ECB - European Economy: ECB braces for more money printing

The European Central Bank is prepared to resume its money-printing programme, according to its vice-president Luis de Guindos.

Meanwhile, the euro tumbled to 22-month lows against the dollar late last week, as US growth data remains robust both in terms of capital goods investment and real wage growth.

With decelerating growth and inflation in the Eurozone, de Guindos reignited speculation about the continuation of a €2.6 trillion bond-buying programme that officially ended in December 2018. Meanwhile, the forthcoming European elections in May are weighing negatively on the Eurozone’s economy, as markets expect a surge in euro-critical movements.

“Quantitative easing is something that we can use again if needed,” de Guindos told an audience in New York, although he made clear that the resumption of bond-purchases beyond the current levels has not yet been discussed. Officially, the ECB projects a rebound in Eurozone growth during the second half of 2019, but De Guindos’ announcement consolidates the overall impression that a prolonged period of subdued growth may be ahead.

Read more: ECB braces for more money printing

Greece: Krugman slams Greece, Germany slams Krugman - by Matt Clinch

Renowned economist, and a fervent critic of austerity, Paul Krugman has slammed the Greek government for accepting harsh tax and reform measures. On the very same weekend, German Finance Minister, Wolfgang Schaeuble, openly questioned the Nobel Prize-winner's knowledge of Europe's monetary union.

Krugman had been calling for Greece's government to reject the proposals that creditors have demanded in exchange for unlocking much-needed cash. He had dubbed the demands as "madness" and a "complete destruction of national sovereignty."

With the reforms having been given the green light, Krugman told CNN Sunday that he may have "overestimated the competence of the Greek government."

"(The Greek government) thought they could simply demand better terms without having any backup plan," he told the news channel in an interview. "So, certainly this is a shock."

The radical-left Syriza Party was elected this year with a mandate to reject tough austerity measures from creditors but last week agreed to a deal despite Prime Minister Alexis Tsipras stating that he did not believe in it. Tsipras has since tried to weather a storm within his own party and experts suggest that another election could come later this year.

Krugman - a noted Keynesian - has been a very vocal critic of the austerity that has been placed on Greece from euro zone lawmakers, which include those in Berlin. Schaeuble used an opportunity to respond to Krugman when asked about the economist in an interview with German newspaper Der Spiegel.

"Krugman is a prominent economist who won a Nobel Prize for his trade theory," he said in an interview on Saturday.

"But he has no idea about the architecture and foundation of the European currency union. In contrast to the United States, there is no central government in Europe and all 19 members of the euro zone must come to an agreement. It appears Mr. Krugman is unaware of that."

Read more: Krugman slams Greece, Germany slams Krugman

EURO - France’s Hollande upbeat as euro nears parity with dollar

French President Francois Hollande says the euro has reached a good level against the US dollar as the two currencies edge closer to parity.

"There will be a favourable effect on activity with a euro that is now at a good equilibrium," Hollande told reporters on Thursday, noting that when the euro was created it was also near parity with the dollar.

Earlier in the day, the single European currency briefly fell below $1.05 in Asian trading, its first such drop in 12 years, and analysts believe it could soon ease further.

The euro, which neared $1.40 last May, has been sliding as the European Central Bank (ECB) embarked on a 1.14 trillion euro stimulus programme designed to boost flagging growth across the 18-member bloc.

Read more: Business - France’s Hollande upbeat as euro nears parity with dollar - France 24

Euro drops to record-low vs dollar: 1.00 EUR = 1.08564 USD - but that's good news for exports

The euro’s exchange rate has dropped to its lowest level against the dollar in 11 years due to speculations on the risks of the European Central Bank’s new stimulus program.

The euro marked its lowest level since September 2003 to settle below $1.11 in currency trade markets on Wednesday, just one day ahead of a meeting by the European Central Bank governing board in the Cyprus capital Nicosia.

During the Thursday meeting, ECB President Mario Draghi is supposedly set to reveal details about the trillion-euro quantitative easing program slated for later this month.

The new program aims to revive the EU economy by the quantitative easing, a policy implemented by a central bank through buying specified amounts of financial assets from commercial banks and other private institutions to raise the prices of those financial assets and lowering their yield.

