“The monthly purchases of €60bn through September 2016 will probably comprise about €45bn in investment-grade sovereign bonds, €5bn in the debt of euro-area public agencies, and €10bn under existing programmes to buy asset-backed securities and covered bonds, an official said.
If it isn’t meeting its inflation objective, the programme will run longer, said ECB governing council member Visco at the World Economic Forum in Davos, Switzerland.”(1)
The headline value for the above spend is about €1.14 trillion.
It won’t work. Though on paper propagandists will claim it is working. How can this be? Welcome to the global Ponsi scheme of debt.
QE is designed to bring about inflation which in turn is claimed will bring about an end to looming deflation in the eurozone.
Deflation makes everyone’s debts greater and drags down economic activity.
What it will do is create paper inflation by giving opportunity to big banks to race back into the casino and purchase gambling shares in stocks/shares/derivatives and other financial paper trail investment vehicles creating the illusion all is well with the global economy.
Banks will compete with each other driving up the cost of financial investment paper and create the illusion of a resurgence in economic activity. Those who work in the financial services industry will beam with myopic delight for a short time. Those who work in Ireland’s financial services industry will look for crumbs to vindicate its success. 250,000 Irish emigrants returning their wages to those left behind will be used to falsify figures on resurgence of economic activity.
European banks’ shortage of funds weighed down with debt inherited as far back as 2008 from the Wall St crash and loaded with debt from their own property bubbles, in theory will be able to better service such debts.
But the purchase of bonds to alleviate debt accompanied by greater investment in the stock market will not address the fundamental problems of the eurozone’s economy. Though touted as the injection of further lending to businesses/SME’s sparking economic resurgence, it won’t happen. Banks will not lend to people sinking because of austerity.
The fact is global business is not dying from thirst for lending for investment/expansion purposes. The goose that lays that golden egg is dead. That goose is the economy flatlining because of austerity.
It would have been better if Draghi flew helicopters filled and bagged with billions of euros and scattered them to the four winds over towns and cities. Either that, or write down the debt that is suffocating millions of individuals across the eurozone.
G8 requires a world debt conference to surmount the mounting debt crisis created by the fiat money system hampering economic activity and mankind’s future progress. The mantra should be ‘freedom from debt slavery’. Currently China expected to lead the world out of its debt zone, is a leading economy about to join the queue of debtor nations exposed to the turmoil of deflationary trends.
One other possibility for QE that might help is fiscal expansion, but ridiculously the mantra of austerity soldiers, is that fiscal expansion contradicts austerity, even though austerity is failing in plain sight. Austerity without debt write down is like having your cake after eating it.
Governments from Greece to Spain, Portugal, Italy and Ireland if infrastructural projects were undertaken to end the housing crisis (eg Ireland -) or invest eg water (new canal/pipeline to renew Dublin’s water supply, Hoover Dam), employment levels could be improved and economic activity expand arising from this.
Instead money is being poured into useless financial paper that ruins real economic activity, hoovers up assets/resources of the poor into the hands of a smaller so-called elite of the super rich. This is a threat to human progress.
The fact that nobody is buying is causing a financial undertow threatening to bring outer core eurozone countries such as Greece, Latvia, Slovakia, Portugal and Ireland under water with unemployment rates hovering 26% – 55% among the young with corresponding huge social welfare bills up to high percentage of GDP anchors.
The property sector in Ireland has become absurd with property prices beyond the reach even of young professionals required to put up in advance €40-60,000 for an average home. The banks control politicians who take orders from the banks to keep property prices high to protect their capital base.
Debt is controlling economic activity restricting movement with extend and pretend and the long fail. This is not working for Ireland or the eurozone. The value of the euro is being compromised on world markets. Why should anyone save for the rainy day when the false economy of low interest rates is mounting mountains of debt.
G8 should introduce a bankruptcy clause capping the amount of debt a country can carry. Debt beyond the ceiling should be written off. Global currency currently being eroded by growing stock piles of debt, needs to be strengthened. We need the opposite of race to the bottom QE. If the global currency system benefits only a small elite and is detrimental to human progress, We need a better system.
Strong consideration should be given by the eurozone to the return of the euro to a more stable monetary system such as that based on the gold standard. This is not without precedent. Consider UK’s return to this system following the Napoleonic wars. A new Breton Woods to bring about this objective is urgently required to prevent the long fail of the eurozone.
News – Striking Teachers (Shrinking Education and Health Service)
Latest target of the austerity brigade are the teachers striking 22/01/15. Propaganda from government is the usual, ‘teachers are striking because they oppose proposed reforms of the education system at junior level’.
In propaganda terms meaning becomes inverted, as George Orwell in ‘Big Brother’ and ‘Animal Farm’ describes, ‘black’ becomes ‘white’. ‘Destruction’ disguised as ‘reform’.
