Tag Archives: Deutsche Bundesbank

Opening Quotes: Give Them What They Want

Pavlovian.

But sometimes it really is laughable simplistic.
Cynics will continue to ask – legitimately – what happens when the drugs no longer work?
But its no consolation.
Markets will become ever more un-tradable in the process.

Bloomberg: ‘European Socks Gain On Stimulus Optimism’

“U.S. stocks gained yesterday after Reuters reported that central banks are prepared to coordinate action, if needed, to boost liquidity in financial markets. Reuters cited officials linked to the G-20 nations.

Spokesmen at the European Central BankBank of England, Bundesbank, Swiss National Bank and Bank of France declined to comment when contacted by Bloomberg News on the prospect of emergency coordinated action.”

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Opening Quotes: Two Tail Days

From the FT:

“The crisis is deteriorating at an ever-increasing pace,” said Mark Schofield, a senior strategist at Citigroup. “Investors are increasingly pricing in either of the two tail risks – full eurozone break-up or fiscal union.”

Agreed.

Its as simple and horrendously complicated  as that.

I find myself torn between wanting to believe Barroso’s ‘very big step <forward>’ is close …….

Whilst sensing we need another – genuinely traumatic – event to breakdown the final barricades of resistance.

Crisis fatigue is creeping across the screens.

Can the eternal ‘fudging’ last much longer?

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Opening Quotes: Job Done?

Austerity bites. Governments continue to fall.

And the ECB has ‘done its job.’

We’ll see.

Bundesbank President Jens Weidmann:

“We shouldn’t get so excited about bond yields rising for a limited period of time,” Weidmann said. “They also constitute an incentive to reform, to embark on consolidation.”

The ECB, which has pumped more than 1 trillion euros ($1.3 trillion) into the banking sector since December in a bid to avert a credit crunch, has “done its job,” Weidmann said. Weidmann added that governments must now press on with budget cuts and structural reforms to encourage economic growth.

“It’s important to get the message to governments, ‘this is your job now,’” Weidmann said.

http://www.bloomberg.com/news/2012-04-23/weidmann-says-bundesbank-is-preserving-euro-stability.html

 

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http://go.bloomberg.com/euro-crisis/2012-03-14/the-ecbs-difficult-crisis-exit/

“One of the consequences of the ECB’s crisis measures is that the Bundesbank has become an increasingly significant “creditor” to the “debtor” central banks of Italy, Greece, Spain, and other poorer European countries. Before the crisis began, these “peripheral” nations accounted for one-sixth of ECB borrowing; now, they account for two-thirds.”

 
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Full Moons & Bad Moods

Jürgen Stark, who resigned last year from the European Central Bank’s executive board, told Thursday’s Frankfurter Allgemeine Zeitung that the quality of the ECB’s balance sheet was “shocking”. Mr Stark is a former Bundesbank vice-president.

“The balance sheet of the ECB is not only of gigantic dimensions, it is also of shocking quality,” the FAZ quoted Mr Stark as saying.

Shocking!! I say shocking!!
Never saw the like in the old Bundesbank days.
Add in 2+% inflation forecasts ….. could be a tetchy old ECB meeting today.
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Opening Quotes

Target 2? Get used to it.

More precisely:

 FT: ‘Southern discomfort fuels German unease’

“Perhaps above all, Mr Weidmann’s complaints to Mr Draghi are borne of fears that the ECB’s “non-standard” measures to fight the crisis – such as this week’s longer-term refinancing operation, facilitated by the looser collateral standards – may not be the “game changers” greeted by the markets but crutches for eurozone banks and political leaders to avoid tough decisions.”

“The Bundesbank agrees that central banks are meant to provide banks with liquidity. But it worries that the ECB is straying beyond being a lender of last resort into a long-term prop for failing banks – without appropriate security for the increasing risks it is taking.”

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Political Risk On

Irrespective of the longer-term implications of the recent interventions of Draghi’s ECB, the Bundesbank’s now very public objections to the ‘looser collateral requirements’ of LTRO2 raises all sorts of uncomfortable questions.

How will this play in Germany? Have the Bundesbank drawn a big red line? Will a ‘democratic ECB’ fracture along the  ‘AAA’ and the rest fault lines? Will national central banks continue to assume more of the (credit risk) burden?

The last thing Europe needs is division in its one truly credible institution. But national politics – dare I say national interests – are front and centre where-ever one looks.

In this context, but from a very different perspective, Richard Beinstein writes ‘Why the ‘risk-on’ rally will not last’ in today’s FT. To quote:

‘During credit bubbles, overcapacity builds on bank balance sheets. When credit bubbles deflate, bloated bank balance sheets are no longer a productive use of assets, and they inevitably contract. The only uncertainties are the means and the speed of balance sheet contraction. Economic history shows that the faster bubble-produced overcapacity is reduced, the quicker economies rebound. Economists, therefore, generally prefer speed in capacity rationalisation because they want assets to be used more efficiently. Politicians abhor such speed because it often means job losses and weak voter confidence.’

As an Irishman – and we continue to suffer the NAMA-esque drag of bank de-leveraging – I can tell you this is painfully true. And despite the delicious irony of ‘democracy at the ECB’ – when its been treated with much distaste elsewhere in Europe – beware the politics self-interest.

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