ECB to continue bond purchases

This observer found the ECB press conference entirely unsatisfactory. The bond purchases will continue through the first quarter of next year but whether there would be any upper limit was a question among many that received no answer.

Jean-Claude Trichet was repeatedly (as usual) at pains to boast of having delivered 1.97% inflation to the "federal" citizens of Europe??? over the past twelve years, and spoke of the pride this evinced in him and amongst the MEPs when he had boasted of achiving this feat two days ago.

Left unsaid and undiscussed by the ECB chief was the glaring fact that having inflation brought in just under the prescribed target for the entire existence of the euro does not help nor alleviate the fact that the currency is clearly in its death throes and unlikely to be able to survive, disregarding whatever professions of determination may come from EU Government Heads, EU Commissioners or other EU officials.

At one stage I felt sympathy for this devious man, that came when he correctly asserted that it had not been he who had destroyed the Growth and Stability pact in 2004/2005, yet the very nature of the currency had to require that the pact would soon have to be abandoned given all the other inherent contradictions and Trichet must have been always aware that would quickly be the case.....the end of such feelings of sympathy therefore quickly followed.

More short term cash will now be grabbed by the bankers and market speculators, (whose loss it will eventually prove to be will be a fascinating future question) in three months we will return to an even worse situation if the markets are prepared to grant such a breathing space. As predicted on this blog the words of the ECB Chief have achieved little, activity on the market according to an FT questioner shows more seriousness, but only of the very worst sort, supposed sterilised quantatitive easing by the ECB purchase of EU peripheral country's bonds!

Crunch Day at the European Central Bank.

Trichet calmed the markets somewhat yesterday, as I noted here earlier, by suggesting that something new would be announced at his regular press conference in Frankfurt today. Bluff has always been Trichet's tool of choice but he is running out of scope in which this weapon can be deployed.

The end of the single currency has been unavoidable for some time. The Irish rescue package clearly cannot work. Belgium, Portugal, Spain and others stand in line unable or incapable to wean their electorates from the soft options of the fantasy worlds in which they seem to pass most of their days.

The end or final destination is obvious to all thinking people, the route by which we arrive at that dreadful point might become clearer from gleaning what flexibility the German government is prepared to lend Trichet in his vain cause of clinging to his position, power and perks for as long as he possibly can, even to the extent of crippling future generations of Europeans with unmeetable debts à la Alan Greenspan.

If Europeans accept eventual German economic governance as the price for a brief period of extra excess consumption, the necessary correction will eventually be that much tougher, blamed on the Germans and almost certainly lead to violence and eventual revolt. If Germany agrees to further ECB bond purchases or some form of money printing dressed up as ECB Quantitative Easing then the day of reckoning will be merely only somewhat delayed.

Abandoning the common currency and the present institutions of the EU to allow a fresh start for a free trade area of sovereign states with their own currencies, parliaments and laws is the only sane way forward. Regrettably, I believe, too many corrupt and powerful people have invested their futures in the EU for that sensible proposition to be heard in Frankfurt today.

A report on the ECB meeting today is linked here.

This blog will provide its own appraisal of the press conference later today.

Europe seeks a Leader

Seventy years since the evacuation of Dunkirk and France may soon be seeking a way forward as critically important as in the aftermath of the British evacuation across the Channel. This time many more feasible options appear available. This afternoon the French Prime Minister, François Fillon, will set out his plans for the economy and face a vote of confidence.

In the unusual absence from the public view of President Sarkosy, busy socialising with the Mayors of the nation, perhaps some route out of Europe's present disastrous mess will be discerned in the Prime Minister's speech. Chancellor Merkel describing the situation as "exceptionally serious" while accurate, was hardly helpful, and seemed to this blogger a dereliction of duty.

France is unusual in Europe at present having a majority government with some reasonable time remaining in its mandate. Will Europeans today be offered some tiny glimpse of some feasible and realistic way forward that will begin to ease rather than add to the Continent's enormous piles of debt? Could removal from the ECB of Jean-Claude Trichet architect of both the early nineteen-nineties ERM collapse and now the Euro currency disintegration not prove a striking message of firm intent?

A Good Night Video for Mr Trichet at the ECB as he ponders his next steps over the PIGS

The ECB - soon the biggest spender in history, but who picks up the tab?

Eurozone Double Dip Discerned

The Wall Street Journal this morning in New York headlines a report "ECB WATCH: Threat Of Double Dip May Prompt Unexpected ECB Moves" from which comes this:

The economic outlook for the 16 countries in the euro zone is deteriorating, and growth in the region may come to a standstill in the fourth quarter.

