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Spain has exposed the limits of the ECB's LTRO, writes John Plender, adding the program only...

Spain has exposed the limits of the ECB's LTRO, writes John Plender, adding the program only reinforced a dynamic of weak EU banks propping up overstretched sovereign borrowers. Bank balance sheets are now in even worse shape as lenders pledged so much collateral as security for ECB loans. It's "back to make do and mend in the eurozone."
Comments (9)
  • Charles A. Smith
    , contributor
    Comments (1082) | Send Message
     
    Half-life of 1 trillion Euro LTRO was astoundingly short.

     

    http://seekingalpha.co...
    10 Apr 2012, 01:37 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (17866) | Send Message
     
    The half-life (and indeed, entire life) of the LTRO lasted until the operation took place. Almost all of the buying enabled by the LTRO took place before the operations (as it should be, since whatever was bought, was pledged as collateral).
    10 Apr 2012, 08:24 PM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1082) | Send Message
     
    Point is that the REASON for the LTRO has not gone away. Bank runs in south Europe continue, so the ECB funding did not bolster systemwide confidence. Best evidence of this is EURCHF busting at the seams of the peg.
    11 Apr 2012, 08:34 AM Reply Like
  • Inzaghi009
    , contributor
    Comments (25) | Send Message
     
    Go go QE go!.. This should show u that QE doesn't help that much and hopefully takes it all off the table..
    10 Apr 2012, 01:43 PM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    It makes some people some very fast money....and you know who they are...but not us..we have to pay it back...
    10 Apr 2012, 01:49 PM Reply Like
  • Banner17
    , contributor
    Comments (60) | Send Message
     
    This proves that the flow of liquidity via debt monetization is far more critical than the stock of liquidity for inflating global financial markets. Unless the ECB, Fed, BOJ, BOE etc are prepared to feed liquidity to markets perpetually, asset prices are set to plunge. Buckle Seat Belt...
    10 Apr 2012, 05:28 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Unfortunately they just may be prepared to keep providing more cheap liquidity until inflation really forces their hands.
    10 Apr 2012, 06:21 PM Reply Like
  • The Last Boomer
    , contributor
    Comments (881) | Send Message
     
    No doubt ample liquidity provided by the central banks plays a role in the financial markets today but it does not explain everything. The corporate profits are real and they drive the asset prices up as much as the liquidity spigot does. The profits in the last three years have been mostly funded through the government budget deficits. If you don't believe me, read this very fine article by James Montier.
    http://bit.ly/HqQrj7
    Once the fiscal consolidation begins, the profits will take a plunge unless the other drivers of profits pick up the slack.
    10 Apr 2012, 09:55 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (17866) | Send Message
     
    Indeed, the profits are not as real as they seem - a good part of them just exist because of the large fiscal deficits, enabled by the money printing. This is in a way, similar to what happened during 2007 - a good part of the profits only existed because of the huge debt expansion.

     

    Not that this means much, as the central banks can indeed continue printing, and thus "make it sustainable".
    10 Apr 2012, 10:56 PM Reply Like
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