Who is the biggest beneficiary in volume reduction after the latest ECB stimulus package?

The ECB this month reacted to the former issue, by introducing a tiering system. It works as follows: any amount of reserves a bank holds at the central bank, up to six times its minimum reserve requirement, will be exempted from negative deposit facility rate. 

According to the German press it is all bad for Germany. Small wonder they say, Draghi is Italian. So here are some headlines (all articles are in German) from the German press.

- Die EZB-Direktion braucht einen Nachfolger aus Deutschland

The ECB Directorate needs a successor from Germany

- Am Ende verliert der deutsche Sparer

In the end, the German saver loses

- Das steckt hinter Lautenschlägers mysteriösem Abgang

This is behind Lautenschlager's mysterious departure

"The jovial lawyer should also have been a thorn in the side of Draghi, who appears rather elitistically distanced, because she, as Vice-Chairwoman of Banking Supervision, argued for a tougher course than shaky banks in the Eurozone. In particular, the banks in Draghi's native Italy are crammed with bad loans, the write-down of which strains the equity of financial institutions. Draghi, who served as ECB chief bank supervisor in Italy before his time, is unlikely to be interested in pushing banks to write down more quickly." (Google translate)

Here is the clear winner of Draghi's policy.

Some of MMT now being taken seriously by ECB chiefs

Short excerpt from the FT (hope they do not mind). In a nutshell, printing (read keystroking) money in countries in deflation does not produce inflation.

Mr Draghi has created something novel — a “contingent safe asset” if you will. If you comply with the fiscal rules in the eurozone, you are eligible for bond-buying programmes carried out by the ECB, and are therefore as good as credit risk-free. Markets understand this. Whenever Italy’s populist government threatens to breach the rules, for example, yields on Italian government bonds rise. When the government toes the line, yields fall. The European Commission does not need to utter a word.

MMT, then, brings into stark relief the institutional contingency of the risk properties of assets. We saw this clearly after the financial crisis. When faced with deflation, money-printing countries face no fiscal constraints, but countries in Europe do. This observation remains tangentially relevant to the politicisation of fiscal policy in America, but it remains pertinent to the eurozone.

As “super Mario” approaches retirement this November, it highlights the importance of his legacy. The eurozone now has a mechanism to deal with fiscal freeriding and has clear conditions for the creation of safe assets. He may have saved the eurozone not once, but twice.

Full article here

German star economist Michael Klein from Sciencefiles.org explains ECB German bonds purchases. Stupidity Prime

It is weekend. Time for some fun. This time Stupidity Supreme.

We switch live to Sciencefiles.org with chief hack Michael Klein. He is (was?) a German star economist, turned court journalist, turned emigrant, turned social blogger on the aforementioned website.

There we learn to our horror that Germany is one third owned by the ECB.

Actually, if you scroll down a little it is a whopping 38%. IOW, just 13% more and the ECB would be majority owner of Germany and could perhaps ..., well, sell it to France??? In any case, the ECB is all fishy according to this German top economist because

Nun ist die Europäische Zentralbank zwar eine Bank, hat aber keine eigenen Einnahmen.

Although the European Central Bank is a bank, it does not have its own revenue.

So forget interest and seigniorage, or revenue from The European refinancing dilemma, and let the wisdom of economist, turned-court journalist set in. It would not be Michael Klein if it did not get better.

Remember, the ECB has no revenue yet buys German bonds. That the ECB is the sole issuer of a sovereign currency and can and does keystroke money into existence does not occur to Michael. So how do the ECB wizards do that? Here comes Michael Klein's explanation:

Bundesanleihen aus dem Zeitraum 2015 bis 2018 sind je nach Laufzeit mit 0,25% bzw. 1,25% verzinst, d.h. die Bundesregierung überweist der EZB Kapital. Die EZB kauft mit diesem Kapital deutsche Staatsanleihen und zwackt sich die Zinsen ab, was bei 518.558.000.000 Euro und einer durchschnittlichen Verzinsung von 0,5% per Annum immerhin einen Jahreszins von 2.628.800.000 Euro ergibt. Die Bundesregierung kauft nicht nur die eigenen Schuldverschreibungen mit dem eigenen Geld über den Umweg EZB, sie verzinst das eigene Geld auch noch.

Federal bonds from the period 2015 to 2018 bear interest of 0.25% and 1.25%, respectively, depending on maturity, i. the Federal Government transfers capital to the ECB. With this capital, the ECB buys German government bonds and tempers its interest rates, which results in an annual interest of 2,628,800,000 euros at 518,558,000,000 euros and an average interest rate of 0.5% per annum. The federal government not only buys its own bonds with its own money via the ECB by-pass, it also pays interest on its own money.

In case you point out the nonsense in their comments section, no luck it will get published.