Draghi had announced in January 2015 that the ECB plans to buy €60 billion ($66.5 billion) worth of private and public bonds each month as of the beginning of March until September 2016.

Read more: PressTV-Euro drops to record-low vs dollar

US Fed Stops The Money Press and US Stock Market Loses a Big Crutch as Fed Ends ‘QE

The US Fed has concluded its asset-purchasing program thanks to an improving labor market. Here's what QE3 has meant to investors and the economy.

After spending trillions of dollars on bond purchases since the end of the Great Recession — to keep interest rates low to boost spending, lending, and investments — the Federal Reserve ended its stimulus program known as quantitative easing.

The central bank’s decision to stop buying billions of dollars of Treasury and mortgage-related bonds each month comes as the U.S. economy has shown signs of recent improvement.

U.S. gross domestic product grew an impressive 4.6% last quarter. And while growth dropped at the start of this year, thanks to an unusually bad winter, the economy expanded at annual pace of 4.5% and 3.5% in the second half of 2013.

Meanwhile, employers have added an average of 227,000 jobs this year and the unemployment rate rests at a post-recession low of 5.9%. It was at 7.8% in September 2012, when this round of quantitative easing, known as QE3, began.

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EU Economy: Europe fears deflation as Ukraine stays centre-stage

The eurozone's growing fears of deflation will be stirred again on Friday when preliminary consumer price data for August will be issued with signs that the European Central Bank (ECB) could be looking at bolder steps to help the region's stagnant economy.

Analyst polled by Reuters forecast the annual inflation rate to slip to 0.3 per cent from 0.4 per cent in July, falling even further below the ECB's target of below but close to two per cent and mired deep in what the bank calls the "danger zone." The ECB cut interest rates in June and promised banks cheap long-term loans starting in September and any new measures before those loans kick in had been considered unlikely.

However, in remarks that opened the door to possible policy action at the bank's next meeting in September, ECB President Mario Draghi said on Friday that the bank is prepared to respond with all its "available" tools should inflation drop further.

Speaking at a global central banking conference in Jackson Hole, Wyoming, Draghi said he is confident that the steps already announced, helped by a weaker euro would boost demand in the ailing economic bloc. But in stronger language than he has used in the past, he stressed the central bank stands ready to do more. "The (ECB's) governing council will acknowledge these (economic) developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term," he said.

The main weapon at the bank's disposal, printing money to buy bonds, known as Quantitative Easing (QE), is still opposed by Germany's Bundes bank which plays down the danger of deflation. In his remarks on Friday, Draghi did not mention the policy specifically, but a growing number of analysts believe it is only a matter of time before the ECB follows the path already trodden by the Federal Reserve and the Bank of England.

"The ECB will ultimately move to QE unless the euro weakens appreciably," said Riccardo Barbieri, chief European economist at Mizuho, adding that, "In the near term stagnation and near-zero inflation in the eurozone are almost a certainty. Developments in Ukraine will continue to be a major focus for markets, with the negative headlines of recent weeks having pushed German bond yields to new lows."

Read more: Europe fears deflation as Ukraine stays centre-stage

EU Economy: Quantitative easing: ECB getting closer to US Fed-style stimulus ( Lets hope not) - by David McHugh

The European Central Bank has deployed a raft of aggressive measures to boost Europe's economy, but stopped short of the one many economists insist would do the most to help: large-scale purchases of bonds.

That could change sooner rather than later, analysts say, if inflation remains low.

Purchases of bonds using newly created money — called quantitative easing — have been used with some success so far by the U.S. Federal Reserve, the Bank of England and the Bank of Japan. They can reduce market interest rates, making it cheaper for consumers and businesses to borrow, helping growth.

So why not in Europe?

To begin with, the ECB faces technical and practical challenges that other major central banks don't have. It has 18 different government bond markets, raising the question of whose bonds to buy and how many.

Beyond that, creating new money has long faced resistance in Germany, the biggest economy in Europe where central bank stimulus measures are looked upon with suspicion and have a prominent place in public discussions.

But after Thursday's meeting, things could be shifting.

At a press conference on Thursday, ECB President Mario Draghi held the door open to such bond purchases, suggesting Germany has at least softened its outright resistance. If inflation falls further, analysts think the ECB could start quantitative easing.

