«Eurozone gloom as French and German industrial output falls». Fear not; the ECB will come to the rescue by letting the Euro devaluate, something it can do for Germany and France, but not for Greece or Portugal.  In the VERY SAME WAY, the obsolete British industry suddenly became «competitive» again when George Soros forced the Pound of the European monetary system in 1992 or 93...European Central Bank staff presented policy makers with models for buying as much as €500bn ($591bn) of investment-grade assets, according to a person who attended a meeting of the Governing Council.  Various quantitative-easing options were shown to governors on January 7 in Frankfurt, including buying only AAA-rated debt or bonds rated at least BBB-, the euro-area central bank official said. Governors took no decision on the design or implementation of any package after the presentation, according to the person and another official who attended the meeting. The people asked not to be identified because the deliberations were private.

A 500 billion-euro purchase program would take the ECB halfway toward its goal of boosting its balance sheet to avert a deflationary spiral in the euro area. The institution is also buying asset-backed securities and covered bonds, and government bond-buying would be part of fresh stimulus to be considered at the Governing Council’s January 22 meeting.,, And why not? If the Euro devalues it helps all exporters in the EZ. Also Spain, Italy and Greece become cheaper for UK, US and Chinese tourists.

The Economist 2015 cover - At first glance, we see political figures like Obama and Putin, references to the Rugby cup and the new Spider-Man movie. But a closer look reveals a plethora of disturbing elements. - The Economist is not a random newspaper that publishes quirky 2015 predictions to sell a few additional copies. It is directly connected to those who shape global policies and who make sure that they are applied. The publication is partly owned by the Rothschild banking family of England and its editor regularly attends Bilderberg meetings. In other words, The Economist is connected to those who have the means and the power to make “predictions” a reality.  The 2015-themed cover basically reflects the overall Agenda of the elite and is peppered with cryptic symbols that appear to be included for “those in the know”. And the masses, like Alice watching the Cheshire Cat disappear, will focus on illusions while the wolf in sheep’s clothing will strike … and strike hard....The presence of the Pied Piper on this 2015-themed cover is downright unsettling. The Pied Piper of Hamelin is a German legend about a man who used his magical flute to lure away the children of the city of Hamelin, never to be seen again....This folkloric figure dating from the Middle-Ages is said to represent either massive death by plague or catastrophe, or a movement of massive immigration. It also perfectly represents today’s youth being “lured” and mystified by the “music” of mass media. Conveniently enough, there’s a small boy right under the Piper’s flute.

se tiparesc bani - "euro"...

Preşedintele Băncii Central Europene, Mario Draghi, a anunţat joi măsuri de relaxare cantitativă (QE) de până la 60 de miliarde de euro pe lună, din martie 2015 până în septembrie 2016, pentru a revigora economia zonei euro, transmite Reuters. Conform programului extins al BCE, achiziţiile lunare combinate de obligaţiuni suverane ale statelor din zona euro şi bonduri corporatiste se vor ridica la 60 de miliarde de euro', a afirmat Mario Draghi.  Propunerea de a injecta bani în economia zonei euro reflectă determinarea preşedintelui BCE, Mario Draghi, de a extinde bilanţul instituţiei pentru a preveni deflaţia şi a stimula redresarea zonei euro.  Majoritatea analiştilor se aştepta ca BCE să nu modifice costul creditului în zona euro, după ce rata anuală a inflaţiei în eurozonă a continuat să scadă în luna decembrie 2014, ajungând la minus 0,2%, mult sub ţinta de 2% avută în vedere de BCE. Aceasta este prima scădere a inflaţiei în teritoriul negativ înregistrată de zona euro după luna octombrie 2009. Dacă această tendinţă se va prelungi, zona euro va intra într-o perioadă de deflaţie. SURSA: Agerpres

