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The world was saved there briefly overnight after SNB’s giant liquidity shot into CS.

But it didn’t take long fort reality to sink in about the band-aid-like nature of this facility.

However, the situation under the hood may in fact be worse than some thought as Bloomberg reports, according to people familiar with the talks, that ECB Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to rising interest rates.

Guindos said that the ECB couldn’t rule out that some lenders might be at risk because of their business models, according to the people.

The market did not like that reality check with European IG credit spreads now above yesterday’s highs…

Guindos also cautioned not to be complacent and warned that a lack of confidence could trigger contagion.

Touching on a likely key theme of Thursday’s rate decision, Guindos highlighted the potential conflict between the ECB’s mission to bring down inflation and potential damage to some financial institutions from higher interest rates.

And after that headline on bank vulnerability, the odds of a 50bps hike today have tumbled…

What will Christine do?

ECB Holds Emergency Meeting To Discuss Market Turmoil

June 15, 2022

ECB Holds Emergency Meeting To Discuss Market Turmoil

Last week, shortly after the ECB’s latest meeting disappointed markets and concluded without a discussion of Europe’s growing bond market fragmentation (which is to be expected since QE – the glue that held the Euro area’s bond market together – is ending) and which has since sent Italian bond yields soaring above 4%, we joked that “at this rate the ECB would make an emergency rate cut” just hours after announcing an end to QT and guiding to a July rate hike.

Once again, our “joke” was spot on because on Wednesday morning, just hours before the Fed’s first 75bps rate hike sine 1994, and with Italian bonds in freefall, European Central Bank “unexpectedly” announced it would hold an emergency, ad hoc meeting of its rate-setters starting 11am CET in which it would “discuss current market conditions.” It wasn’t immediately clear if a statement would be published after the confab.

The meeting, which comes less than a week after the rate-setting governing council’s last vote, raised investor expectations that the central bank is preparing to announce a policy instrument to stave-off another debt crisis in the region, which can only come in the form of more QE… which is ironic at a time when the ECB just announced it was phasing out all QE!

Italian government bonds rallied in price following news of the planned meeting, reversing some of the recent sell-off that analysts said brought the country’s borrowing costs towards the “danger zone”. Gilles Moec, chief economist at Axa, an insurer, said the “stakes are high” for the ECB “now that everyone is dusting off their debt sustainability spreadsheets for Italy, they probably need to go up an extra notch”.

…click on the above link to read the rest of the article…

Eurozone Inflation at a Record High

December 6, 2021

Eurozone Inflation at a Record High

Inflation in the doomed Eurozone increased 4.9% in November, marking the highest level of inflation since the creation of the euro. The larger economies within the bloc experienced a significant rise in inflation, with Germany posting a 6% increase and France experiencing a 3.4% rise. Other nations saw extreme spikes such as Estonia and Lithuania that reported increases of 8.4% and 9.3%.

Artificially lowering rates has backfired; the inverse relationship between reducing rates and increased inflation is now extremely apparent. Like the Federal Reserve, the European Central Bank (ECB) is aiming for a 2% inflation target. The ECB does not see anything wrong with its current policy. ECB President Christine Lagarde said that the bank will not raise rates in 2022, although they anticipate inflation to continue into the new year. “We still see inflation moderating in the next year, but it will take longer to decline than originally expected,” Lagarde stated in mid-November. Instead of changing the policy, Lagarde will simply revise inflation forecasts at the December meeting, marking the sixth consecutive time the ECB has done so. She should take a page from Powell’s book and retire the term “transitory” when discussing inflation.

Weekly Commentary: A True Central Banker

October 23, 2021

Weekly Commentary: A True Central Banker

Who can blame him? Certainly not me.

October 20 – Financial Times (Martin Arnold and Guy Chazan): “Jens Weidmann has decided to step down after a decade as head of Germany’s central bank, only weeks after the country’s general election and shortly before a crucial decision on the future of eurozone monetary policy. The president of the Bundesbank has been one of the most vocal critics of the ultra-loose monetary policy pursued by the European Central Bank, where he fought an often lonely battle against its bond buying and negative interest rate policies. The 53-year-old said… he was leaving for ‘personal reasons’. But colleagues said he was tired of opposing ECB policies and expected these frustrations to increase as the economy recovers, inflation rises and the ECB’s generous stimulus becomes harder to justify.”

