Something Huge Just Happened In Europe

John Rubino
Dollar Collapse

Critics of modern monetary policy have been predicting that the day would come when a central bank would cut interest rates (or at least promise to), and the financial markets, instead of throwing a party, would fall. Then it would be game over for easy money. 

This has yet to happen in the US. Both when the Fed stopped tightening in January and when it promised to resume easing more recently, stock prices soared, which implies that the addict is still responsive to new injections.

But in Europe, where monetary policy is further down the road to universally-negative interest rates, the story is different. On Thursday, European Central Bank chair Mario Draghi went back to his tried-and-true “whatever it takes” script, promising to restart QE and cut interest rates even further if the weak EU economy doesn’t pick up steam. 

The markets, instead of reacting with their typical euphoria, seemed to recoil. Most EU member bond yields went up rather than down, bank stocks fell and the euro — which would normally be expected to fall on the prospect of easier money — rose. 

This is both huge and, like I said, expected. Once a central bank has pushed interest rates below zero and bought up most of the available high-grade bonds, lower interest rates and more bond purchases ought to lose some of their punch. And it appears that they have.

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Gold: Welcome To The Weimar Death Spiral

Dave Kranzler
Investment Research Dynamics 

For starters, I want to re-emphasize the importance of getting your money OUT of fiat currency and OUT of U.S. banks.  If you read this article and do not come to that conclusion, you will end up getting what you deserve:  Commerzbank To Hoard Euros  The Fed is devaluing the dollar every day.   My solution for day to day cash management is Bitgold.  I am not an “ambassador” or “affiliate.”  But I am convinced that it’s the best viable means of managing money that requires “fungability” – i.e. that you need for daily expenses.  You can sign-up for Bitgold here:   Gold-Backed “Checking” Account.  Bitgold operates OUTSIDE of the global Central Banking system.

Second, a colleague of mine told me he knows why the stock market is up today – because it’s open.   That’s not entirely a joke.  But what is a joke is the underlying cause:  rampant global money printing disguised as “quantitative easing  – or Central Bank asset monetization.”

Goodbye Keynes, hello Havenstein.  The Fed and the ECB have resorted to Weimar-style money printing.   The lack of transparency makes it easy for them to impose various forms of disguise to hide the outright money printing.   Today the ECB rolled out its program to buy corporate bonds.  It prints money and buys the bonds of U.S. and European corporations.  The disguised name is “quantitative easing.”

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QE For The Eurozone Is A Gigantic Confidence Trick. It Should Fool No One

Simon Jenkins
The Guardian

At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totalling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the European Central Bank (ECB) has ridden to the rescue.

No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since.

There is absolutely no requirement on these banks to release this money into private or commercial bank accounts. Given the fear of over-lending that regulators have struck into bank bosses since the collapse of Lehman Brothers, the money will simply build up reserves. That is exactly what has happened to quantitative easing in Britain since 2010: there has been no surge in bank lending, except into property investment.

Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves.

Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace. If no one can afford to buy anything, no one will sell anything or invest money in making anything. The chronic imbalance between northern and southern states of the eurozone, previously ameliorated by selective devaluation, has bound poor and rich countries alike in a rictus of cash starvation. Collapsing demand drives down prices and profits; there is nothing for banks to invest in. The Chinese are laughing.

Greece and some other Mediterranean economies are facing poverty not seen in half a century. A return to normal growth means they must declare themselves bankrupt, restructure past debts, leave the eurozone and devalue. Don’t bury money in their banks. Bury it in their wallet. The eurozone may still look great from the top of a Swiss mountain; it looks terrible from the foot of the Acropolis.

The New York Fed Has Contracted JPMorgan to Hold Over $1.7 Trillion of its QE Bonds Despite Two Felony Counts and Serial Charges of Crimes

Wall St. On Parade

The Federal Reserve Board of Governors in Washington, D.C., which functions as the central bank of the United States, has farmed out much of its Quantitative Easing (QE) programs to the Federal Reserve Bank of New York since the financial crisis of 2008. The Federal Reserve Bank of New York has, in turn, contractually farmed out a hefty chunk of the logistics of that work to JPMorgan Chase in the last six years.