The European Central Bank head Mario Draghi is expected to make good on his promise to “do whatever it takes” to save the deflating euro and sagging economy and introduce US-style quantitative easing to the tune of €500 billion in bond purchases. The sovereign bond purchases could inject €550 billion ($650 billion), according to a survey of economist by Bloomberg News. The bank meets Thursday and will make a rate decision announcement at 13:45 CET in Frankfurt, which will be followed by a news conference at 14:30 CET.  A non-standard monetary policy to purchase bonds and asset-backed securities is likely to be announced, and will include sovereign debt purchases, but not gold. It is very similar to the US stimulus scheme to ease the money supply. Declining prices and low growth have brought the EU economy, and its currency, to a sluggish stasis. Record low interest rates of 0.05 percent haven’t boosted the economy, either. This extra cash liquidity measure in the banking system will be instead of the current support program known as “suspending sterilization,” which amounted to about €175 billion in weekly fund extractions from EU banks over the last 4 years. This money won’t disappear, but will stay in the banks, and possibly be leant out, thus stimulating growth.   Germany has been against the stimulus, as it believes it could further agitate highly-indebted EU countries, and the German authorities have argued the bond buying program is illegal. Under EU law it is illegal to finance governments and debt. However, the ECB is allowed to buy government bonds in the secondary market and the move wouldn’t be in violation of any eurozone law. At December’s meeting, the ECB Governing Council said it will reassess the monetary stimulus package “early next year.”

 

Iceland's government is now set to make a second attempt at revoking the country's EU application. The country's ruling coalition first decided to submit a bill to stop EU accession early last year, sparking major protests in the capital, Reykjavik.   Iceland is expected to withdraw its application to become a member of the European Union, the Reykjavik Grapevine reported Monday, citing the country's prime minister.   "Participating in EU talks isn't really valid anymore. Both due to changes in the European Union and because it's not in line with the policies of the ruling government to accept everything that the last government was willing to accept. Because of that, we're back at square one," Icelandic Prime Minister Sigmundur David Gunnlaugsson was cited as saying by the magazine.  In an interview with the Icelandic Morgunbladid newspaper on Monday, Birgir Armannsson, chairman of the Foreign Affairs Committee in Iceland's parliament, stated that "it is not unexpected that the prime minister is likely to present a new parliamentary resolution to revoke the membership application."   Iceland applied to join the European Union in 2009 and began formal negotiations the following year. After the 2013 elections, the country's new center-right government decided to end accession talks with the EU. Iceland is currently a member of the European Economic Area, the European Free Trade Association, and a part of the Schengen Area.

The European Central Bank is considering three possible options for buying government bonds ahead of its January 22 policy meeting, according to reports.   As fears grow that cheaper oil will tip the eurozone into deflation, speculation is rife that the ECB will unveil plans for mass purchases of eurozone government bonds with new money, a policy known as quantitative easing, as soon as this month.   According to the Dutch newspaper Het Financieele Dagblad, one option officials are considering is to pump liquidity into the financial system by having the ECB itself buy government bonds in a quantity proportionate to the given member state's shareholding in the central bank.

A second option is for the ECB to buy only triple-A rated government bonds, driving their yields down to zero or into negative territory. The hope is that this would push investors into buying riskier sovereign and corporate debt. The third option is similar to the first, but national central banks would do the buying, meaning that the risk would "in principle" remain with the country in question, the paper said. So let me get this right..  The ECB buys all the nice juicy lower risk AAA rated bonds leaving my pension and insurance company Greek, Spanish, Italian etc. bonds plus corporate bonds.

So my pension buys some corporate bonds in a few lower risk European blue chips, probably those who think it's a good wheeze to borrow at low rates and buy back shares (mmm. where have I seen that before??).   Hey presto the European equity market starts to lift off with an (un?)expected liquidity injection. We see asset price inflation.   How exactly does the real Euro economy benefit?

How does this extra liquidity translate into money velocity / inflation when there is no obvious connection between the printing press and job creation?   For the last six years the developed world has been suffering from a chronic shortage of demand: demand for goods, demand and services, demand for investment. The need to deleverage personal, corporate and government debt has meant that there has been massive excess capacity and a huge shortfall in aggregate demand. This lack of demand has been driving up unemployment and driving down prices and it is this problem that the ECB need to address.