Teachers are striking to vindicate the right of young people at the Junior Certificate/cycle level to objective and independent assessment of their coursework, something that has served the Irish education system almost since the foundation of the state. Pity we did not have this for our banks!
Teachers are not against properly funded modernisation and true reform of the education system. They are against ‘self assessment’ of the educational system leading to corruption of standards, unjust and unfair pressure on both students and teacher.
So called ‘reforms’ of the Junior Certificate are an austerity gambit put in place to save money for the state.
If they could save money by doing away with all state exams and load all the bureaucracy of designing and setting examinations and correcting them onto teachers and students, they would.
Self regulation of the education system has about the same potential for success as self-regulation of the banks.
News – Pathetic Banking Inquiry Cover Up
Banking Inquiry continues its peripatetic way with Professor Honahan of the Central Bank before it. Called on to resign on numerous occasion on this blog, instead Honahan has become the darling of the inquiry, entertaining because of his wit, his erudite and beneficent charm and wry humour. He should never have left academia.
He has even supported the burning of bondholders! True to form though his stance has been the same as others before the tribunal blaming ‘us all’ for the bursting of the credit bubble. ‘All’ being politicians, regulators, ECB, developers, those addicted to property’.
Of course this ‘blame all’ mantra is all rubbish. If truth be told, we are not going to get much more than this rubbish at our so-called ‘banking inquiry’.
What we have is the regaling of old wives tales of wuda, cuda, shuda dodging flying bullets in the blame game in another financial coverup. We do not get any more than the public already know.
Ernie Madoff of Enron was a master of this form of opinionated spooning before the fall of Enron.
Enron was on public tv giving seminars in the US, ‘how to be a successful company’. Even the guys in PR, marketing did not know what was really going on, in the back rooms of Enron as the financial logs were falsely manipulated.
The only way to hold a banking inquiry is to take 10 of the largest loans and follow the money.
(2)Drumm may be indited for perjury because reading the judgment of Judge Frank Bailey, it appears that the Judge believes that only some of the divesting of assets have been discovered. What other concealed assets are involved? The case goes on.
The point is the judge has access to the financial records that tell the real story. He doesn’t have to rely on 2nd and 3rd hand propaganda that has a self-interest in cover up or frankly depends on hearsay from whatever source.
No doubt commercial sensitivity/privacy laws will plead the impossibility of this approach.
Sometimes when there is a will, there is a way; no such will, then no way. Expect a cover up.
News – ‘Ireland—Lessons from Its Recovery from the Bank-Sovereign Loop’
However, to avoid any acrimonious distaste on the part of the Irish public in the wake of any embarrassing revelations in the ‘banking inquiry’ we had during this week, we had invitation only by the IMF, hosted in Dublin by IMF, a propaganda fest: ‘Ireland—Lessons from Its Recovery from the Bank-Sovereign Loop’.
Noonan wondered giving the apparently quicker recovery of US economy compared to eurozone, were there lessons to be learned? One lesson from Lehmans is you do not try to recapitalise non viable banking black holes eg Anglo.
Another is you try to offload as much debt elsewhere as you can.
US managed to export much of its debt to European banks, not a lot to be learned from there as eurozone exported 42% of its banking liabilities in the crisis to Irish banks and on to Irish taxpayers.
Exercise in mutual and self-congratulation, back slapping and show boating took place in Dublin Castle, conference location. The Irish taxpayers their pockets plundered and picked by austerity soldiers, were commended for their bravery!
Still smarting at their betrayal by FG/LB the response of the Irish public to water charges, property charges, USC is one of brave revolt rather than cowardly compliance shown by poor leadership.
Ann Nolan Department of Finance was in fine form savouring the disastrous the bank guarantee…”wasn’t the worst outcome that could have happened..”
Dublin Castle, Main Conference Hall, Ireland
January 19, 2015
In a question re debt write-offs, “Were efforts made (6bn written off) to set targets for debt write-offs? Representative from ECB said ‘you cannot have a target for debt write offs’.
Oh really, Iceland have already done this with average savings of €24000 per stricken household (3)
A similar deal should be immediately put in place for Greece, Portugal, Spain and Ireland, to bring debt down to sustainable levels, end ‘extend and pretend’, end suffocation of economic activity and enterprise, restore fiscal balance and a stable currency, return life to the eurozone.
News – Greece
(photo Panos Kammenos and Alexis Tsipras share an opposition to Greece’s international bailout terms
Congratulations to the people of Greece in saying No to austerity enslavement.
“The far-left Syriza party, which won Greece’s general election on Sunday, has formed an anti-austerity governing coalition with the right-wing party Greek Independents.
The coalition will have a comfortable majority in Greece’s new parliament.”
They are a ray of hope that contrast with Ireland’s compliant, obedient poodle politicians who do not even recognise their own humiliation; reduced to showcasing Ireland’s role as poster boys of austerity for the IMF and troika.