QE To Infinity Only Seen In Retrospect

Posted at 1:08 PM (CST) by & filed under General Editorial.

Dear Friends,

The action of the Euro and the news out of Euroland is suspiciously counter intuitive. Don’t buy the party line that it is buying on the bad news.

The Euro minus at least Greece looks better, not worse. The Chinese have to help in order to protect their markets.

I think the deal with the Fed is that the Chinese will watch out moderately for the level of Euro while the Fed will provide all the euro QE money via swaps to the ECB, and why not to other central banks that will then redo the swaps with the ECB?

Follow the money even though it will only be seen in retrospect.

The decrease in French interest rates on the last auction is pure QE and nothing else. It is the use of Fed swaps to the ECB and ECB loans to euro banks to buy the bonds which then add, not detract, from the bank liquidity calculations.

Who are they trying to kid? All this says that 80 to 82 on the USDX is a place where fundamental selling of the US dollar will be huge. That further supports my statement that the gold accordion price reaction is over and the downside is now quite limited in the euro.

Basically what no one a week ago would listen to is starting to take meaningful form. Aren’t you glad you gave me 2 days before joining the herd of Gold? That is those of you that took time to listen to my interview.


ECB’s Chief Warns Situation Is ‘Very Grave’
JANUARY 17, 2012

FRANKFURT—European Central Bank President Mario Draghi delivered his sternest warning to date on Europe’s debt crisis, saying it could cripple financial markets and the economy unless effective actions are taken by governments.

"We are in a very grave state of affairs and we must not shy away from this fact," Mr. Draghi said in testimony to the European Parliament.

Three months ago, Mr. Draghi’s predecessor, Jean-Claude Trichet, told the same group of lawmakers the crisis had reached "systemic dimensions." Mr. Draghi on Monday said "the situation has worsened further" since then.

Steps must be taken to restore economic growth and boost employment even as vulnerable governments reduce their budget deficits, Mr. Draghi said. Concerns over government-bond markets in some European countries, in addition to a worsening of economic growth prospects, "led to severe disturbances in the normal functioning of financial markets and, ultimately, the real economy," Mr. Draghi said.

The ECB has responded "decisively," Mr. Draghi said, citing the bank’s decision last month to make three-year loans available to commercial banks and relax its collateral rules to expand access to the loans. Early results are "encouraging" that the measures helped to avert a major credit crunch, he said, reiterating comments made last week after the ECB’s monthly meeting.

The ECB president delivered a more upbeat message when policy makers met Thursday, pointing to "tentative" evidence that the euro-zone economy was stabilizing. Since then, the euro bloc has been hit by a series of setbacks, including a mass downgrade of euro-zone credit ratings on Friday and a breakdown in Greek debt-restructuring talks.