Mario Draghi said this week that the transmission channels for European Q€ were opening up and crowed how well his cunning plan was working (by well we assume he means stocks are up). Today we get the ultimate test of that ‘transmission’ as 3-Month EURIBOR fell below 0.00% for the first time ever (likely wreaking havoc on European derivative pricing models). In English that means banks are being paid to borrow from one another in the interbank money-markets (which sounds a lot like a ‘glut’ of excess cash) seemingly confirming ICMA’s de Vidts fears: “We are scared about the [repo] market freezing,” as the ECB is “driving without headlights in the dark.”Of course this is yet another disturbing distortion on the heels of homeowners being paid to take out mortgages…
Banks now paid to borrow from one another…
As fears of the repo market in Europe freezing appear to be confirmed… (via Reuters),
The European Central Bank (ECB) risks secured-lending or repo markets grinding to a halt unless it works more closely with national central banks (NCBs) to improve liquidity, a senior trade association official told Reuters. Continue reading »
Mario Draghi, perhaps blinded by confetti, doesn’t see a scarcity of collateral while HSBC thinks that’s a bit “strange,” and Morgan Stanley doesn’t really see what the problem is even as their own analysis shows that it is now “impossible” for Germany to fully implement their portion of the program under the capital key. Meanwhile, FT thinks it’s possibly important that thanks to the absurd consequences of NIRP-dom, the ECB may soon take the plunge into euro corporate credit sending yields on corporate bonds negative.
You may well have seen the coverage of my intervention in the ECB press conference yesterday, during which I jumped on the table and showered Mario Draghi with confetti. Many people have contacted me on social media since then, asking me why I did it, how I got into the ECB’s inner sanctum so easily, and what stunts I plan in future.
Here, I’ll attempt to answer those questions as comprehensively as I can.
First, the inspiration. Four weeks ago I saw the anti-ECB protest by Blockupy in Frankfurt, my home city. The demonstration was greeted with a massive, draconian police response in the form of tear gas, water cannons and riot shields.
I was shocked. I thought: “the ECB doesn’t have any political mandate, it’s never been elected. Why are the police defending them with such brutal force?” I wanted to to try and take the criticism against the ECB’s policies to the very heart of the organisation, inside their buildings. Continue reading »
and in the face of the overwhelmingly powerful external
environment of the ECB’s monetary police,
sometimes it’s hard to remember.
We own our own lives –
and they’re not the chips in the ECB’s gambling game,
not to be played with, not to be sold, not to be devastated.
We own our own lives!
-will be the outcry of those who face repression,
when we begin to see our poverty not as personal defeat or unchangeable destiny.
master of the universe,
I come to remind you that there is no god,
but there are people, behind those lives,
and if you rule instead of serving,
you will hear our outcries louder, brighter, inside and outside your halls, everywhere, and you shall deserve no rest. Continue reading »
The European Central Bank’s press conference was briefly disrupted by a protester today, who jumped on to the stage and threw confetti. Staff from the ECB are investigating the incident.
Security staff took immediate and effective action.
Initial findings suggest that the activist registered as journalist for a news organisation she does not represent. Like all visitors to the ECB, she went through an identity check, metal detector and x-ray of her bag, before entering the building.
ECB President Mario Draghi remained unharmed and calmly proceeded with the press conference.
It was bound to happen sooner or later: moments ago Mario Draghi was attacked by what appears to be a female (non-Greek) protester screaming “End ECB Dick-tatorship” while delivering his prepared remarks.
We probably haven’t seen the last of the troubles in the Eurozone. As the European Central Bank is trying to put out several fires with regards to Greece and its huge Quantitative Easing money-printing program, it’s important for the Eurozone to keep everybody on the same page. But as could be expected, some banks in the Eurozone aren’t really too keen on playing ball and have rejected the interference of the central bank.