Jens Weidmann fought the good fight – a superior intellectual warrior overwhelmed by the onslaught of rank inflationism. He is a statesman in an age of few, a too often lone voice for sanity in a world of monetary absurdity. The foundation of Weidmann’s analytical framework rests on the profound importance of two simple words (you won’t hear uttered by a U.S. central banker): “stable money.”

Weidmann’s plight is testament to why virtually every central banker falls in line. From the FT: “Labelled by former ECB president Mario Draghi as nein zu allem, no to everything, Weidmann articulated the view of monetary hawks…” While Weidmann resigns with scant fanfare, inflationist extraordinaire “Super Mario” governs as Italy’s Prime Minister. As for U.S. inflationism luminaries, while it’s unclear if Ben Bernanke still collects millions from lunch dates and appearances ($250k for 40 minutes in Abu Dhabi! ), collaborator Janet Yellen runs the U.S. Treasury.

…click on the above link to read the rest of the article…

There is No Getting off Europe’s Elevator to Hell

October 19, 2021

There is No Getting off Europe’s Elevator to Hell

The European Union has been, in the immortal words of Private Hudson from Aliens, “… on an express elevator to hell, going down,” for a long time now.

From the day of then ECB President Mario Draghi’s “We will do whatever it takes” speech in July 2012 to today, the EU has chosen a path of fiscal, foreign and monetary policy insanity that has lead it directly to where it is today, the sick man at the geopolitical table.

The most recent missive from the great Alistair Crooke over at Strategic Culture Foundation has some very choice words for Europe as well as his always trenchant analysis.

“Two events have combined to make a major inflection point for Europe: The first was America’s abandonment of the Great Game ploy of attempting to keep the two Central Asian great land powers – Russia and China – divided and at odds with each other. This was the inexorable consequence to the US’ defeat in Afghanistan – and the loss of its last strategic foothold in Asia…

Crooke lays out the fundamentals which led to the formation of AUKUS and the recent application of a more rapid depreciation curve for NATO.

Underscoring the divisions within the U.S. policy establishment which left Europe, especially France, twisting in the wind with the shift in priorities, Crooke quotes George Friedman of Stratfor, who argued recently on Polish television that NATO serves no real current purpose for a U.S. that finally acknowledges China, not Russia, as its biggest threat.

Since Friedman and Stratfor are as deep state as they come, you should always read Friedman’s publicly available ‘analysis’ as an operations manual for U.S. foreign policy. It’s the real official policy said out loud.

…click on the above link to read the rest of the article…

“Transitory” is the New Spandex: Powell Admits it, Still Denies its Cause. Why this Inflation Won’t Go Away on its Own

September 30, 2021

“Transitory” is the New Spandex: Powell Admits it, Still Denies its Cause. Why this Inflation Won’t Go Away on its Own

Blames tangled-up supply chains but not what’s causing supply chains to get tangled up in the first place: The most grotesquely overstimulated economy ever.

Fed Chair Jerome Powell, during a panel discussion hosted by the ECB today, admitted again that inflation pressures would run into 2022 and blamed “bottlenecks and supply chain problems not getting better” and admitted they are “in fact at the margins apparently getting a little bit worse.”

“The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy, which is a process that will have a beginning, a middle and an end,” he said.

OK, good, he almost gets it: “very strong demand” is causing this. But where the heck does this “very strong demand” come from?

Here’s where: The most grotesquely overstimulated economy ever.

The Fed has handed out $4.5 trillion to investors in 18 months, and repressed short-term interest rates to near 0%, and long-term interest rates (via the $120 billion a month in bond purchases) to ridiculously low levels, and this has inflated asset prices, including home prices, and beneficiaries are feeling rich and flush, and they’re going out and borrowing against their assets and buying $70,000 pickup trucks, electronic devices, yachts, second and third homes, and a million other things. That’s where much of the demand comes from.

The other part of the demand comes from the government, which spread $5 trillion in borrowed money around over the past 18 months – stimulus checks, forgivable PPP loans (over $800 billion), extra unemployment benefits, funds sent to states to spend how they see fit, to airlines and other big companies to bail them out, which then used this money to buy out their employees that then spent this money.

…click on the above link to read the rest of the article…

The ECB is the Reason We Have the Great Reset

September 11, 2021

The ECB is the Reason We Have the Great Reset

The European Central Bank (ECB) has kept its monetary policy unchanged. However, it did slow down the pace of net asset purchases under its pandemic emergency purchase program. The ECB’s main refinancing operations remain at 0%, on the marginal lending facility at 0.25%, and on the deposit facility at -0.5%. The ECB said that it believes that “favourable [sic] financing conditions can be maintained with a moderately lower pace of net asset purchases under the (PEPP) than in the previous two quarters.”

