Posts Tagged ‘Jean-Claude Trichet’

European Banks Still on the Brink

European Banks Still on the Brink

european banksCourtesy of MIKE WHITNEY writing at CourterPunch 

The EU banking system is in big trouble. That’s why European Central Bank (ECB) head Jean-Claude Trichet continues to purchase government bonds and provide "unlimited funds" for underwater banks. It’s an effort to prevent a financial system meltdown that could wipe out bondholders and plunge the economy back into recession.

"We have the best track record on price stability over 11 1/2 years in Europe and among the legacy currencies,” Trichet recently boasted. “What we have done and what we do with the same purpose is to help restore an appropriate functioning of the monetary-policy transmission mechanism.”

Nonsense. EU banks and other financial institutions are presently holding more than 2 trillion euros of public and private debt from Greece, Spain and Portugal. All three countries are in deep distress and face sharp downgrades on their sovereign debt. The potential losses put large parts of the EU banking system at risk. Trichet knows this, which is why he continues to support the teetering system with "unlimited funds". It has nothing to do with restoring the "functioning of the monetary-policy transmission mechanism". That’s deliberately misleading. It is a straightforward bailout of the banks.

Imagine that you are deeply in debt, but the bank offers to lend you as much money as you need to keep you from bankruptcy. To help maintain appearances, the bank agrees to accept the worthless junk you’ve collected in your attic in exchange for multi-million dollar loans. Does the bank’s participation in this charade mean that you are not really broke after all? Does it increase the value of the garbage collateral you’ve exchanged for cash?

The ECB is providing billions of euros per week to maintain the illusion that the market is wrong about the true value of the bonds. But the market is not wrong, the ECB is wrong. The value of Greek bonds (for example) has dropped precipitously. They are worth less, which means the banks need to take a haircut and write down the losses. More liquidity merely hides the problem.

This is from Reuters:

"Despite the open-arms approach, outstanding ECB lending has fallen more than a third since the start of July to 592 billion euros…. Liquidity remains abundant though. Over 120 billion euros was deposited back at the ECB overnight, the latest figures show."

So, overnight…
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Another Bank Bailout

Another Bank Bailout

Courtesy of MIKE WHITNEY writing at CounterPunch

Jean-Claude Trichet, President of the European Central Bank (ECB) addresses the media during his monthly news conference at the ECB headquarters in Frankfurt June 10, 2010. The ECB kept interest rates at 1.0 percent as expected on Thursday and predicted an uneven, moderate economic recovery.   REUTERS/Ralph Orlowski (GERMANY - Tags: BUSINESS HEADSHOT)

On Thursday, European Central Bank head Jean-Claude Trichet announced that he would continue the ECB’s low interest rates (1 per cent) and easy lending policies for the foreseeable future. Wall Street rallied on the news, sending shares rocketing up 273 points on the day. Trichet also said that he would continue his controversial bond-purchasing program which has drawn fire from wary German leaders who fear the onset of inflation. The bank chief dodged questions on the program suggesting that he will operate secretively like the Fed, buying up downgraded assets and concealing their original owner. By appointing himself the de facto Fiscal Czar of the European Union, Trichet has stopped the fall of the euro, scattered the short-sellers, and zapped the markets upward.  Not bad for a day’s work.

Up until yesterday, credit conditions in the EU had been steadily deteriorating. Hoarding by banks had intensified while the rates that banks charge each other for short-term loans was on the rise. Lenders were afraid that the $2.4 trillion in loans to countries in the south (Greece, Italy, Spain, Portugal) and East Europe would not be repaid and that that would push more banks into default.  Euribor (the rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another ) had been creeping upwards while overnight deposits at the ECB were setting new records every day.  Jittery banks have parked over $390 billion at the ECB’s  deposit facility since the crisis began. Banks would rather get low interest on their deposits then lend in the money markets where they might not be repaid at all. 

From Bloomberg News:

“Jean-Claude Trichet said the European Central Bank will extend its offerings of unlimited cash and keep buying government bonds for now as it tries to ease tensions in money markets and fight the European debt crisis.

“ ‘It’s appropriate to continue to do what we’ve decided’ on sovereign bonds, ECB President Trichet said at a press conference  in Frankfurt today. ‘We have a money market which is not functioning perfectly.’

Trichet’s ECB is buying debt and pumping unlimited funds into the banking system as part of a European Union strategy to stop the euro region from breaking apart. While Trichet refused to bow to some investors’ demands for more details


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The ECB Takes a Page From the Fed Playbook, Monetizes Anything That Isn’t Nailed Down

The ECB Takes a Page From the Fed Playbook, Monetizes Anything That Isn’t Nailed Down

Courtesy of Jr. Deputy Accountant 

Hell, they may get desperate and monetize whatever IS nailed down if things don’t look up and quick. Wonder if Trichet has Bernanke on speed dial for this one. At least the ECB is being completely clear about its intentions.