The Guardian (Ted Elliot) writes :
For Mario Draghi, Thursday is the day the talking stops. It is two and a half years since the president of the European Central Bank said he would do “whatever it takes” to safeguard the future of the euro. Financial markets now want him to deliver on his pledge.  All the hurdles – economic, political and legal – have allegedly been cleared. The ECB will announce a programme of sovereign bond purchases, its equivalent of the quantitative easing programmes that were announced by the US Federal Reserve and the Bank of England six years ago.  But nothing is ever simple when it comes to the eurozone. So when François Hollande stated earlier this week that the ECB would create a “movement that is favourable to growth” by buying sovereign debt, it was only a matter of hours before the French president rowed back, saying that he was speaking “hypothetically”.  It was not hard to see why Hollande backtracked so quickly. The German government has been dragged kicking and screaming towards this latest attempt to boost activity in the 19 countries that use the single currency, fearful that it will be the citizens of Europe’s biggest economy that foot the bill for any losses from the bond-buying plan.  The signs this week were that Germany’s still massively influential Bundesbank was seeking to limit the scale of the programme and ensure that each eurozone country’s central bank bear the risk for buying its own national bonds. Reuters said on Monday that it had been talking to a source familiar with Bundesbank thinking, who said: “What exactly comes and in what dosage, that’s where the real action is at the moment. It could be that the decision is taken with details to follow.” Few were in doubt that “familiar with Bundesbank thinking” meant a Bundesbank official speaking on a non-attributable basis.  Having ramped up expectations, there is now a danger that the long-awaited plan proves a damp squib. Markets want Draghi to put a figure on the size of his programme (preferably at least €1tn) and they want to know exactly how it will be operated. Given the length of time that has elapsed since Draghi’s “whatever it takes” speech, they will be unhappy with anything less.  In reality, the nature of the challenge facing the ECB has changed since July 2012. Then, the eurozone was facing an existential crisis: the interest rates on the government bonds issued by Italy and Spain suggested that the financial markets foresaw the risk of the single currency breaking up. Today, the problem is more chronic than acute: the eurozone has been gripped by economic torpor ever since the deep recession of 2008-09 and prices are lower than they were a year ago. The risk of a euro break-up is more remote but is still seen as possible if stagnation leads to a persistent deflation that makes the debts of some euro members too expensive to bear. Draghi’s plan is designed to ease the deflation risk.   But it is by no means certain that the ECB will succeed. One fear is that the plan is too, little late. Jonathan Loynes, chief European economist at Capital Economics, said: “It is virtually certain that the ECB will announce some form of quantitative easing (QE) at its governing council meeting on January 22nd. But given the ECB’s natural caution and Germany’s objections, we’re not very confident that the programme will be big and effective enough to revive the eurozone economy or eliminate the risk of a prolonged bout of deflation.”   Others are sceptical about whether QE has worked in the US and the UK, even though the central banks in both countries believe that bond buying has led to both growth and inflation being higher than they otherwise would have been. Dhaval Joshi, of BCA research, said the recent growth and employment differences between the world’s major economies were largely due to fiscal policy – the severity of austerity – and whether governments had facilitated new lending by repairing their banking systems.   “Meanwhile, like-for-like inflation (which requires stripping out shelter costs in the US and the VAT tax hike in Japan) is converging towards the same near-zero level in all the major economies”, Joshi added. “Simply put, the different directions of central bank balance sheets have had zero impact on inflation outcomes.”   In the end, the buying of bonds by a central bank can only work through one of three channels. Banks can use the money they receive in exchange for their bonds to increase lending to consumers and businesses. Purchases of sovereign debt can drive down interest rates because the removal of bonds from the market makes them more attractive. This increases their price and reduces the yield (interest rate) payable on them. Finally, central banks can use bond buying to drive down a currency, since increasing the supply of dollars, pounds, yen or euros makes them less attractive to hold.   Eurozone banks are already awash with cash so analysts suspect they will fail to increase their lending no matter what the ECB does. Interest rates on eurozone sovereign debt are already low. That leaves only the exchange rate as a somewhat indirect means for generating the growth and inflation Draghi is looking for. Such are the deep-seated problems of the eurozone that even a €1tn bond buying programme unencumbered by German-imposed limitations is unlikely to do the trick on its own. 

Crude dropped to its lowest since April 2009 in the wake of a glut of supply, triggering more swings in share prices after heavy falls on Monday.  At one point Brent crude fell 2 per cent to $51.23 a barrel and US crude dropped nearly 3 per cent to $48.47, adding to market worries about a possible Greek exit from the euro.  The UK's FTSE 100 index of leading shares plunged as much as 78 points, after a 130 point drop on the previous day, before staging an afternoon rally to close down 50.7 points to 6366.5 points.  Shares in Germany and France were also under pressure, as Wall Street fell 141 points in early trading following Monday's 331 point slump.  Oil prices have been driven lower by a combination of higher US shale gas and oil production and a refusal by Saudi Arabia to cut output.  Alastair McCaig, analyst at broker IG, said: "Commodity prices continue to play havoc with the FTSE."   Despite market volatility, chief European economist Jonathan Loynes at Capital Economics predicted UK economic prospects would be improved by lower energy costs which would hold down inflation.