Mario Draghi ECB Press Conference, Thursday, 19/01/17, 1.30pm

Tadhg Gaelach

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#1


That time of the month again when Mario Draghi faces the press to tell EU citizens \ victims why their currency is worth sweet f-all, and getting worse by the day. December saw a great leap in EU inflation, when the rate went over 1%. This is mostly down to fuel price increases and internal German inflation, which is causing chronic property bubbles in places like Munich.

The ECB's inflation target is 2%, the same as the target of the US FED. You might think that inflation is a bad thing and should be avoided. And that's certainly true if you are an old aged pensioner, or someone else on a fixed income, or living from your savings. But, if you owe lots of money, as most states and companies do, then inflation is a good thing as it effectively lowers your debt. Inflation is a way to rob the old aged pensioners and give the money to states and corporations.

The effect of inflation on a currency is that is allows central banks to increase interest rates - to curb inflation - and increased interest rates mean that the currency is more valuable. But, before that happens, increased inflation will allow the ECB to "taper" its quantitative easing (QE) program, i.e. money printing program. At December's ECB meeting it was announced that the ECB would be tapering corporate bond buying from 80 billion euro a month to 60 billion euro a month, but extended the original end date of March 2017 to the end of 2017. Again, any tapering \ cutting back in QE will tend to increase the value of the Euro.

So the markets will be listening very keenly today to hear if Mr. Draghi will drop any hint that QE is to be further reduced.
 
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Anderson

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#2
I expect him to make some reference to May's Brexit speech, something along the lines of Feck you UK. I just cant wait till the UK actually enacts Article 50, then the fun will begin. Many politicians including Draghi still dont think they will do it, including many of our own thick TD's.
 

TheKing

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#3


That time of the month again when Mario Draghi faces the press to tell EU citizens \ victims why their currency is worth sweet f-all, and getting worse by the day. December saw a great leap in EU inflation, when the rate went over 1%. This is mostly down to fuel price increases and internal German inflation, which is causing chronic property bubbles in places like Munich.

The ECB's inflation target is 2%, the same as the target of the US FED. You might think that inflation is a bad thing and should be avoided. And that's certainly true if you are an old aged pensioner, or someone else one a fixed income or living from your savings. But, if you owe lots of money, as most states and companies do, then inflation is a good thing as it effectively lowers your debt. Inflation is a way to rob the old aged pensioners and give the money to states and corporations.

The effect of inflation on a currency is that is allows central banks to increase interest rates - to curb inflation - and increased interest rates mean that the currency is more valuable. But, before that happens, increased inflation will allow the ECB to "taper" its quantitative easing (QE) program, i.e. money printing program. At December's ECB meeting it was announced that the ECB would be tapering corporate bond buying from 80 billion euro a month to 60 billion euro a month, but extended the original end date of March 2017 to the end of 2017. Again, any tapering \ cutting back in QE will tend to increase the value of the Euro.

So the markets will be listening very keenly today to hear if Mr. Draghi will drop any hint that QE is to be further reduced.
I so love the photo!

Any live links Tadhg?
 
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Tadhg Gaelach

Tadhg Gaelach

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#6
Draghi says risks are still to the downside, Eurozone still needs substantial stimulus, cutting back on QE was not discussed at the ECB meeting. On Brexit he says a deal that will last is needed.
 
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Tadhg Gaelach

Tadhg Gaelach

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#8
A generally upbeat message from Draghi. He says no EU state has an unsustainable debt - including Greece. He claims that zero interest rates and QE have worked, and that the Eurozone economy is recovering. Unsurprisingly, many of the journalists questions focused on Germany. Germany badly needs increased interest rates to cool off the emerging property bubbles. Unlike the Irish, the Germans consider the social chaos caused by property bubbles to be a bad thing. The Irish see it as a sign of excellent government policy. IN answer to these questions, Draghi just said that the Germans will have to put their own interests second to the collective interest of all the EU states. But he says its in Germany's interest to see all the other recover too. Despite the upbeat tone, the Euro traded a cent lower against the USD than when Draghi began talking.
 
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Tadhg Gaelach

Tadhg Gaelach

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#11
One serious point that did come up is that the ECB is now buying corporate bonds that have a yield below the bank deposit rate. So not only is the ECB (supposed to be owned by EU citizens) buying bonds that pay nothing, but is actually loosing money by not just leaving the money in the bank. This is great for the shareholders of those corporations - but rubbish for the likes of you and me.
 
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Tadhg Gaelach

Tadhg Gaelach

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#12
And, as mentioned, the one size fits all monetary policy continues to wreak havoc. It was one thing when it was Greece that was being shafted - but how long will Germans take this treatment? The Germans need increased interest rates now.
 
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