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ECB & Helicopter Money

Mario Draghi

How to Run Gov for DummiesSo-called helicopter money involves using a central bank’s power to create money to directly inject funds either into government coffers or straight into the pockets of the public. Yet, nothing has been working and the ECB is now stating that they will continue to buy in debt, but they will also buy corporate debt. On the other side of the table lies the banks. The banks are advising the ECB what to buy so they can clean out the crap from their books. This is by no means in any textbook on how to manage the economy for dummies. The ECB is just shooting in the dark, hoping this will one day have some effect.

While in theory this should be creating money that would be inflationary, no such impact would take place if all they are doing is buying in debt from banks who are desperate to get their balance sheets in order. This money is just monetizing money already lost. Hence, they are not really creating helicopter money until the real money supply increases and passes through the banks into the hands of the public, which has NOT been taking place.

Central banks rely WAY TOO MUCH on commercial/investment banks who both front-run them in the markets of today. The ECB says they will buy corporates and the spread comes in 30bp instantly because the banks have a buyer who has announced they will be a buyer. Those in government are really clueless. When Gordon Brown announced in advance that he would see the British gold reserves, the price fell, the market bought the gold and then it rallied. Those in government have absolutely no idea how markets function.

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

Why Mario’s Got A Bee In His Bonnet

Why Mario’s Got A Bee In His Bonnet

“We have a mandate to preserve price stability for the whole of the euro zone, not only for Germany,” he said. “We obey the law, not the politicians, because we are independent.”

There you have in brief the whole rationalization for the monetary madness that Draghi and his kindred central bankers have unleashed on the world. They claim that their rubbery statutory mandates to pursue the equivalent of economic apple pie, such as ‘price stability’, leads in a straight, unbreakable line of logic and monetary science to the lunacy of negative 0.4% money market rates and $90 billion per month of bond-buying.

No it doesn’t.  There is no scientific linkage whatsoever—–just an ideological leap based on a Keynesian demand model that conveniently delegates all power to the central bankers’ soviets.

Just as in the case of the Humphrey-Hawkins Act in the US, the ECB’s enabling statute does not define price stability in quantitative terms—-nor does it specify the inflation index to be used or the duration to be measured. Even when the ECB’s Governing Council attempted to formulate a quantitative definition of ‘price stability’, it only got slightly more specific in defining it as something between zero and 2% over the course of a year.

“Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%.”

By its own definition, therefore, the eurozone does not have a “deflation” problem or even a “lowflation” threat. For the last 16 years, the core HICP has averaged 1.5%, and during the last year when allegedly the deflationary sky was falling, the core consumer inflation index has risen by 1.0%.

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

Central Banks Are Trapped – Are Higher Interest Rates the Only Answer?

COMMENT: Marty, well it looks like you have done it. The central banks are going to start raising interest rates right in line with your model. It is interesting how your computer puts the entire world before you to see. Keep up the good work. They obviously are starting to follow you.


REPLY: I do not think that the central banks are simply beginning to follow us. Yes, they all probably read us, no doubt. But make no mistake about it, they are going to raise rates, not because of our model, but because they have no choice. Low interest rates have wiped out pension funds and destroyed the living standards of the elderly. These people are clueless and should never have followed Larry Summers down this path of absolute hell. The comments of Glenn Stevens, the meeting between Yellen and Obama, and the criticism starting to surface against Draghi at the ECB are the realization that interest rates must be “normalized” (raised). However, they have created a nightmare for governments are addicted to low interest rates and their budget will explode; we will see a sharp rise in taxes from 2017 onward.

We will be putting out a very important special report. Behind the curtain, state pensions are lobbying Congress to make it MANDATORY for everyone (not just government employees) to contribute to state pension systems. They want to takeover your 401K, manage everything, and rob your savings to pay for unfunded liabilities to state workers. This is how they are looking to bail themselves out — it will be the dark side post-2017. All of this is going on right now but it is still hush-hush.

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

“We Cannot Afford another Draghi”: Germany Attacks ECB

“We Cannot Afford another Draghi”: Germany Attacks ECB

Negative interest rates, helicopter money trigger Clash of Titans.

