Mish's Global Economic Trend Analysis |
- Demand for Dollars from Fed's Discount Window Swells in Europe by 12,735% After Fed Cut Rates on Dollar Swap Lines
- Europe's Ass Backwards Plan to Stimulate Lending
- Chart of the Day: Food Stamp Recession Curve
- Merkozy Dog-and-Pony Show is Nothing but Fleas; Immense Arrogance, Loose Cannons, No Credibility
Posted: 07 Dec 2011 07:31 PM PST On November 30, Central Banks Cut Rates on Dollar Swap Lines which made borrowing at the Fed's discount window cheaper for foreign banks than US banks. As a result, Dollar-Loan Demand Swells In Europe and Japan The European Central Bank said demand for three-month dollar loans surged after it cut the cost of the financing almost in half in a coordinated action last week with five other central banks including the Federal Reserve.Discount Window Borrowing Swells by 12,735% $395 million to $50.7 billion is quite a move. Percentage-wise it is approximately 12,735%. In Japan, demand for loans increased from $1 million to $25 million, a mere 2,400%. The actual demand in Japan is trivial. In Europe, it's not. Who is desperate for the cash? The ECB will not say. Does the Fed even know or care? Further information on the discount window, including interest rates, is available from the Federal Reserve System's discount window web site. Discount Window US banks going to the Fed's discount window pay .75% for primary credit. European banks going to the Fed's discount window paid a fixed rate of .59%. That said, US banks are generally not using the discount window given adequate liquidity. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Europe's Ass Backwards Plan to Stimulate Lending Posted: 07 Dec 2011 12:02 PM PST Please consider the ass backwards Measures to Stimulate Bank Lending in the EMU. The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, said three euro-area officials with knowledge of policy makers' deliberations.Confidence? What Confidence? There is no confidence. Investors stepped in to buy Italian and Spanish debt hoping to unload to the ECB when it steps up bond purchases in the secondary market. Confidence is nothing more than investors front-running ECB president Mario Draghi's hint that the ECB is about to purchase more sovereign debt. Ass Backwards Plan Banks cannot or will not lend in Europe for the same reason they don't in the US.
Cutting rates will not fix either of those problems. Worse yet, and with thanks to French President Nicolas Sarkozy, taxpayers and businesses will bear 100% of the responsibility to recapitalize banks. Europe is in recession. Yet the fools at the EMU and EU want to increase the VAT, increase property taxes, increase fees, etc, to ensure that French and German banks do not shoulder any responsibility for making idiotic loans. This may (or may not) increase confidence that banks will not go under, but it sure will not inspire consumers to spend or businesses to borrow. Moreover, lowering interest rates further will put additional stress on those living on fixed income. Correct Approach
In every instance, except perhaps number three in some countries, the ECB, EU, EMU, and various national leaders have taken the exact wrong approach. This is a balance sheet recession, not the garden variety in which the standard solution of central bank rate cutting might appear help. Few seems to have figured this out yet. Worse yet, most of the few who have figured this out are hell-bent on trying various QE strategies proven to be complete failures by Japan and the US. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Chart of the Day: Food Stamp Recession Curve Posted: 07 Dec 2011 09:11 AM PST The latest Food Stamp data (now called SNAP) is out. Here is a chart by reader Tim Wallace showing program usage. I added highlights in yellow to mark recessions based on NBER Business Cycle Expansions. The NBER is the official arbiter of recession start and end dates. Food Stamp Participation 1969 to Present click on chart for sharper image Tim writes ... The latest food stamp (SNAP) data is available for September 2011. The reporting lags by two months. We have now surged past 46 million, up to 46,268,257 to be exact.In the last three recessions, a significant change in upward slope in food stamp participation served as a leading indicator of the upcoming recession. Only the second 80's recession failed to meet that pattern. Based on demographics as well as weak hiring trends, it is reasonable to assume this steep upward slop will continue. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Merkozy Dog-and-Pony Show is Nothing but Fleas; Immense Arrogance, Loose Cannons, No Credibility Posted: 06 Dec 2011 11:27 PM PST Within a couple of days German Chancellor Angela Merkel and French President Nicolas Sarkozy will present their "Grand Plan" to save Europe to a formal hearing on EU debt. Their plan is on the death-bed already, but it does not officially die until formal votes in May as noted in Eurozone Treaty Changes to be Finalized in March, Then a Vote in May, Then Country-Specific Referendums, Then? Merkozy Dog-and-Pony Show is Nothing but Fleas As with grand plans for the EFSF, still not finalized, the Merkozy plan has morphed into nothing but budget rules that the EMU will not be able to enforce because Sarkozy would not cede fiscal control to the EU. Merkel will not accept Eurobonds, because she can't, by German supreme court ruling. By any reasonable standard, the Merkozy dog-and-pony show is in reality neither dog nor pony but rather all fleas. Loose Cannons and No Credibility Steen Jakobsen, chief economist for Saxo Bank asks Where have your standards gone, Europe? This week is being touted as the make-or-break week for the Euro and its Euro-zone - we did not get a Grand Plan in Cannes as Sarkozy had promised us, so now it seems we will get a Desperate plan instead.Immense Arrogance Reader Andrea emails ... Hi Mish,Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
Google Inc., 20 West Kinzie, Chicago IL USA 60610 |