Bloomberg

Jean-Claude Trichet said the European Central Bank will extend its offerings of unlimited cash and keep buying government bonds as it tries to ease tensions in money markets and fight the European debt crisis.

“It’s appropriate to continue to do what we’ve decided” on purchases of sovereign and corporate bonds, Trichet, who heads the ECB, said at a press conference in Frankfurt today. Earlier, the central bank kept its benchmark interest rate at 1 percent. “We have a money market which is not functioning perfectly.”

The ECB is buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. While Trichet refused to bow to some investors’ demands for more details on the bond purchases, he said the ECB plans to offer further help to banks struggling to raise cash in money markets.

“The ECB is really in fire-fighting mode and is no longer thinking about exit,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam. “Interest rates will be lower for longer because of this euro-region sovereign debt crisis.”

Whatever it takes! 

 


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The Center Cannot Hold

The Center Cannot Hold

brown falcon Courtesy of John Mauldin, Thoughts from the Frontline 

The Risks from Fiscal Imbalances 
The Challenge for Central Banks 
Bang, Indeed! 
The Center Cannot Hold 
A Decent Employment Report 
Montreal and New York and Italy

Turning and turning in the widening gyre 
The falcon cannot hear the falconer; 
Things fall apart; the center cannot hold; 
Mere anarchy is loosed upon the world, 
The blood-dimmed tide is loosed, and everywhere 
The ceremony of innocence is drowned; 
The best lack all conviction, while the worst 
Are full of passionate intensity.

- William Butler Yeats

Last week we focused on the first half of a paper by the Bank of International Settlements, discussing what they characterized as the need for "Drastic measures … to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability." As I noted, you don’t often see the term drastic measures in a staid economic paper from the BIS. This week we will look at the conclusion of that paper, and then turn our discussion to the fallout from the problems they discuss, initially in Europe but coming soon to a country near you.

But first, what a week in the markets! I’m sure more than a few investors felt like they had a severe case of whiplash. We will discuss the volatility a little more below.

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How Much is Needed to Bail Out Greece? $159 Billion? $794 Billion? Estimates Vary Wildly as Greece Turns Viral; S&P Downgrades Spain

How Much is Needed to Bail Out Greece? $159 Billion? $794 Billion? Estimates Vary Wildly as Greece Turns Viral; S&P Downgrades Spain

Courtesy of Mish 

Pressure is on German Chancellor Angela Merkel to do something. European Central Bank President Jean-Claude Trichet is in Berlin along with the IMF to arm-twist Merkel. Meanwhile, German citizens want no part of a Greece bailout.

Trichet in Berlin

Trichet in Berlin as Germans Balk at Greek Rescue

European Central Bank President Jean-Claude Trichet is on a diplomatic mission to Berlin as Germany’s reluctance to bail out Greece helps fan a fiscal crisis now burning around the euro region’s periphery.

Trichet and International Monetary Fund Managing Director Dominique Strauss-Kahn will brief German parliamentary leaders in Berlin around noon today about the $60 billion aid package for Greece, which has met with opposition in Europe’s biggest economy. The joint European Union-IMF package would require Germany to stump up the biggest individual loan to Greece.

“It’s a sales pitch in front of an audience that needs it,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “The lawmakers probably need it spelled out that this is not about financing luxury pensions in Greece. Not helping Greece will unfortunately have a direct impact on the euro-area economy and German jobs.”

“Why do we have to pay for Greece’s luxury pensions?” Germany’s biggest-selling tabloid newspaper, Bild Zeitung, asked on its front page yesterday. Almost 60 percent of Germans don’t want to help Greece, Die Welt newspaper reported, citing a survey of 1,009 people.

German Finance Minister Wolfgang Schaeuble asked Trichet and Strauss-Kahn to speak with lawmakers to “facilitate direct insight into the actions as they stand.”

Merkel Puts Demands On Greece

Merkel’s Cabinet Meets on Greece as Pressure for Action Grows

Chancellor Angela Merkel’s Cabinet met to debate help for Greece as Europe’s growing debt crisis tests her refusal to rush German approval of aid.

Merkel is insisting Greece commit to several years of deficit reduction as a cut in the nation’s debt rating to junk yesterday drove up borrowing costs from Italy to Portugal and Ireland and boosted indicators of corporate credit risk around the world.

Action “has to be done now, has to be done very fast,” Organization for Economic Cooperation and Development Secretary General Angel Gurria said in an interview today with Bloomberg television in Berlin before


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Zero Hedge

Radioactive Dust Is Sweeping Over Parts Of Europe From The Sahara 

Courtesy of ZeroHedge View original post here.

An alarming health disaster could be in the making as it's being widely reported this week that radioactive dust has been sweeping out of the Algerian desert and broader Sahara region across the Mediterranean. Further scientists say the ominous sounding 'radioactive Saharan dust' is causing a pollution spike even over parts of Southern Europe.

