The President of the ECB kicked off the ECB Forum on Central Banking 2020 on Wednesday. It is the European counterpart of the Jackson Hole symposium. Jerome Powell (FED) et Andrew Bailey were also in the game.
“We were there for the first wave, we will be there for the second”
Christine Lagarde made it very clear that hundreds of billions of euros are in the pipes for December 09.
« All options are on the table “She declared before specifying that” LTRO and PEPP have proven their effectiveness “And that they will be” therefore probably the main monetary policy adjustment tools. “In other words, the ECB will pour a lot of money into the banks…
By the way, what exactly are PEPP and LTRO?
- The Pandemic Emergency Purchase Program (PEPP) is nothing other than “Quantitative Easing” with Covid sauce. It consists in buying the debts of the Member States of the Euro Zone as well as those of multinationals. Nothing new under the sun. Simply, hygienist hysteria serves as a pretext to print a few trillions more. The ECB has already injected through this disguised QE more than 640 billion (out of the 1350 billion promised).
- The LTRO allows for borrowing at the ECB counter at a rate of -1%. Which means banks are paid to borrow. Banks reimburse 1% less each year. The amount of the LTRO currently represents 1500 billion.
It is rumored that the ECB will announce an additional 500 billion (probably a little more). This Christmas present for the banks would imply an extension of quantitative easing until the summer of 2022… Needless to say that this ocean of money, a source of inflation, bodes well for the Bitcoin (BTC)…
Inflation and consequences
The former IMF President also said in her opening address to the Forum that “ the evolution of the Euro exchange rate could have a negative impact on inflation ».
Translation : The rise of the Euro will weigh on inflation. Which makes sense because a strong euro makes it possible to buy more foreign products for the same amount. By the way, the ECB estimates that a 1% increase in the euro exchange rate translates into a 0.3% decrease in inflation, all things equal otherwise.
This statement strongly suggests that the ECB expects the euro to fall against the dollar in the medium term. Here again, Bitcoin could hardly ask for better …
Still on the subject of inflation, let us note that the chief economist of the Spanish Central Bank recently declared that the ECB should adopt the same strategy as the FED by letting inflation exceed the limit of 2%. “Temporarily” of course … Words echoing those of Christine Lagarde who also touched on this idea not long ago.
So we move further and further away from the unique ECB mandate conferred by European treaties, namely to guarantee price “stability”. Thus, in the Orwellian world of the ECB, price stability goes hand in hand with inflation above 2% … As a reminder, 2% inflation per year results in a doubling of prices after 35 years.
Central banks need inflation because it is vital for the Ponzi scheme of money creation from interest. Without inflation, the exponential dynamics of interest rates would make public debts absolutely unsustainable.
Did you say vaccine?
Other interesting information: the allusion to the vaccine. Christine Lagarde called on governments to widen their budget deficits to bridge the gap ” until the vaccination of the population is well advanced »…
Overall, Western central bankers have greeted the news of Pfizer’s vaccine with caution. The tone employed by Christine Lagarde was also very cautious. And what could be more normal when we know that the Covid and the economic collapse linked to confinement are blessed bread, allowing the printing press to run with impunity …
Covid = printing press = rising Bitcoin. From where the decline in gold and cryptocurrency during Pfizer’s announcement.
But don’t worry, bitcoiners. The President of the ECB declared that the economic recovery will not be smooth sailing if restrictions are needed to curb the multiple waves of the virus despite the breakthrough in the vaccine race …
Covid or not, it is written that central banks will tirelessly continue to devalue money to support the debt house of cards. The current highly inflationary context is reflected in the rise of safe havens such as Bitcoin.