The junkies think what the central banks have to say is still relevant and are eagerly waiting for word to come down from above to see if their unwinding of pandemic-era stimulus in the face of surging inflation would take place. That seems like reading a nice bedtime story to the kids so they sleep with pleasant dreams. The ECB reiterated that interest rates will remain at their present or lower levels until inflation is seen reaching 2% “well ahead of the end of its projection horizon and durably for the rest of the projection horizon,” and until the ECB determines that inflation will stabilize at 2% over the medium-term.

It is really extraordinary to think that there will ever be a return to normal. The ECB has had negative interest rates since 2014. The Federal Reserve warned the ECB that they could get trapped. The warnings were coming in, and even in 2016, the London Evening Standard warned of the black hole of negative interest rates. This entire Great Reset is now due to the fiscal mismanagement of governments and central banks. Those who still think there will be some return to normal finance are no doubt those wearing masks and lining up for booster shots every six months. They can’t wait for the new Pfizer daily pills as well and are ready to listen to Bill Gates and never buy beef again.

…click on the above link to read the rest of the article…

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

September 10, 2021

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

Yesterday, the ECB announced that in Q4, it would “modestly lower the pace of net asset purchases under the PEPP than in the previous two quarters” (even as Lagarde scrambled to convince markets not to call it tapering) with Reuters sources adding that “policymakers set a monthly target of between 60 billion and 70 billion euros” down from 80 billion currently “with flexibility to buy more or less, depending on market conditions.” Putting this non-taper taper in context, Nomura calculated that “even if net PEPP is scaled down to €60bn/month the ECB would still buy 85% of the remaining gross supply, strongly supporting EUR rates.”

Despite the shrinkage of ECB bond-buying, Lagarde made it clear that the fiscal spice must flow:

*LAGARDE: FISCAL SUPPORT HAS TO BE CONTINUED
*LAGARDE: FISCAL SUPPORT NEEDS TO BE MORE TARGETED

The most notable proposal is to exempt “green” investments from calculations of deficit and debt limits and temporarily forgetting existing rules that say debt must be cut every year, Reuters reported citing documents prepared for the ministers’ talks showed.

“The challenge in coming years will be to consolidate deficits while increasing green investments to achieve the ambitious targets of the EU to cut emissions or any other investments,” a note prepared by host Slovenia said.

In other words, the EU will use the “green” strawman of fighting climate change as a loophole to issue debt over and above the EU’s self-imposed ceilings.

…click on the above link to read the rest of the article…

Eurozone finances have deteriorated

August 28, 2021

Eurozone finances have deteriorated

Despite negative interest rates and money printing by the European Central Bank, which conveniently allowed all Eurozone member governments to fund themselves, having gone nowhere Eurozone nominal GDP is even lower than it was before the Lehman crisis.

Then there is the question of bad debts, which have been mostly shovelled into the TARGET2 settlement system: otherwise, we would have seen some substantial bank failures by now.

The Eurozone’s largest banks are over-leveraged, and their share prices question their survival. Furthermore, these banks will have to contract their balance sheets to comply with the new Basel 4 regulations covering risk weighted assets, due to be introduced in January 2023.

And lastly, we should consider the political and economic consequences of a collapse of the Eurosystem. It is likely to be triggered by US dollar interest rates rising, causing a global bear market in financial assets. The financial position of highly indebted Eurozone members will become rapidly untenable and the very existence of the euro, the glue that holds it all together, will be threatened.
Introduction

Understandably perhaps, mainstream international economic comment has focused on prospects for the American economy, and those looking for guidance on European economic affairs have had to dig deeper. But since the Lehman crisis, the EU has stagnated relative to the US as the chart of annual GDP in Figure 1 shows.

Clearly, like much of the commentary about it, the EU has been in the doldrums since 2008. There was a series of crises involving Greece, Cyprus, Italy, Portugal, and Spain. And the World Bank’s database has removed the UK from the wider EU’s GDP numbers before Brexit, so that has not contributed to the EU’s underperformance…
…click on the above link to read the rest of the article…

The Fed Says, “Let Me Squeeze Your Dollars…5 Basis Points at a Time”

August 22, 2021

The Fed Says, “Let Me Squeeze Your Dollars…5 Basis Points at a Time”

I still maintain no one will mark June 16th, 2021 as the day the world changed. Watching the dollar surge into this weekend thanks to a breakdown in the euro only validates that conclusion in my mind.