The Association for Control of Radioactivity in the West (Acro) ...



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ValueWalk

Adversity and Pandemics: Dr Yosef Alhasany's Innovative Perspective on Psychoanalysis

By Adriaan Brits. Originally published at ValueWalk.

  • The WHO pointed out that the pandemic caused mass trauma bigger than that of WWII
  • A unique and ‘medically realistic’ approach provides new, innovative insights and paves the way towards a much brighter future in today’s challenging and stigma-infested society in relation to Mental Health.
  • With the arrival of COVID-19 mental health issues have seen a drastic incline worldwide, and more people are now looking for a form of therapy that actually works. 

The adversity brought by the global pandemic, have experts rethink mental health provisions, most notably, access to ass...



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Phil's Favorites

Goldman, Bank Of America Made Hundreds Of Millions From Texas Blackouts

 

Embed from Getty Images

 

Courtesy of ZeroHedge

Who needs Enron when you have taxpayer-backed "banks."

Whereas 20 years ago, it was Enron that made billions from the California electricity crisis (which it caused), a scandal which culminated with Enron's scandalous and convoluted bankruptcy, this time it is pristine banks such as Goldman and Bank of America that made hundreds of millions of dollars in revenue as tens of millions of Texans were stuck in the dark.

A...



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Chart School

Who is King? The Bond Market or the FED

Courtesy of Read the Ticker

The King Arthur story is battle between a false KING and the true KING. Generally the movie involves surprises, love and violence, and all this coming to the risk on markets very soon. 

The financial blog space expects the FED to do some sort of Yield Curve Control (YCC) to hold interest rates down while inflation moves higher, this is allowing inflation to run hot. The FED wishes to do this over time to deflate the debt away. Very similar to the 1940's post WW2, yields were pegged to 2% and risk on assets went sky high.

However Peter Boockvar suggest the FED may soon learn it is not in control and the true king of the markets is the BOND MARKET. Peter says simply the bond market is telling the FED to bite me!

The FED is not us...

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Biotech/COVID-19

88% Of COVID Deaths Occurred In Countries Where Over Half Of Population Overweight

Courtesy of ZeroHedge View original post here.

A new report by the World Obesity Federation found that 88% of deaths in the first year of the pandemic occurred in countries where over half of the population is classified as overweight - which is defined as having a body mass index (BMI) above 25. Of note, BMI values above 30 - considered obese - are associated with 'particularly severe outcomes,' accor...



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Kimble Charting Solutions

Tech Indicator Peaking Again At Dot.com Highs? Joe Friday Says Watch This Index!

Courtesy of Chris Kimble

Technology is at the heart of our economy… the same way that industrials were 100 years ago.

And that leadership has been present in the stock market for the past two decades. Today’s chart illustrates this… as well as a potential “pause” in that leadership vacuum.

Below is a long-term “monthly” ratio chart of the Nasdaq Composite versus the S&P 500 Index. Here you can see how technology stocks...



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Politics

Why repressive Saudi Arabia remains a US ally

 

Why repressive Saudi Arabia remains a US ally

A demonstrator dressed as Saudi Arabian Crown Prince Mohammed bin Salman with blood on his hands protests outside the Saudi Embassy in Washington, D.C., on Oct. 8, 2018. Jim Watson/AFP via Getty Images

Courtesy of Jeffrey Fields, USC Dornsife College of Letters, Arts and Sciences

Saudi Crown Prince Mohammad bin Salman “approved an operation … to capture or kill Saudi journalist Jamal Khashoggi,” according to a...



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Mapping The Market

Which Governments Ordered Johnson & Johnson's Vaccine?

 

Which Governments Ordered Johnson & Johnson's Vaccine?

Courtesy of Niall McCarthy, Statista

On Wednesday, U.S. regulators announced that Johnson & Johnson's Covid-19 vaccine being developed by its subsidiary Janssen Pharmaceuticals in Belgium is effective at preventing moderate to severe cases of the disease. The jab has been deemed safe with 66 percent efficacy and the FDA is likely to approve it for use in the U.S. within days.

The Ad26.COV2.S vaccine can be stored for up to three months in a refrigerator and requires a single shot, ...



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Digital Currencies

Crypto - It Is Different This Time

 

Crypto – It Is Different This Time

Courtesy of Howard Lindzon

?I have been astonished as you know by the growth of crypto.

I remember back in 2017 when I noticed that Stocktwits message volume on Bitcoin ($BTC.X) surpassed that of $SPY. I knew Bitcoin was here to stay and Bitcoin went on to $19,000 before heading into its bear market.

Today Bitcoin is near $50,000.

Back in November of 2020, something new started to happen on Stocktwits with respect to crypto.

After the close on Friday until the open of the futures on Sunday, all Stocktwits trending tickers turned crypto. The weekend messages on Stocktwits have increased 400 percent.

That has continued each weekend...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Feb. 26, 1pm EST

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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