on deposit except maybe for a small part.
It will go in to shares. It will not go in to a house in Ireland.
These ECB rates do have an effect on behaviour although the behavour they encourage may not be beneficial to society.

[fungus]

Pictet speculate that the repo cut in December will be 5 bps and 10 bps for the deposit rate.

perspectives.pictet.com/2015/10/ … dependent/

it could choose an intermediate option consisting in a 10bp cut in the deposit rate combined with a 5bp cut in the refi rate (to 0%), resulting in a 5bp widening of the corridor, hoping to mitigate potential adverse effects on interbank lending. The question of the refi rate becoming negative would persist in the event of the ECB leaving the door open to further cuts.

[Eschatologist]

Not sure if this was covered in another thread or not.

ECB to blame for Irish austerity, says UK Labour adviser
irishtimes.com/business/econ … -1.2410743

Simon Wren-Lewis, an Oxford professor and economic adviser to the British Labour Party, told Dublin economists last night that the European Central Bank (ECB) was to blame for the level of austerity in Ireland during the financial crisis. In a discussion chaired by outgoing Central Bank governor and ECB member Patrick Honohan, Mr Wren-Lewis said the ECB should have “done its job” earlier to act effectively as a lender of last resort. He said that if the ECB had done this, it would have led to “a more modest fiscal consolidation” in stressed euro-zone countries.

but…

ignore the last two paragraphs which are confused/wrong

The ECB as sovereign lender of last resort
mainlymacro.blogspot.in/2015/11/ … -last.html