'..these irresponsible attitudes..' - '..an unprecedented period of unsound global money and Credit.'

Posted by ProjectC 
'..the ECB to buy up to 60 billion euros a month in European sovereign debt from March 2015 until September 2016 .. It is an expression of helplessness..'

<blockquote>'The programme, agreed on January 22, 2015, allows the ECB to buy up to 60 billion euros a month in European sovereign debt from March 2015 until September 2016. The total will exceed one trillion euros. A risk-sharing programme with national central banks was also introduced and quality criteria for eligible debt established .. It is an expression of helplessness. Helplessness before the fact that politicians in European Union countries are not prepared to address the necessary reforms .. Necessary basic reforms are crucial in Europe if it is to restore global competitiveness, increase productivity and get the unemployed back to work. This includes reducing the share of national and local government in the economy. This will reduce the overheads of the national economy and reduce the deficit. Deregulation of laws which are too stringent such as labour and competition law, would enhance activities and ease innovation and job creation.


The real problem with the QE programme of buying sovereign bonds is that it takes the pressure for reform off the politicians .. Most of them – and especially France – have failed to use this opportunity.

It seems unlikely that these irresponsible attitudes will change with QE.'

• Prince Michael of Liechtenstein, European QE funds will not reach the economy, January 23, 2015 (Source, January 23, 2015)</blockquote>

'..an unprecedented period of unsound global money and Credit.'

<blockquote>'I have written that I am these days more worried than in 2007, and back then I was quite apprehensive. And while today’s global risks dwarf those of 2007, complacency and faith in central bankers have become so deeply embedded in securities and derivative prices. Never has there been such extreme divergence between inflating securities markets and deflating future prospects. As an analyst of Bubbles, I contend with the inevitable “chicken little” issue.


I am again reminded of Adam Fergusson’s classic, “When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany.” In reading a brilliant account of the German monetary breakdown, it was incredible how German central bankers remained oblivious to the reality that their printing operations were at the root of an unfolding catastrophe. Like today’s central banks, German bankers at the time believed their actions were a necessary response to outside forces.

These days it goes unappreciated that crises - ongoing and unfolding alike - emanate from an unprecedented period of unsound global money and Credit. To be sure, financial, economic, social and political turmoil in Greece has been a direct consequence of years of unsound finance. The euro monetary experiment, hatched during a period of optimism, integration and cohesion, is now a slow motion train wreck in today’s backdrop of growing discontent, disenchantment, hostility and disintegration. Greece, of course, must shoulder much of the responsibility. Yet the euro currency coupled with unfettered global finance provided the noose for the Greeks to hang themselves. Runaway global monetary inflation has ensured an abundance of nooses.


The euro closed Friday trading at about 1.13 to the dollar. The euro traded below 1.22 only briefly during the tumultuous summer of 2012. Draghi has successfully collapsed sovereign yields. He has also taken a battering ram to confidence in the euro currency. The expectation is that a weak euro will help grease the inflationary wheels. But if the markets begin to fear a Greece euro exit the wheels could come off the weakened euro currency. King dollar wasn’t an issue in 2012. And if the reality begins to sink in that the ECB and others are sitting on near-worthless Greek debt, the public outrage over further ECB bond purchases in Germany and elsewhere could be further inflamed. At this point, “money” must be flying out of the Greek banking system. The ECB’s job just became even more difficult. It’s that age-old illiquidity vs. insolvency issue – throwing good “money” after bad.


I’ll provide a counter argument. The global Credit “system” is quite vulnerable – and king dollar is increasingly destabilizing. “Hot money” is on the move - out of EM, Europe and, increasingly, China. Global currencies are unstable. The ongoing collapse in commodities and EM currencies is creating enormous amounts of impaired global Credit. China remains a Credit accident in the making. The global leveraged speculating community is susceptible to de-risking/de-leveraging.

This week at home, market participants were awakened to the reality that American multinationals have major earnings exposure to both dollar strength and global economic weakness. And the significant tightening in Credit Availability in the energy sector this week manifested into meaningful reductions in capital expenditure budgets (and job cuts). The U.S. economy is not immune to global forces. Yet the greatest exposure is within the financial markets. There were certainly indications this week that contagion at the “periphery” gained important momentum. There were as well signs that the deflating Bubble at the “periphery” is increasingly impinging the “core.” For inflated and over-confident markets, it’s an inopportune time for Games of Chicken with really high stakes.'

- Doug Noland, Dangerous Games of Chicken, January 30, 2015</blockquote>



..Credit Deflation, January 29, 2015

Financial Blogger Profile of "Mish" on Equities.Com, January 30, 2015

'Academic research indicates that QE in the US contracted rather than expanded economic activity..'</blockquote>