An apotheosis seems to have reached as a German bank has now effectively sued the European Central Bank. The Landeskretitbank Baden-Wurttemberg (hereafter ‘L-Bank’) has protested against the fact it would now fall under the new regime whereby the ECB would assume supervision over in excess of 100 financial institutions in the Eurozone. Continue reading »
Amid growing pressure from their ‘Troika colleagues’ with Eurogroup Chair Dijsselbloem noting there is “still a long way to go” on Greek proposals and The IMF withdrawing its staff in Athens; new prime minister Alexis Tsipras heads to Russia to meet with Putin early next week. As Kremlin spokesman, Dmitry Peskov noted – somewhat intriguingly – “Greece has not asked [Russia] for financial aid… yet,” as Tsipras is expected to seek agreement for a ‘road map’ of initiatives on the political and economic levels. Greek default risk has resurged in the last few days to its highest since the last ‘restructuring’…
Investors started off 2015 with a slow global economy, low oil prices, a strong Dollar, and a deflationary Europe with great uncertainties on the progress of the US economy and the recent launch of Europe’s quantitative easing. The question is, what opportunities lie ahead? This article highlights the main topics covered in an interview between Mr. Frank Suess, CEO and Chairman of BFI Capital Group, with the globally renowned Swiss fund manager, Mr. Felix Zulauf. Mr. Zulauf currently heads Zulauf Asset Management, a Switzerland-based hedge fund and has forty years of experience with global financial markets and asset management. He has been a member of the Barron’s Roundtable for over twenty years.
Felix Zulauf, Swiss fund manager and long-standing member of the Barron’s roundtable
Frank Suess: Felix, first I would like to thank you for taking the time to speak to us. You are a renowned investor and fund manager with a solid track record over the past 40 years. In those 40 years, you’ve encountered many highs and lows in financial markets and business cycles. What do you think about the current cycle we are in?
Felix Zulauf: The current cycle is very unusual, because never before have we seen authorities, central banks in particular, intervening on such a large scale and pumping so much money into global financial markets. Hence, global financial markets are more distorted than ever before and accordingly, the risks are very high. Investing becomes very difficult in such an unprecedented environment, as it can’t be compared to previous situations.Continue reading »
“More on Greece vs. Eurozone………………. appears the Greeks are not getting any more money. Add in “worsening deposit flight” the politically correct version of bank runs………..their language is beyond belief………and the fact all capital (funds) are vanishing.”
Esteemed reader Kittie Kittie mentioned that today the ECB opened its new headquarters in Frankfurt (seen above). Lots of Jews showed up at the opening ceremony, including Salomon Korn, Head of the Jewish Community Frankfurt.
I discussed the following matter in the “Truth About Money” series, but I wish to do it again here, in simpler terms.
If you can understand the following items, then you will understand more about euro-zone economics than do most “experts.” Instead of your eyes glazing over when you read some financial commentary, you will see through the lies, and declare “bullshit!”
Please ask questions if the material is not clear, or is poorly worded.
The Tower of Evil in Frankfurt is the headquarters of the euro scam, which works like this… Continue reading »
It’s not just Greece which is protesting the utter lack of reforms enabled by the ECB known as “austerity” – as of today so is Germany itself with the so-called #Blockupy movement. According to local media reports, the start of anti-austerity rallies in Frankfurt coincided with the European Central Bank opening its new headquarters, whose occupants are now besieged by tens of thousands of protesters, so perhaps #OccupyQ€ would have been more appropriate. Police said they expect around 10,000 anti-capitalist protesters, marching under the banner of leftist alliance Blockupy, to attend the rally, with a march through the city planned for later in the evening. The result is what according to a police spokesman “is one of the biggest deployments ever in the city.”
As the photos below shows, several police cars have been set on fire, with windows being smashed and demonstrators throwing stones at police ahead of the massive demonstration on Wednesday, and as riots break out across Frankfurt even as thousands of police respond with water cannon, pepper spray and mass arrests.
Repeat after us: the biggest threat facing Europe’s banking system is not a Grexit, is not the Austrian “bad bank” black swan (although it is pretty bad), it is the trillions in non-performing loans on the balance sheets of European banks, which Europe has no idea how to and which continue to multiply in the process threatening to impair depositors with bail-ins (see Cyprus). It is also why, after years of debate, the ECB finally agreed to flood European banks with what it hopes will be over €1 trillion in excess reserves a la the US (of course, if Zero Hedge, and now JPM, is correct, the ECB will break the bond market long before it achieves its goal) in order to mitigate the relentless cash demands of a constantly rising NPLs.
And unfortunately for the third largest issuer of sovereign bonds in the world, Italy – the country all eyes will focus on once Greece and/or Spain exit the Eurozone – when it comes to NPLs things are going from bad to worse because as Reuters reported earlier, citing ABI, gross bad loans at Italian lenders continued to rise, totaling 185.5 billion euros ($196.5 billion) in January from 183.7 billion euros a month earlier.