Remember, on June 16th Presidents Biden and Putin met for a summit which altered the course of geopolitics forever, agreeing to disagree about Nordstream 2 and reversing the worst of U.S./Russian relations among other things.

While that was happening the FOMC met and reversed the flow of dollars globally.

I told my Patrons something was up on June 18th. Then I did 2 hours worth of podcasts on it (here, here, and here) after thinking it through. Finally, after fully digesting it I wrapped it all up in a lengthy post on July 3rd.

The Fed’s decision to pay 5 basis point on Reverse Repos was the subtlest but most effective way to taper without tapering, tighten without tightening and undermine the WEF’s Great Reset while seemingly still supporting it.

I can hear the howls from the gallery who think otherwise so I’ll address them first.

Yes, normie macro-guys, the bond market has been screaming at the Fed that inflation is soaring and they need to raise rates.

Yes, first year domestic policy students, the Fed looks like it is putting pressure on Republicans to cave to Nancy Pelosi’s hardball over the Infrastructure, Budget and Debt Ceiling deadlock, so far to no avail.

Yes, second year geopolitics students, the Fed is forcing China to respond to soaring commodity prices while simultaneously trying to defend the yuan.

Yes, these are all effects of the Fed’s move in June.

…click on the above link to read the rest of the article…

Investors Do Not See “Transitory” Inflation

May 4, 2021

Investors Do Not See “Transitory” Inflation

The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory”. The problem is that investors do not buy it.

Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of non-replicable goods and services to decade-highs have monetary policy to blame. Injecting trillions of liquidity makes more funds chase fewer goods and the rise in the real inflation perceived by citizens is much larger than the official CPI.

Take food prices. The United Nations Food Price Index is up 30% in the past five years and up 10% year-to-date (April 2021). The rise in food prices already caused protests all over the world in 2018 and it continues to reach new highs. The correlation in the price increase of most agricultural goods also shows that it is a monetary effect.

The same can be said about the Bloomberg Commodity Index which is also at five-year highs and up 15% year-to-date.

Yes, there have been some supply disruptions in a few commodities, but it is not widespread let alone the norm. If anything can be said is that the rise in agricultural and industrial commodities is happening despite the persistent overcapacity that many of these had already before the pandemic. We should also remember that one of the unintended consequences of massive monetary expansion is perpetuation of overcapacity. Excess capacity is refinanced and maintained even in crisis times…

…click on the above link to read the rest of the article…

Yield Curve Control: Bubbles And Stagnation

March 25, 2021

Yield Curve Control: Bubbles And Stagnation

Central banks do not manage risk, they disguise it. You know you live in a bubble when a small bounce in sovereign bond yields generates an immediate panic reaction from central banks trying to prevent those yields from rising further. It is particularly more evident when the alleged soar in yields comes after years of artificially depressing them with negative rates and asset purchases.

It is scary to read that the European Central Bank will implement more asset purchases to control a small love in yields that still left sovereign issuers bonds with negative nominal and real interest rates. It is even scarier to see that market participants hail the decision of disguising risk with even more liquidity. No one seemed to complain about the fact that sovereign issuers with alarming solvency problems were issuing bonds with negative yields. No one seemed to be concerned about the fact that the European Central Bank bought more than 100% of net issuances from Eurozone states. What shows what a bubble we live in is that market participants find logical to see a central bank taking aggressive action to prevent bond yields from rising… to 0.3% in Spain or 0.6% in Italy.

This is the evidence of a massive bubble.

If the European Central Bank was not there to repurchase all Eurozone sovereign issuances, what yield would investors demand for Spain, Italy or Portugal? Three, four, five times the current level on the 10-year? Probably. That is why developed central banks are trapped in their own policy. They cannot hint at normalizing even when the economy is recovering strongly, and inflation is rising.

Market participants may be happy thinking these actions will drive equities and risky assets higher, but they also make economic cycles weaker, shorter, and more abrupt.

…click on the above link to read the rest of the article…

From a Hamilton Moment to Perpetual Debt Slaves: This Is the True Face of the EU

December 18, 2020

From a Hamilton Moment to Perpetual Debt Slaves: This Is the True Face of the EU

Over the summer while the U.S. was mired in the worst kind of color revolution with race riots, economic shutdowns and the worst kind of divisive politics, the European Union was celebrating its great achievement.