Relations between the government of Europe’s biggest economy, Germany, and Europe’s most powerful financial institution, the European Central Bank, have soured to the point of curdling.

The latest volley of barbed remarks came from Germany’s dour Finance Minister Wolfgang Schäuble, who has never been one to mince his words. Speaking at an awards ceremony outside Frankfurt on April 8, he told the audience that the stellar rise of right-wing populist Alternative für Deutschland party was due in large part to the ECB’s loose monetary policy.

“I told Mario Draghi … you can be very proud,” according to a report by a Dow Jones journalist who was present.

Schäuble’s off-the-cuff remarks set in motion a flurry of caustic statements from other conservative German politicians, with the lion’s share of the ire reserved for the ECB’s negative interest rate policy.

“Mario Draghi’s policies have led to a massive loss of credibility of the ECB,” said the deputy head of the CDU parliamentary group, Hans-Peter Friedrich, who also called for Draghi to be replaced by a German when the Italian completes his term, in 2019. “The next ECB Chief must be a German, who feels bound to the German Bundesbank’s tradition of monetary stability.”

Friedrich’s sentiments were echoed by the CSU foreign policy expert and member of the Bundestag Hans-Peter Uhl. “We cannot afford another Draghi,” he said. “We need to place a key German financial specialist at the head of the ECB.”

As the German daily Handelsblatt notes, the latest exchange marks a new low for Germany’s policymakers in their relations with the Frankfurt-based ECB. The main trigger for the latest storm of protest was Draghi’s praise last month for the idea of “helicopter money” – showering citizens with newly created money.

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

The Catastrophic Mismanagement of the Economy & The Coming Meltdown

Draghi Schauble

Cover-Pension CrisisWe are finishing up the “Pension Crisis – The Next Nightmare,” which is a special report outlining the next global meltdown. Germany’s Federal Finance Minister Schaeuble is now openly blaming Mario Draghi for the electoral success of the AFD in Germany, which is the Alternative for Germany (In German: Alternative für Deutschland, AfD). The AFD is a right-wing populist party that is also the Eurosceptic political party in Germany. The AFD has risen from 0% to nearly 40% in about 2 years.

Additionally, Schaeuble seems to be rumbling that the ECB is creating a huge problem with negative interest rates. If the ECB does not change its monetary policy radically and soon, Germany will be engulfed in its own major pension crisis. Central banks may be forced to raise rates to try to bail out pension funds. This has nothing to do with the economic trends.

The pension crisis is becoming a real nightmare for federal and state budgets and now depend on exceptionally low interest rates while pension funds are going bankrupt. Raising rates to help the pension funds will wipe out government budgets. This entire idea of Keynesian economics, which says that government is capable of managing the economy by raising and lowering interest rates, is a complete disaster. These people are incapable of forecasting the economy, as former Secretary of the Treasury Larry Summers openly admitted to Bloomberg TV. Those who think they are endowed with magical powers to manipulate society have created a complete mess and they are too brain-dead to realize the consequences. Our computer is extremely bearish on government. The turning point (2015.75) was the PEAK IN GOVERNMENT. Ever since that turning point, we have begun the downhill move that is destined to collapse into January 2020 (2020.05).

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

Schauble Throws Up All Over Mario Draghi: “The ECB Is Causing Extraordinary Problems”

Schauble Throws Up All Over Mario Draghi: “The ECB Is Causing Extraordinary Problems”

Following this weekend’s snafu in which Spiegel said that Germany is considering suing the ECB if it launched QE, Mario Draghi reportedly made attempts to “mollify” Germany with promises that this won’t happen (it will) and that it was willing to meet – literally – with the German finance minister to appease any concerns he may have. Moments ago, Reuters reports that the meeting appears to have gone… badly.

Oops.He added that he doesn’t see the ECB seriously discussing helicopter money (it is) adding that ECB policy does not help trust in Europe integration, and conluded with the following condemnation of everything that has been tried, and failed, so far:


Meanwhile, the IMF says that only more monetary and fiscal policy can save the world from fiscal stagnation.

While it is unclear what happens next, it is very much clear that never during the New Normal has there been so much confusion on how to proceed and what the next steps should be.