"Are we finished?" he said after the decision. "The answer is no." The ECB is keen to bring up the inflation rate, which at 0.5 percent is so low it raises fears the eurozone will fall into outright deflation, a crippling downward price spiral.

Note EU-Digest:  quantitative easing is the kiss of death for an economy and even though it creates some relief at first it will eventually come and haunt you, as the US is experiencing, but not speaking about. 

Read more: FRANKFURT, Germany: ECB getting closer to Fed-style stimulus - Business Breaking News - MiamiHerald.co

US Economy: The US Dollar Printing Presses Are Running Out of Ink - by RM

"stop the dollar printing press"

For someone to get a n immediate birdseye view as to the status of the US economy, the usdebtclock.org shows that the official US deficit of US 17 trillion dollar now breaks  down to a $753,000 debt share for each American citizen.

But is that the whole deficit picture?

When US politicians speak about the US debt they usually only refer to this 17 plus trillion US deficit.  They hardly ever mention that this is only the tip of the iceberg. For on top of that 17 trillion dollar deficit, the US also has a 17 trillion liability for social security, 22 trillion in prescription drug liability, 88 trillion in medicare liability, and 127 trillion in unfunded liabilities, including, but not limited to such items as the quantitative easing program.

The US debt is in fact now more than the debt of all the 27 EU nations combined.

This means that if you add to the US deficit all the other liabilities and financial obligations it would equates to every US citizen carrying a  $ 1,107.000 of that debt burden.

As to the US's ability to pay off this mounting debt and interest on the debt, which is mainly money borrowed from abroad,  the US Fed’s answer so far has been to print more dollars to pay the bills.

So far this scheme has worked relatively smooth, mainly because the dollar became the world’s reserve currency after the second world war and as a result most international trade is now conducted in dollars. This has also provided the US with the ability to call the shots ( manipulate) the figures when it concerns the actual value of the dollar in comparison to other currencies.
 
But printing dollars can not go on forever and will not only devalue it's value, but eventually also dilute the total money supply of the US. In essence

"Pay back time", where the US has to cough up the money it borrowed from its overseas creditors is coming closer every day. For the foreign creditors are also getting very wary about the US financial status. 

Unfortunately for the US,  just as small businesses object to getting paid with a deflated currency for goods they purchased abroad at a hard currency rate, so do the international trading partners of the US .

Sooner, rather than later, US trading partners will  require payment for all the money the US owes them or for new purchases and loans, in hard currencies, like the European Euro'  or Chinese Renminbe.

When that happens, the US will have to go onto the International Financial Marketplace to buy hard currencies with their inflated “weaker” dollars to pay of those debts abroad.  Obvious the result will  be that this creates an even bigger deficit for the US tax payer and the US Treasury.

The present hype about an improving US economy, booming stock market and other positive financial reports are all basically frantic attempt by political and economic forces to  delay the inevitable pay-back time and present a rosy picture of what in reality is a very dire situation.

EU-Digest

Europe’s leaders starting to move away from austerity but remain weary about quantitative easing

Austerity is out after the euro-area recession extended to a sixth quarter, but stimulus isn’t in.

That was the something-for-everyone message from European leaders at a summit in Brussels on Monday.

All touted a previously announced €6 billion ($7.7 billion), seven-year initiative to fight youth unemployment, now at 24%.

 “National governments won’t put up more cash,” German Chancellor Angela Merkel said. “It’s not a matter of money,” Merkel told reporters after the summit. “It’s a matter of looking at how to spend this money most productively.”

 In an interview Dieter Wemmer, Member of the Board of Management of Allianz SE, Europe's largest insurer which has assets totaling more than 500 billion euros said: "Basically today financial markets are being manipulated by the central banks".

"Although terms like "quantitative easing" and "financial repression" sound more moderate, this is essentially what they boil down to. But it will be tricky to break with the current monetary policy any time in the near future, especially since Japan has now also taken interest rate measures to join the global race to secure export opportunities by maintaining a currency that is as weak as possible."

"In the US, two-thirds of the financing for private companies comes from bonds and one-third from bank loans. In Europe, the ratio is the exact opposite. This is an area in which investors with a long-term focus could play a particularly significant role in supporting European trade and industry.”

EU-Digest