Euro-zone private-sector output growth in September slowed beyond expectations to a seven-month low, preliminary results of a survey by data provider Markit showed Thursday.

Ireland, meanwhile, posted an unexpected decline in second-quarter gross domestic product. The country's GDP dropped 1.2% from the first quarter, dashing hopes that the economy had turned a corner.

Cast your minds back to the departure of ECB head Jean Claude Trichet at the press conference before his departure for a holiday, on which I posted on this blog "Smug and self-satisfied Trichet heads for St Malo" linked here, which included this paragraph:

The silver tongued and similarly white-haired manipulator of markets, amongst whose many disgraceful battle honours can be numbered the Credit Lyonnaise collapse and the european Exchange Rate Mechanism fiasco, has neatly bluffed the markets, so that like all good eurocrats he can depart for his lengthy undeserved summer vacation, secure in the knowledge that the fog he has dispersed will remain mostly impenetrable until well after his return to Frankfurt.

Well the Central Bankers have finally returned to work as the sun slips south across the equator and the fog, for a brief moment, before the winter chill forces a return, has dispersed and the true disaster area of the euro of which Trichet has for long been a prime architect, is clearly in its death throes.

How could the ECB head have then gone on holiday, knowing what was in store for us all, after all, this blog got it spot on!

Who bails out a bankrupt European Central Bank?

The ECB is not a lender of last resort. Yet according to yesterdays Open Europe press briefing quoted here:

... the FT notes that the ECB has stepped in to shore up the eurozone government bond markets in its biggest such intervention since early July. The ECB has bought between €100 million and €300 million of Greek, Irish and Portuguese bonds so far this week, traders said yesterday.

So who steps up to pay for all this useless paper at the end of the day?

First the commercial banks were effectively belly up and their Governments shrilling they were too big to fail met the consequences of their disastrous investments with tax payer commitments the taxpayers (themselves mostly up to their necks in debts with mortgages on homes about to plunge in value) will never be able to pay. So now the Central Banks step in with yet more commitments, which in the case of the ECB nobody seems obligated to cover. Slovakia who have refused to join the Greek bail out and the Czech Rebublic who sidestepped the EU commitment for a financial levy on banks, must both appear comparatively well positioned compared to the rest of the eurozone let alone the EU as a whole who undoubtedly will be the final soft touch at the end of the day!

On Sunday we are today informed Basel III for the international banks will be finalised, an event that has seen Deutsche Bank this morning scrambling to raise billions more in capital, read here, before the rest of the pack leap in.

Yet what use a well capitalised commercial banking sector in a world of bankrupt sovereign governments and floundering central banks? Let alone hundreds of millions of consumers saddled with debts on their over-valued houses, which, as this blog repeatedly points out, NOTHING absolutely ZERO has been done about. The house price bubble that first sparked this crisis remains ignored while money is everywhere printed out of nothing but thin air to presumably eventually price other worthwhile and essential commodities, such as wheat, to appear reasonable when compared with terraced houses considered near slums in more sensible times, now valued in several hundreds of thousands if not millions of now worthless local currencies.

Smug and self-satisfied Trichet heads for St Malo.

The head of the ECB announced that euro interest rates will be held at 1% during a news conference today, while boasting of the ECB's eleven year record in keeping inflation down in accordance with the bank's mission. He repeatedly boasted of the credit soon to be earned by the ECB for its recent actions!

The silver tongued and similarly white-haired manipulator of markets, amongst whose many disgraceful battle honours can be numbered the Credit Lyonnaise collapse and the european Exchange Rate Mechanism fiasco, has neatly bluffed the markets, so that like all good eurocrats he can depart for his lengthy undeserved summer vacation, secure in the knowledge that the fog he has dispersed will remain mostly impenetrable until well after his return to Frankfurt.

Where has all the dodgy debt once held by Eurozone banks disappeared? Wait until the fouth quarter of this year and all surely by then must begin to become clear! Even ex-P.M., Gordon Brown, by his almost complete disappearance from view, must finally be suspecting that his actions were not as sound nor sensible as he so often maintained!

Trichet boasting of the ECB's achievement in maintaining the best price stability since WWII over the past eleven years, reminds me very much of the demented Prime Minister Brown, as he slitheringly repeats that the mostly likely next stage will be further, albeit less robust second semester growth, more likely IMO, will be a Weimar style hyperinflation, or the closed border negative growth, siege economy wished upon the EU by Trichet's countryman President Sarkozy with his anti-parliamentary plans for pan-European Economic Governance.

St Malo is a great holiday destination in the hot summer month of August. I am glad I have no plans to visit there this year, however, and I hope the same is true for the Frankfurt financial press corps forced to listen to this propaganda on a monthly basis.