As the chart below shows, Italy now has over 10% of its GDP in the form of bad debt.
Back in January, when European stocks were only starting their unprecedented QE ramp, we presented the “Driver Behind The European Stock Surge” in which we showed that ever since Mario Draghi’s “whatever it takes” speech in July 2012, European equity prices were up 50% (even higher now) even as corporate earnings had actually declined by 7%. Continue reading »
We already know that the Bank of Japan will monetize 100% or just over of all Japanese gross sovereign bond issuance (source). As for Germany, on a run-rate basis, and assuming allocation based on the abovementioned capital key, it means that for the next 12 month period, assuming no major funding changes in Germany, the ECB will swallow more than a whopping 140% of gross German issuance! Or, said otherwise, the entities who will buy more than all gross German and Japanese issuance for the next 12 months, are the ECB and the Bank of Japan, respectively. Continue reading »
Having been shamed what seems like numerous times now by the Eurogroup in recent weeks, Greece suffered its greatest humiliation today. First, the farcical renaming of ‘Troika‘ to ‘Institutions’ was summarily dismissed as “semantics,” as France played good cop (asking for the group not to call it Troika) while Germany’s bad-cop Schaeuble used the T-word four times in one interview. And second, Eurogroup chairman Dijsselbloem stated that “technical teams will begin considering Greek reform plans on Wednesday,” adding that some of the negotiations will have to take place “in situ in Athens.” So instead of discussing reforms with institutions in Brussels, the Varoufakis-defined “cabal of technocrats” Troika will be back on Greek soil to straighten out the nation. Continue reading »
There was one reaction by the Eurogroup following the (delayed) submission of the Greek 7-point reform proposal – which includes the brilliant idea to use foreign tourists as wired, part-time tax spies – in advance of the latest Monday finmin meeting: laughter.
Financial Times reports that the reaction from eurozone officials to the tourist plan was received with humor. They thought the proposal was hilarious and even laughed when they read it. “It’s quite hilarious, if it were not so tragic, that this is what a government in an industrialised country comes up with,” said one eurozone official involved in the talks.
There will be little laughter in cash-strapped Greece, however, if the Sunday Times is correct in its report that the “Eurogroup finance ministers are to reject radical reform proposals from Greece at a meeting in Brussels tomorrow.” Continue reading »
The Fed and the ECB know exactly that it is totally insane what they are doing, unless you want to destroy the middle class and the entire financial system, which is exactly what they are doing and deliberately so.
In short, the entire citizenry of the euro area has already become poorer due to the efforts of the ECB. The explicit goal of the central bank is now to make them even more so. What is the point of such a policy?
There is of course a point to this seeming lunacy: it is all done to support the profligate governments of Europe’s welfare states and keep the formation of the socialistic super-state in Europe on track. Whether this is seen as good or bad by the average citizen is not even up for debate: it is simply what the political and bureaucratic elites have long ago decided is good for the citizenry, since they think they know best. One might say that it is up to said citizens to elect someone who would do things differently, but that runs into the practical problem that many, even most, of the political groups offering an alternative are even bigger etatistes than the current elite. Whether they are of the socialist or the nationalist (more precisely, national socialist) variety matters little in this context. One would have to expect them to implement even more central economic planning.
The ECB may succeed in increasing economic activity and prices in Europe (especially the latter) by stepping up the pace of monetary pumping even more. However, this will not create any new wealth and will ultimately only sow the seeds of the next crisis. Since many economic regions in Europe are already very poor structural shape, it is also possible that that not even the illusion of economic growth can be created anymore. Bondholders should however be happy, as they can now unload the debt of governments that are up to their eyebrows in debt that will never be repaid in real terms on a buyer with unlimited buying power.
Perhaps echoing two entire nations’ frustration, one reporter loses his cool when Mario Draghi explains how everyone else in Europe gets free money except Greece and Cyprus…
Having explained that The ECB’s Bond-Buying program wil lnot include Greek and Cypriot bonds, “feisty” veteran Greek journalist Aristidis Vikettos unloads on Draghi… “You’re Biased…” he exclaimed, leaving Draghi speechless
Mario Draghi was left speechless on live television when a feisty veteran journalist accused him of bias during really tense moments at a press conference, following the conclusion of the ECB Governing Council meeting in Nicosia. Continue reading »