Deficit Spending is Not the Answer

The Growing Chorus for Fiscal Stimulus

Central bankers and monetary adherents the world over are united in the common grouse that fiscal policy is lacking.  Grander programs of direct stimulation are needed, they grumble.  Monetary policy alone won’t cut the mustard, they gripe.

1-global debtGlobal debt-to-GDP ratios (excl. financial debt). Obviously, it is not enough. More debt is needed, so we may “stimulate” ourselves back to prosperity.

Hardly a week goes by where the monetary side of the house isn’t heaving grievances at the fiscal side of the house.  The government spenders aren’t doing their part to boost the GDP, proclaim the money printers.  Greater outlays and ‘structural reforms’ are needed to spur aggregate demand, they moan.

For example, last month, just prior to the G20 gala, the Organization for Economic Cooperation and Development (OECD) asserted that “Getting back to healthy and inclusive growth calls for urgent policy response, drawing on monetary, fiscal, and structural policies working together.”

The OECD report also stated that “The case for structural reforms, combined with supporting demand policies, remains strong to sustainably lift productivity and the job creation.”

4295203312_1ec36291bc_bThe Chateau de la Muette in Paris – this magnificent building that once housed members of France’s nobility nowadays ironically serves as the headquarters of the socialistic central planning bureaucracy known as the OECD. This parasitic carbuncle is high up on the list of globalist institutions that must be considered an extreme threat to economic freedom and progress.     Photo via oecd.org

Several weeks later, on March 10, European Central Bank President Mario Draghi offered a similar refrain.  At the ECB press conference Draghi remarked that “all [Eurozone] countries should strive for a more growth-friendly composition of fiscal policies.

Then, wouldn’t you know it, former Fed Chairman Ben Bernanke also added his alto vocals to the chorus.  Last week, in his Brookings Institution blog, he wrote:

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


Yellen, Draghi, Kuroda: Deranged Lab Rats


As John Hussman points out, the market is poised to deliver nothing over the next decade, with a 40% to 55% “dip” in the foreseeable future. I wonder how many barely sentient, iGadget addicted, non-questioning, normalcy bias dependent zombies are prepared for a third Federal Reserve generated market collapse in the last 15 years?

From a long-term investment standpoint, the stock market remains obscenely overvalued, with the most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons. From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by about 40-55% from present levels; an outcome that would not be an outlier or worst-case scenario, but instead a rather run-of-the-mill cycle completion from present valuations.

The only people who can’t see the recession in front of their noses are central bankers who are paid to lie, obfuscate, and mislead; corrupt politicians trying to get elected or re-elected; and media pundits whose job is to keep the sheep sedated with positive propaganda and a never ending stream of trivialities and drivel.

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

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

On Monday, in “JPM Looks At Draghi’s ‘Package,’ Finds It ‘Solid’ But Underwhelming,” we noted that according to Mislav Matejka, investors would do well to fade the ECB’s latest attempt to jumpstart inflation, growth, and of course asset prices with Draghi’s version of a Keynesian kitchen sink.

Overall, we believe the latest package is far from a game changer,” Matejka opined.

What was especially interesting about that particular note was the following graph and set of tables which show just how “effective” NIRP has been for the five central banks that have tried it so far.

As you can see, once you go NIRP, it’s pretty much all downhill from there whether you’re talking inflation, the economy, or even equities.

Given that, and given that the entire idea is absurd on its face for a whole laundry list of reasons, one wonders why any central banker would chase down this rabbit hole only to find themselves the protagonist in the latest retelling of “Krugman in Wonderland”.

In any event, for those wondering whether the Fed will join the ECB, the BoJ, the Riksbank, the SNB, and the NationalBank in this increasingly insane monetary experiment, below, courtesy of Bloomberg, find a chronological history of Fed and analyst commentary on NIRP in America.