Reading Lounge

1. How to Leave the Euro: A Practical Roadmap for Italy - more important than ever

2. Dunning-Kruger and one more

3. Briefing Paper on TARGET2 Balances

4. Can we enable a robot to do the same, learning to manipulate a new object by simply watching a human manipulating the object just as in the video?

5. Losing public attention raises the severity of terrorism. - Give them air time they deserve

6. J'aime Paris in Mai - not back then

7. Italy should prioritise an exit of the Eurozone madness

Reading Lounge - Italy

1. The assault on democracy in Italy

2. Italy’s Organic Crisis

3. Eurocracy

4. Here's some real good porn and spot on: One Word: Contagion

5. Someone's peace of mind has been severely disturbed. Not directly by Italy.

Reading Lounge

1. “I hope for Goldman Sachs’ bankruptcy”: Nassim Nicholas Taleb on Skin in the Game

2. Must read! Monetary policy and fiscal discipline: How the ECB planted the seeds of the euro area crisis

3. Discernment of mortality risk associated with childbirth in archaeologically derived forager skeletons

4. Economic Leadership and Growth

Economies governed by former economics students grow faster than economies governed by leaders with other education backgrounds; a result which is most evident for presidents. 

Evidence in Europe missing. Pdf here.

5. From 2005 but still entertaining: Gender differences are a laughing matter, study reveals

"These included the left prefrontal cortex, suggesting a greater emphasis on language and executive processing in women, and the nucleus accumbens, or NAcc, which is part of the mesolimbic reward center."

6. Google Japan Now Has Street View From a Dog's Perspective

Guess what, the German Constitutional Court agrees with me, Super Mario, and my 2% inflation goal.

Keep it up, Karlsruhe.

Don't even know, how the heck we get there. Not even Janet knows. Anyway, I keep buying shit, even corporates. Where does the money go? Dunno, may be here, or here.

Look, the EU would be screwed without my 'Whatever it takes' in July 2012 and my additional quantification "And believe me, it will be enough” just so I could get my point across.

Still, some dimwits say I am contravening the Maastricht Treaty, as if I would care. They even drag their asses to the Red Coated in Karlsruhe to get me stopped. Losers! Here it is from those funnily clad chaps:

2. a) ...

Mit der Unterbrechung der Anleihekäufe durch die Bundesbank würde die Zielsetzung des PSPP, durch eine weitere Lockerung der monetären und finanziellen Bedingungen eine Anhebung der Inflation auf knapp 2 % zu bewirken, aufgrund des hohen prozentualen Anteils der von der Bundesbank getätigten Ankäufe jedenfalls stark eingeschränkt oder womöglich sogar verhindert werden.

2. (a) ... With the interruption of the bond purchases by the Bundesbank, the objective of the PSPP to effect an inflation of just under 2% by an additional easing of the monetary and financial conditions would in any case be severely restricted or even prevented.

Didn't expect anything else from Gruppo Rosso.

When you're walkin' down the street

And the man tries to get your business

And the people that you meet

Want to open you up like Christmas

You gotta wrap your fuzzy with a big red bow

Ain't no sum bitch gonna treat me like a ho

I'm a classy honey kissy huggy lovey dovey ghetto princess

Cause you're filthy Oooh, and I'm gorgeous.

Why did the German Constitutional Court not read Wynne Godley?

(Image via Goofynomics)

Instead, they pester the ECJ.

ECB's QE Questioned by German Judges Asking for EU Review

The ECB is not the FED ...

Quote of the day:

"THE ECB IS NOT THE FED FOR DRAGHI HAS SET IT ON A PATH TO FULFILL THE MANDATE OF THE PRESERVATION OF THE EURO."

This must have been lost on them.

Oops, wrong image, I meant those.

They passed on the hot potato to the ECJ. Perhaps the Constitutional Court should read the mandate of the ECB. But when you are too close to Berlin ...

ECB's QE, NAIRU and Merkel's immigration policy

Merkel, hopeless

Just a random thought.

ECB chief economist Peter Praet: If you print enough money, you will always get inflation.

Let's leave aside that he does not understand what creates inflation. The ECB's aim is a 2% inflation rate.

The NAIRU, the Non-Accelerating Inflation Rate of Unemployment (NAIRU) is the unemployment rate consistent with maintaining stable inflation. According to the standard macroeconomic theory, inflation will tend to rise if the unemployment rate falls below the natural rate.

Now let's bring Merkel's immigration policy into the equation and fat German labor minister Nahles' latest assessment on all those foreigners flocking into Germany and elsewhere.

Nahles sees the vast majority of refugees as unemployable for years.

So if you believe in the policy of the ECB and believe that NAIRU has any scientific value and is not a jargon, then Merkel's immigration policy is clearly undermining all efforts of the ECB.

What does Mario say?

New old government in Greece and who is that mysterious yellow line?

OK, Greece is toast, but the ECB has just released the latest Target2 balances. Who is that mysterious yellow line hovering way up in the sky? This is supposed to be a monetary and economic UNION???

ECB