Sitting quietly on the Federal Reserve Bank of New York’s web site is a vendor agreement and other documents indicating that JPMorgan Chase holds all of the Mortgage Backed Securities (MBS) that the New York Fed has purchased under its various Quantitative Easing programs. As of last Wednesday, that figure was $1.7 trillion dollars. (The New York Fed has confirmed that JPMorgan is custodian for these assets.)

In addition to holding the MBS, JPMorgan also has a contractual agreement to exercise discretion (its own judgment) in trading the surplus cash that sits in the New York Fed’s cash account. While JPMorgan is restricted to holding collateral backed by U.S. government securities for these cash trades in Repurchase Agreements, its approved list of counter parties include global banks variously charged with rigging the international interest rate benchmark known as Libor, money laundering, aiding and abetting tax evasion, and defrauding clients.

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Tapering of Quantitative Easing Is Throwing Emerging Markets into Chaos - And Big Banks Are Getting Richer

The Real News Network - Despite no real economic recovery, the Fed is winding down quantitative easing, throwing developing countries' economies into chaos

Is Anyone Really Surprised That the System is On the Brink Again?

Phoenix Capital Research c/0 Black listed News

We find it truly extraordinary that anyone is surprised the financial system is under duress again.

After all, what have the Central Banks accomplished in the last five years?

1)   Did they clear out the bad debts that caused the 2008 collapse? NOPE

2)   Did they implement structural reforms to insure another 2008 didn’t happen? NOPE

3)   Did they punish fraud or corruption in any way to insure that the system was clean? NOPE

So what did they do?

They cut interest rates over 500 times and funneled over $10 trillion into the financial system, over 98% of which went to the very players (key banks) who nearly blew up the world in 2008.

And people are actually surprised that the system is back in trouble again? Would you be surprised if giving another shot of heroin to a drug addict who was in a coma didn’t bring him to health?

Honestly, did anyone think this would really work? I know that the connected elites loved it because the whole process allowed them to hand off their garbage investments to the public while leveraging up to acquire more assets via the Fed’s cheap money… but what about those who DON’T work for a top 20 global financial institutions? Did anyone actually believe this would work?

So here we are today, Europe’s already insolvent banks are now potentially on the hook for $3 trillion in Emerging Market investments.

When your entire banking system is leveraged at 26-to-1 it really doesn’t matter who you lend to… you’re bust. But in this case, the bad emerging market investments are just the icing on the rotten cake that is Europe’s banking balance sheets.

Hopefully Mario Draghi can “promise” something again and the whole system will hold together. After all, THAT and Bernanke’s decision to engage in more and more QE (despite NO evidence that QE benefits the economy) are what brought us back from the brink in June 2012… maybe Janet Yellen and Mario Draghi can repeat this.

Then of course there’s China… which has created the single biggest credit bubble relative to GDP in history. Nevermind, that they literally blow up buildings to build new ones to pad their GDP numbers… China is a miracle and its economy is on the verge of becoming another US.

The world believes China can become more driven by consumers… though the data shows consumer spending has grown by 9% a year for 30 years there… so hoping that things are going to erupt higher there is a little misguided.

And of course there’s the US, which is STILL printing $65 billion per month despite two QE tapers… which folks claim were terrible for the world (how exactly is printing $65 billion per month five years into an alleged recovery, a good thing? Doesn’t that NEGATE the entire claim of a recovery at all?).

You can build a house on a rotten foundation (bad debt, fraud, corruption) and it will stand for a while. But eventually it will collapse.

This will again happen with the markets. The only difference is that this time around, the Central banks have already spent most if not ALL of their ammo propping up the system.