  • March 16: Yellen said during post-FOMC press conference Fed isn’t actively considering negative rates, studying effects in other nations
  • March 2: San Francisco President Williams said “we’re not doing negative interest rates”; Williams Feb. 25 said negative rates are “potentially in the toolbox” but may have “unintended consequences”
  • March 1: Former Fed Chairman Alan Greenspan said on Bloomberg Radio and TV negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment…click on the above link to read the rest of the article…

The Narrative Fix Is In

The Narrative Fix Is In

But the most amazing thing happened the next day on August 3. What the Financial Times had originally called “Draghi’s Blunder” was now written up as “Draghi’s Bold Move”. Every talking head and person of media influence (what game theory calls Missionaries) with access to the ECB or a European central bank started reading from the same playbook (“Mario is a genius”, “markets got it wrong”, etc.). I thought my head would explode if I heard the word “bold” one more time. Combine this with the European Plunge Protection Team buying up every risk asset in sight at the opening bell, and the rest, as they say, was history. European (and global) markets rocked on in risk-on mode for months … years, really, if you focus on Eurozone sovereign rates. It’s the purest example of Narrative creation and the Common Knowledge Game in action that I know, and was in many ways the spark for my starting Epsilon Theory.
…click on the above link to read the rest of the article…

Ryan McMaken: The European Central Bank Finally Throws in the Kitchen Sink

Back in January, ECB President Mario Draghi doubled down on his earlier commitment to do “whatever it takes” to prop up the European economy with easy money.” “There are no limits to how far were willing to deploy our instruments,” Draghi swore in January.

He wasn’t joking. Today, Draghi and the ECB resorted to what some are calling the “kitchen sink” option, and what others are calling the “bazooka.”

You don’t have to be an expert on monetary policy to understand what these metaphors are trying to tell you.

According to CNBC:

In light of cuts to the growth and inflation outlook, the ECB announced on Thursday that it had cut its main refinancing rate to 0.0 percent and its deposit rate to minus 0.4 percent.

“While very low or even negative inflation rates are unavoidable over the next few months as a result of movement in oil prices, it is crucial to avoid second-round effects,” Draghi said in his regular media conference after the ECB statement.

The bank also extended its monthly asset purchases to 80 billion euros ($87 billion), to take effect in April. In addition, the ECB will add corporate bonds to the assets it can buy — specifically, investment grade euro-denominated bonds issued by non-bank corporations. These purchases will start towards end of the first half of 2016.

Eighty billion euros? That’s a huge number. Some may remember that during QE3 — the largest of the Quantitative Easing programs — in 2013, the Fed was making $85 billion per month in asset purchases.

It eventually trimmed back to $75 billion and then $65 billion. In that time, the Fed amassed a balance sheet of more than $4 trillion.


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

The Central Bankers Are Crazy & Public is Out Of Its Mind – Where’s the Beef?


The central bankers are simply crazy, not evil. They are trying to steer the economy by utilizing this simpleton theory that if you make something cheaper, someone will buy it. Japanese and German cars managed to get a major foothold in the U.S. because the quality of U.S. manufacturers collapsed, thanks to unions. The socialist battle against corporations forgot something important – the ultimate decision maker is the consumer. The last American car I bought in the 1970s simply caught on fire while parked in my driveway. Another friend bought a brand-new American car and there was a terrible rattle. When they took the door panel off, there was an empty bottle of Coke inside. Cheaper does not always cut it. Gee, shall we cheer if the stock market goes down by 90%? It would be a lot cheaper. Why does the same theory not apply?

Crazy IIThen we have the trading public. If the central bankers have gone crazy with this whole negative interest rate theory, then the public is simply out of their minds. The euro rallied because Draghi cut rates further, extended the stimulus another year, increased the amount by another 33%, and then declared rates would stay there for years to come. And these insane traders cheer. Unbelievable! They are celebrating the public admission of Draghi that all his efforts to date have failed, so let’s do even more of the same. And they love this nonsense? Negative interest rates have become simply a tax on saving money and the stupid traders and media writers love it. The Fed tries to raise rates and they say – NO! This is a stunning combination of admission and stupidity that one would expect from a pretty but clueless girl and her drunk college boyfriend who can’t say no to any girl:

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

Draghobert the Terrible Strikes Again

Ahead of Thursday’s ECB meeting, there was a widespread consensus that Europe’s chief printing press supervisor would make up for the alleged “mistake” of under-delivering on monetary lunacy last time around. Therefore, a sizable dose of fresh absurdities had to be expected, with only small disagreements on the details. It is fair to say the man didn’t disappoint.

