Commodity Trade Mantra

All posts under ‘ECB-European Central Bank’

Why Gold Investors Should Love Central Banks

The ECB’s announcement last week is not a good test because it announced additional monetary stimulus as well as lower interest rates. Is gold going up because of negative interest rates, or because of monetary inflation? It is probably a combination of both, but it is hard to know which is the dominating factor. At least it is a bright spot for gold investors, if nothing else.

The Euro Crisis: Solvency of the ECB is at Stake

How the Greek crisis is a euro crisis: ECB itself now needs refinancing as losses that ECB faces from Greece alone are about €189.3bn – twice its equity capital & reserves of €98.5bn. Given the likely collapse of the Greek banking system & default on its debt, collateral held by ECB are more or less worthless. Upsetting of the Greek applecart risks destabilising the euro itself.

Conspiracy Theory: A Greek Default Is Precisely What The ECB Wants

From an economic perspective, Greece shows “internal devaluation,” – which is a very polite way of saying plunging wages, labor costs, and generally benefits, including pensions. Goldman essentially says that it is in the ECB’s & Europe’s, best interest to have a Greek default – and with limited contagion at that – one which finally does impact the EUR lower.

ECB Will Cut Rates To Minus 3%: JP Morgan

ECB is now close to running out of ammunition. Contrary to its initial design, the OMT programme could no longer be seen as unlimited. Draghi is already playing down Q€’s potential, noting that QE alone will not be sufficient to reignite eurozone growth. It seems the only option for the ECB would be to plunge further into NIRP-dom.

ECB Will Be Big Factor in 2015’s First Half

A widely hoped for positive decision at the January 22 ECB meeting could well have a result similar to stimulus announcements in the U.S., China, and Japan. However, another meeting ending with no action, only more of the familiar promises of action ‘if necessary’, could well be devastating as markets lose patience.

Negative Interest Rate Policy Arrives In Europe

Negative interest rates would support banks but destroy the business model for money- market funds, which would face the prospect of paying to invest. But the ECB doesn’t set policy to keep alive certain parts of the financial sector. Policy makers want to show that they haven’t exhausted their options yet.

German Top Court Finds ECB's OMT Is Illegal

The German Constitutional court said that, in its judgment, the ECB’s Outright Monetary Transactions (OMT) program (conceived in July 2012 to prevent the collapse of the Eurozone and yet non-existent, but still only existing in Mario Draghi’s head) likely exceeded the central bank’s powers.

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