A seven-year budget and COVID-19 bailout package that was heralded as German Chancellor Angela Merkel’s “Alexander Hamilton Moment.” Because that legislation, meant to be the cornerstone of Germany six-month stint as the president of the European Council finally granted the European Commission the ability to issue debt, collect taxes and disburse funds.

That would be the way the COVID-19 relief funds would be raised and distributed. It was the first moment of fiscal integration under a central EU body that would bypass the individual member states as the means by which to raise capital.

It would be the first step in the process of consolidating debt issuance and euro creation under the control of Brussels, rather than continuing to carry out the fiction of individual sovereign debt.

The euro is a fatally flawed currency because of this and if it is to survive deeper into the 21^st century having only one central issuer of it, the EU itself via the European Commission and the European Central Bank, with one aggregated risk profile (interest rate) is necessary.

The current leadership of the EU was put in place to make this happen on powerful Germany’s watch. And in July is looked like it was done. The markets loved it. The media hailed Merkel as the great leader of Europe. Some countries balked, the so-called Frugal Five, but eventually they signed off on the draft legislation once they were no longer directly on the hook for any more wealth transfers from them to perpetual problem children like Italy, Greece and Spain.

…click on the above link to read the rest of the article…

What the Great Reset Architects Don’t Want You To Understand About Economics

October 24, 2020

What the Great Reset Architects Don’t Want You To Understand About Economics

It shouldn’t come as a surprise that the Vice President of the World Bank Carmen Reinhardt recently warned on October 15 that a new financial disaster looms ominously over the horizon with a vast sovereign default and a corporate debt default. Just in the past 6 months of bailouts unleashed by the blowout of the system induced by the Coronavirus lockdown, Reinhardt noted that the U.S. Federal Reserve created $3.4 Trillion out of thin air while it took 40 years to create $14 Trillion. Meanwhile panicking economists are screaming in tandem that banks across Trans Atlantic must unleash ever more hyperinflationary quantitative easing which threatens to turn our money into toilet paper while at the same time acquiescing to infinite lockdowns in response to a disease which has the fatality levels of a common flu.

The fact of the oncoming collapse itself should not be a surprise- especially when one is reminded of the $1.5 quadrillion of derivatives which has taken over a world economy which generates a mere $80 trillion/year in measurable goods and trade. These nebulous bets on insurance on bets on collateralized debts known as derivatives didn’t even exist a few decades ago, and the fact is that no matter what the Federal Reserve and European Central Bank have attempted to do to stop a new rupture of this overextended casino bubble of an economy in recent months, nothing has worked. Zero to negative percent interest rates haven’t worked, opening overnight repo loans of $100 billion/night to failing banks hasn’t worked- nor has $4.5 trillion of bailout unleashed since March 2020. No matter what these financial wizards try to do, things just keep getting worse. Rather than acknowledge what is actually happening, scapegoats have been selected to shift the blame away from reality to the point that the current crisis is actually being blamed on the Coronavirus!

…click on the above link to read the rest of the article…

The Insanity of Central Banks

October 14, 2020

The Insanity of Central Banks

QUESTION: Marty, you mentioned several times now, that the ECB MUST convert to a digital Euro. I have done speeches about that based on a paper from the IMF (Christine Lagarde) last year, in which they too discuss how to do it. But I have a serious question regarding timing.

I live in Germany and I would say that WE (the country) are not ready for such a move yet. Let alone many people. I have people in my family who still don’t have smartphones (just plain mobile).

I am completely with you that this move is coming (I am also part of a crypto community but as a critical member (I am the party spoiler there)).

But how can they move to a digital Euro to prevent bank runs, when I can’t see the infrastructure in place to do so.

Especially in such a short amount of time rg. the date you mentioned. They can eliminate cash withdrawals, yes, but paying with my smartphone reguires technology .. ?

Thanks a lot,

ANSWER: We are talking about bureaucrats. They only think in concepts much like Klaus Schwab’s Great Reset. The practical application of what they are doing is not there. They lack even the infrastructure, as in California, to force all cars to be electric. They do not have the power grid to support that.

I was in meetings where they actually told me with a straight face that they had to take trading the Euro away from Britain. I asked if they were going to take it away from the USA, Japan, Hong Kong, Singapore, etc? They looked at me puzzled, and said no! Just Britain. I asked if they really wanted to control the Euro just convert it into the old Soviet Union ruble. No free market at all.

…click on the above link to read the rest of the article…

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