Draghobert the TerribleDraghobert the Terrible, trying to assault the euro again   Photo credit: Michael Probst / AP Photo

There was an even greater consensus that the punters populating the casino were eagerly awaiting such news, and that they stood ready to deploy wagon-loads of money (mostly other people’s) in the direction wished for by the central planning puppeteers. This particular detail didn’t quite work out as expected, at least not at first. For instance, after an initial swoon, the ECB’s very own confetti became more rather than less expensive.

1-Euro June futures, 20 minJune euro futures, 20 minute candles. At first, the euro did what it was “supposed” to do – and then it went “yen” on the Dragon and his minions – click to enlarge.

Similar scenes played out elsewhere. Here is for instance a 20 minute chart of the  June Bund futures contract, which was subject to a similar sudden change in market opinion:

2-german bund, june future,20 minInstant hangover in Bund futures  – click to enlarge.

Other playthings were similarly impacted, from the DAX to gold. All the stuff that used to habitually react in a certain manner to more ECB largesse essentially did the opposite of what it was “supposed” to do.

Readers may recall the last time when a similar thing happened. That was on occasion of Kamikaze Kuroda’s attempt to smite putative yen bulls by cutting the BoJ’s deposit rate into negative territory.

3-June yen futureThat didn’t quite work out as planned either… – click to enlarge.

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


The ECB – A Victim of its own Ignorance?


Mario Draghi

“Rates will stay low, very low, for a long period of time and well past the horizon of our purchases,” Draghi declared. “From today’s perspective and taking into account the support of our measures to growth and inflation, we don’t anticipate that it will be necessary to reduce rates further.” The ECB cut its main interest rates to new record lows on Thursday as they continue to move into negative territory without a clue as how to reverse the trend.

Beginning in April, the ECB will buy €80 billion euros worth of bonds each month, which is an increase from the €60 billion euros presently. Draghi will keep the stimulus program running at least until March 2017. However, while he thinks simply lower interest rates will entice people to borrow, he fails to see the other side of the coin that is spinning.

Lower rates rob savers of income, destroy pension funds, and leverage the debt to a dangerous level when the trend changes. People will not borrow or spend when they have no confidence in the future and businesses will not hire or expand. You cannot stimulate the economy with lower rates while crushing it with taxes.

It is true that the economic community was expecting a rate cut and more asset purchases of government debt. However, the ECB went further this time by saying it will start buying debt issued by companies as well as governments. While that is an improvement for corporations, whom typically have to pay back their debt unlike government, there is a dark cloud behind this statement. The debt they will buy, according to reliable sources, will be riskier debt of entities (banks) that are in trouble.


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

Mario Draghi Got Lost In A Rabbit Hole

Arthur Rackham “Why, Mary Ann, what are you doing out here?”1907

I’ll try and keep this gracefully short: Mario Draghi ‘unleashed’ a bazooka full of desperate tools on the financial markets yesterday and they blew up in his face faster than you could say blowback or backdraft (and that’s just the start of the alphabet). This must and will mean that Draghi’s stint as ECB head is for all intents and purposes done. But…

But there are two questions: 1) who has the power to fire him (not an easy one), and 2) who can replace him. Difficult issues because the only candidates that would even be considered for the job by the same people who hired -no, not elected- Mario -and who will still be in power after he’s gone-, under present conditions, are carbon copies of Draghi. They all went to the same schools, worked for the same banks etc.

So maybe they’ll let him sit a bit longer. Then again, the damage has been done, and Mario has done a lot of destruction, is what the markets said yesterday. But to replace him with someone who’s also already lost all credibility, because they supported Mario every step of the way, carries a very evident risk: that nobody will believe in the entire ECB itself anymore. If you ask me, it’s crazy that anyone still would, but that’s another chapter altogether.

Not that Janet Yellen and Japan’s Kuroda and China’s Zhou Xiaochuan should not also be put out by the curb. While they may -seem to- vary in approaches today, they all started from the same untested, purely theoretical and entirely clueless origins. Just saying. None of them have any idea what negative rates etc will lead to. They’re all in the same rabbit hole. And that’s not a joke, it’s deeply sad.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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