The big billing starts with friendly words. “Dear Mr. monetary authorities, please do not buy so many bonds,” wrote Citi chief credit strategist Hans Lorenzen in the heading to a new study. However, with the ease it is quickly over. “The harm done to the system outweigh the benefits by far,” says Lorenzen and includes details about what the biggest banks so far pumped liquidity into the world economy and how little effect the money. In particular, the European Central Bank (ECB) takes over the general reckoning of economists gone bad: The buy-back program of Euro-keepers will the economy never inspire enough
The. word of Lorenzen has weight. After all, the Citi-man belongs to the ranks of the influential credit strategists who significantly shape their analyzes, the multi-billion dollar investment decisions of their financial institutions.
While the central bank does not judge by such individual opinions. Nevertheless, the increasing discontent of the industry is the last thing that can make use of the gentlemen of money. At least for the moment is unlikely to continue to grow this discontent. After Draghi did not extend the minimum duration of the bond program through March 2017 on Thursday, bringing the majority of the experts had reckoned
But according to the motto:. Is Postponed not canceled, analysts expect now been with the fact that Draghi will extend later than the meeting on December 8, the program and will then just yet disregard the warnings from the industry.
Especially as the ECB President appeared determined to his first press conference after the nearly seven-week summer break friendly and combative. “For the moment there is no weight change, which would justify action. Our monetary policy is effective,” Draghi let it be known. And held on multiple demand unswervingly to his argument. Whether it is about a general extension of the bond purchase program – short QE – went to an expansion of purchasing universe to stocks or even to the question of a debate on the so-called helicopter money: the response of the ECB President always fell out: “We have . not discussed “
His message was clear to the markets: the ECB does not follow the desires of investors to extend the liquidity is becoming stronger. And the banks summoned Draghi instead to sue rather to support the economy. “The ability to make loans, is not hindered by the negative interest.”
Cheap money galore
Although the main target was missed again and go about the experts at JP Morgan believe that the ECB will achieve it at the earliest in 2022, Draghi was satisfied. “The transmission of monetary policy on the real economy was never as good as now,” he said, counting the successes of the past months: as lending has increased, the same yield spreads in Europe are significantly shrunk. “Today we can say that the risk of disintegration of the euro zone has been averted,” Draghi praised the activities of the ECB.
“I was not surprised that Draghi defended his program so vehemently. the relatively muted market reaction is likely to have supported the argument that further action for the time being is not urgent, “says Lorenzen. “We will see if the markets remain really calm until December.”
The expert wants his trial Although not to be understood as an attack. But his calculations have it in them. Thereafter, the six leading central banks in the world have increased their budgets by more than $ 15 trillion since the millennium. Say, once the annual economic output of America of liquidity pumped into the markets. Most Active this was not even the US Federal Reserve, but the People’s Bank of China (PBoC). The BoJ and the ECB have recently intervened with its aggressive bond purchases heavily on the markets. And the Bank of England (BoE) has its QE program, as the bond purchases in the jargon also called, started again after the Proposed referendum on United Kingdom membership of the European Union.
The combined total assets of Fed, ECB, PBoC, BoJ, Swiss National Bank and BoE equivalent to almost 40 percent of global economic output, already in 2018 could the monetary authority areas with their budgets, more than half of global GDP. The mountains incalculable risks, as Lorenzen.
would the disadvantages of the QE programs now the advantages far exceed. Thus, the multi-billion dollar intervention would distort markets massively and endangering complete disincentives.
was visible that about this week, as the German consumer goods company Henkel and the French pharmaceutical giant Sanofi two companies in the euro zone have issued a minus interest first bonds
Say. could be paid for up debts from investors. That should encourage many more companies to get into debt too. The goal of the central banks, with the bond purchases to stabilize the financial system would thus be reversed.
The money flowing into stock and bond markets
But that’s not everything Lorenzen Mario Draghi & amp; Co. holds. The monetary authorities would decompose literally with their purchases societies. Finally, the low interest rates destroy the pension systems. The shortfall in private pension plans have reached a record.
Adverse effect of interventions was also higher inequality. In the US, the richest ten percent of the population possess now 60 times as much as the second-richest quarters of society. Before the financial crisis and the intervention of the central banks of the factor have only half as high, located at 30. ‘/ P>
In numerous graphs Lorenzen leads central bankers in mind where all the money flows. Not in the real economy, but primarily in the equity and bond markets. In this way a sham recovery is created, which can quickly fall apart.
At the same time, commercial banks are weakened by the low interest rates, which are actually the by lending to promote economic recovery. So it is no coincidence that overthrow the prices of bank shares in synchronism with the interest in the depth.
In fact, most experts Draghi’s optimism did not infect during the press conference. “Unlike alleged by the ECB, the loose monetary policy is only limited to the real economy. In particular, the core inflation to rise makes no move,” says Jörg Krämer, chief economist at Commerzbank. “Sooner or later we the ECB until soft.” Kramer expects that the ECB will buy bonds on March 2017.. Presumably they would also reduce its deposit rate again, where it is likely to partially free the banks of the penalty interest, in order not to burden the sake of lending too much.
For a temporal extension of the QE program is also suggested that the ECB chief wants to appoint a task. This is to discuss how the buy-back program can be realigned so that the central bank can smoothly acquire securities on. This panel had the “full mandate to cover all possible options” to explore, stressed Draghi. That seems so far necessary, have become almost as Bunds.
“We have to ensure that we can implement the program in the new interest rate environment, which the has significantly reduced the universe of available bonds, “Draghi said, and thus gave the impression that this is not the self-imposed rules of the purchasing program holy. This also lifting the capital key seems possible. At present, the ECB buys according to the proportions to keep the national central banks to the common institution.
For example, according to the capital share of the Bundesbank to the ECB about a quarter of purchases in German papers invested. Consequently, many of the good one trillion euros of government bonds, the central bank has been put into their books, Bunds with a volume of around 238 billion euros. They are followed by French title with 189 billion Italian in the volume of 164 billion euros.
the majority of Bank economists now expects the ECB to act no later than the end of the year and the financial markets on the monetary policy meeting on December 08 will bring an early Christmas gift. “The ECB was not yet ready to act now, but we firmly anticipate that they will announce another round of measures in December,” says economist Elga Bartsch of Morgan Stanley.
A special lesson had brought for the European finance ministers from the summer break Draghi. It is imperative that the governments to help the efforts of the Central Bank, the euro zone to new heights, supported better. Some countries have indeed their public expenditure increased significantly after the financial crisis, but was defeated little gain in terms of growth of it.
“It is not so much on the level expenditure on, but what the money is spent, “he warned. On this occasion the Italians fired at the ECB tip a broadside against Germany from “countries that have financial leeway should use this even Germany has financial leeway..”