Jim’s Mailbox

Posted at 1:46 PM (CST) by & filed under Jim's Mailbox.


Liquidity to what end?

“If Draghi gets aggressive on the monetary stimulus, look for something similar to the BOJ’s program: A qualitative quantitative easing (QQE), which would involve purchasing of equities in addition to bonds. If it is QQE then the monthly amount ought to be BIGGER as there are plenty of bank and financial stocks that the ECB could purchase, pumping liquidity into the financial system while supporting bank stock valuations, which have been decimated under negative interest rates.”

Liquidity to help institutions and hedge funds get out of financial stocks before the collapse?

Certainly, in my eyes, supporting financial stocks will do that, but nothing to resolve the economic turmoil Europe ( and the rest of the world ) is undergoing.

The public, again, is having the wool pulled over their eyes.











Stupidity represented by politicians

(not looking beyond their noses)

Fear represented by the public

(over reacting to the natural market corrections and cleansing mechanism in capitalism)

Greed represented by the big investment houses (utilizing the political system to their own ends, at the expense of the public)

CIGA Wolfgang Rech

Notes From Underground: The ECB and the Swan Song of Mario Draghi
September 10, 2019

We are coming to the end of Mario Draghi and the “Whatever It Takes” era. Remember, the head of the European Central Bank said he would do whatever it takes to preserve the EURO. This fealty to the currency has resulted in a -40 basis point deposit rate, a massive expansion of the ECB’s balance sheet via sovereign and corporate bond purchases.

The EURO has been weakened since it has been a beloved tool of the carry traders. The negative result has been that European domestic banks have been crushed as lending margins have disappeared and negative rates have resulted in net payments to the ECB from the banks. (Unlike in the United States, where the interest on excess reserves rate has resulted in the FED paying out interest premiums to its deposit-taking institutions.)

Now, we’re going to have to contend with Draghi’s presentation Thursday, his last before Christine Lagarde takes the scepter.

The EUROPEAN SOVEREIGN DEBT markets have been pricing out an uber-dovish Draghi as BUNDS, OATS and BTPs have all been in corrective mode. The consensus seems to be that the ECB will cut the deposit rate to NEGATIVE 50 BASIS POINTS while embarking on a new, open-ended QE plan of 25 billion euros per month.