ECB money injection not a reason for optimism

Euro banknotes

Are you feeling optimistic yet? Are you confident that policy-makers have things under control? - If so, you must believe that we can solve any economic problem by throwing freshly printed money at it. Even problems that are evidently the result of previous periods of 'easy money'- such as overstretched and weak banks. The ECB this week allotted another EUR529.5 billion of new money to Europe's banks. The banks get these funds for three years at 1 percent interest. That this is a gigantic subsidy for one specific industry … [Read more...]

Unstoppable: Why this crisis will keep unfolding

Balls of euro banknotes

When the tectonic plates underneath society shift, confusion reigns, together with wishful thinking. It appears that financial markets have again managed to get themselves into a state of unrealistic expectation. The European summit this coming Sunday (or the follow-up summit on Wednesday) is now supposed to bring a "comprehensive plan" to solve the European debt crisis. Of course, nothing of the sort will happen, and for a simple reason: it is impossible. Those who cherish such fanciful hopes are naïve and will be … [Read more...]

A Band-Aid for a cancer patient


This was another hectic week for financial markets, and nerves were calmed somewhat over the past 24 hours with another liquidity injection from the central banks - this time the provision of dollars from the U.S. Fed channelled through a few other central banks, most importantly the ECB. This is certainly not a solution but again the doctoring of symptoms. Pumping ever more fiat money into the system to avoid - or rather postpone - a much needed recalibration will not solve the underlying malaise. Four years into the crisis … [Read more...]

Financial markets still don’t get it

Picture of shares

 Apologies if the title of this Schlichter-file sounds somewhat arrogant but after the events of the past three weeks I may perhaps be forgiven for feeling a bit emboldened in my views. Of course, this is often the point at which the pendulum swings in the other direction and developments take a slightly different turn, if only for a short time. After all, big trends almost never go from A to B in a straight line. So let's stay modest and nimble. But there can be no denying that the events of that past two to three weeks … [Read more...]

Divinely comical

Image of Dante

"Italy, long a bystander to the euro-zone's debt woes, was thrust into the eye of the storm on Monday, as investors fled the country's bonds and Europe's leaders struggled to keep the crisis from infecting the Continent's third-largest economy." Thus reports the Wall Street Journal Europe this morning. What?, I was thinking. Bystander? Investors fleeing the country? --  Was anybody still holding Italian bonds? That Italy was next in line was so obvious, how can anybody truly be surprised? What were you thinking, sitting … [Read more...]