It is clear from the EU Finance Ministers’ template-like comments to the press what the real worry is in Europe (and the world). It’s not The Greeks (Schaeuble: “No other decision was possible, no problem with Greek referendum… need to see what happens next”), it’s something else:
*SCHAEUBLE SAYS DOING EVERYTHING POSSIBLE TO AVERT MARKET UNEASE
*PADOAN: INSTRUMENTS IN PLACE TO COUNTER POSSIBLE CONTAGION
*DIJSSELBLOEM: OUR INSTITUTIONS ARE PREPARED TO TAKE ANY ACTION
*STUBB: “I DO NOT SEE A RISK OF CONTAGION”
*SCHAEUBLE SAYS WE’LL DO EVERYTHING TO FIGHT CONTAGION THREAT
*PADOAN: IF INSTABILITY, ECB HAS INSTRUMENTS TO INTERVENE
“… the immediate aftermath of such a non-payment will be to push bond yields up across the periphery. This rise in the fiscal risk premium (Exhibit 3) will of course be limited, because the ECB will likely accelerate QE, including via the Bundesbank. That will push rate differentials, especially longer-dated ones, against EUR/$. We estimate that the initial fiscal risk premium effect could be three big figures, while the subsequent QE effect could be worth around seven big figures”
This was not supposed to happen: by now the Greek insolvency “can” should have been kicked, and the Greek government, realizing the money has run out for both the government and the banking system, should have folded to Troika demands, and allow the Troika money to return repaying obligations to the Troika in exchange for more spending cuts.
Instead, the “game theoretical” approach of bluffing until the end, and beyond, has put both countries in a corner from which neither knows how to escape, and with the “final deal deadline” passing this weekend we now have quotes such as this from the EU: Continue reading »
“The head of Germany’s Bundesbank ripped into the European Central Bank on Thursday, saying emergency funding for Greek banks broke the taboo of financing governments and it was not up to central banks to decide who was or wasn’t in the euro zone,” Reuters reports.
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.
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 »
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 »
The European Central Bank will kick off its monthly €60 billion purchases of government bonds and private sector assets next Monday, said the head of the ECB Mario Draghi.
“Following up on our decisions of 22 January 2015, we will, on 9 March 2015, start purchasing euro-denominated public sector securities in the secondary market. We will also continue purchasing asset-backed securities and covered bonds, which we started last year,” Draghi said in a press-release published Thursday after a news conference in Cyprus.
The programme will last till September 2016, Draghi confirmed. The €1.14 trillion package is hoped to avert deflation and save the eurozone from a triple-dip recession.Continue reading »
With less than 24 hours until the ECB’s meeting at which Mario Draghi and company are set to decide if i) they will increase the current Greek emergency liquidity allotment from €65 billion as a result of the ongoing bank deposit run or ii) reduce – or even outright cancel it – to send Tsipras a message that the time for negotiations is over, Europe is no longer playing Mr. nice guy. In fact, judging by the latest report in Reuters, which may well be nothing but another planted trial balloon (in the aftermath of today’s latest Telegraph revelations one should read everything presented in the media, here certainly included, with a cape-size ship full of salt) Greece can kiss goodbye not only any a loan extension without a bailout “programme” resumption, but also any hope that tomorrow’s its ELA will be increased. Continue reading »
“In short: anyone betting that tomorrow the ECB will extend the Greek last-ditch source of liquidity no questions asked, may want to not hold their breath. And once Greek ELA access is withdrawn, well… Cyprus was called a “blueprint” for a reason.”
As we have consistently shown over the past month, the battle between Greece and the Eurozone is all about leverage, and specifically who has more of it. Furthermore, as we laid it out previously, the best way to quantify this duel of leverage is through two easily observable metrics: the level of Eurozone risk asset prices (if Greek contagion fears were dominant, the Eurostoxx would be tumbling), and the pace of deposit outflows from Greek banks (if the Greeks fear the ECB is about to yank all money they would pull their cash from the bank, in the process forcing Tsipras and Varoufakis to the negotiating table willing to sign anything Europe throws at them).
ECB leverage measured in Greek ATM lines;
Greek leverage measured inversely in the level of the Stoxx 50
Which is why in a Eurozone in which all price levels are now controlled by the ECB, it is not surprising that no amount of huffing and puffing has managed to derail the Stoxx or the Dax even briefly from their relentless surge to all-time highs. Continue reading »
*ECB SAYS IT LIFTS WAIVER ON GREEK GOVERNMENT DEBT AS COLLATERAL
*ECB SAYS IT CAN’T ASSUME SUCCESSFUL CONCLUSION OF GREECE REVIEW
What this means simply is that since Greek banks are now unable to pledge Greek bonds as collateral and fund themselves, and liquidity is about to evaporate, the ECB has effectively just given a green light for Greek bank runs, as suddenly it has removed, both mathematically but worse politically, a key support pillar from underneath the already bailed out Greek banking system, (or merely a negotiating move to let Greece see just what kind of chaos this will create ahead of the big D-Day on Feb 25th when ELA could be withdrawn). Continue reading »
In the early 1970s, there were about 200,000 new US businesses created each year (net of closures). Now, the number is negative. Why are Americans getting poorer?Look no further. No new businesses (net). No new jobs (again net). No new wealth. Under Obama and Draghi, crony capitalism flourishes. Real capitalism dies.