Once upon a time, everyone was shocked when one after another central bank adopted what previously was unthinkable: a Zero Interest Rate Policy, or ZIRP. Then, on June 5, the ECB added “awe” to the equation when it became the first major central bank to push rates negative. The move was meant to shock depositors into pulling their money out of banks and into risk assets. It failed, which is why 2 days ago the ECB took awe to the next level when it added QE to NIRP. It did however succeed in one thing: pushing $1.4 trillion in Euro area government debt into negative interest rate territory and right into an abyss that screams deflation.
As JPM nots, the chart below shows an estimate of the amount of Euro area government bonds with longer than 1-year maturity trading at negative yields over time. Around €1.4tr of Euro area government bonds are currently trading with negative nominal yields, almost all of them of core euro governments of up to 5 years maturity. Back in June, before the ECB’s shift to negative depo rate, the amount of euro area government bonds with longer than 1- year maturity trading negative was virtually zero.
German central-bank President Jens Weidmann didn’t vote in favor of the European Central Bank’s program to buy large amounts of bonds, according to excerpts of a newspaper interview to be published Sunday.
The ECB’s governing council, of which Mr. Weidmann is a member, on Thursdayapproved the plan to buy more than €1 trillion ($1.12 trillion) of debt securities, including government bonds, with newly created money. The plan is aimed at boosting inflation in the eurozone.
But Mr. Weidmann said he didn’t see a need for the program, according to excerpts of the interview to be published in German newspaper Welt am Sonntag.
“Inflation is very low at the moment, but this is driven by the low oil price. Therefore there are many reasons to assume that the low inflation is a temporary phenomenon,” the Bundesbank president is quoted as saying. >> Read More
Since the U.S. has had near absolute control over the global financial system for the past 70 years through its position as the keeper of the global reserve currency, the dollar can and has been used as a weapon to force other nations to succumb to their national and foreign policy agendas. However for beleaguered Iran, which has been the focal point of economic and political sanctions from the U.S. over the past decade, the decision to fight back has now suddenly occurred on Jan. 24 as the Middle Eastern oil power announced they were ending their relationship with the petro-dollar and the American currency, and were beginning new bi-lateral trade in currencies other than the dollar.
Iran’s shift in policy leaves open the option of a plethora of different strong currencies they can now use and accept in trade, including the Yuan, Rouble, Euro, and even the Turkish Lira. And as the price of oil drops at the same time the U.S. dollar is rising to much higher levels, accepting other currencies like the newly devalued Euro will facilitate greater trading options for Iran through a combination of arbitrage, and lower prices elsewhere for imported goods.
On top of this new announcement, Iran also completed a new agreement with China for a $2 billion line of credit to aid in the construction of new petro-chemical projects that might include the building of refineries and other self-sustaining infrastructures. >> Read More
Iran’s parliament has started to draft a law that would allow the country’s nuclear scientists to intensify their uranium enrichment, a step that could complicate ongoing talks with world powers.
The move, announced on Saturday by parliament’s National Security and Foreign Policy Committee, comes after US lawmakers said they were planning legislation that could place new sanctions on Iran.
The negotiations between Iran and the permanent members of the UN Security Council – Britain, China, France, Russia and the United States – plus Germany, face a June 30 deadline for a final deal.
But with two deadlines already missed last year both sides have admitted big differences remain on the hard detail of what a comprehensive agreement would look like.
Hossein Naghavi Hosseini, committee spokesman in Tehran, told the ISNA news agency that draft legislation was underway.
In 2012, when Alexis Tsipras last ran to be prime minister of Greece, his compatriots were quite literally killing themselves in public squares because of the tough austerity measures that had strangled the country’s economy.
Tsipras, just 37 years old at the time, personable, extremely telegenic, took a page from his playbook as a student activist to rabble-rouse for a better life. Tsipras’s office was adorned with a poster of Ernesto “Che” Guevera. (His youngest son is named Ernesto.) And he rarely wore a necktie—especially when he tooled around Athens on his German BMW motorcycle.
His alternative-left Syriza party, he said, was the ticket out of the hell that Greece had become. “We have never been in such a bad place,” he told The Daily Beast back then. “Greeks are on their knees and leaving the country en masse. This is not an acceptable future for a European state.”
Back then, Tsipras promised to guide Greece to a better future, which he proposed would be one without the single European currency and thus outside what’s called the Eurozone.
In the end, Tsipras lost the election, which was played out in two rounds after no clear winner emerged from the first poll. But the fact that Syriza won 27 percent of the vote meant that more than a quarter of Greeks thought his plan had legs, and that worried mightily the powers that be Berlin and Brussels.
“People believe that bankruptcy is what we experience now. Bankruptcy is when imports, fuel, raw materials and medicines are being immediately stopped. This is something we have seen in Cyprus, in Venezuela, in Argentina.”
“No, there is no toilet paper in Argentina and Venezuela. Therefore, I recommend, you do your supplies.”
The European Union is considering an emergency meeting to discuss the Russia-Ukraine conflict after rocket attacks killed at least 30 people in Ukraine’s strategic Maruipol port on Saturday.
Latvia, which holds the EU’s six-month rotating presidency until July, called for an emergency meeting of the EU foreign affairs council next week.
“I call for extraordinary EU Foreign Affairs Council meeting next week, fully support action by HR @FedericaMog addressing situation in UA,” Latvian foreign minister Edgars Rinkevics said Saturday via Twitter.
In a separate statement the Latvian Foreign Ministry said it was increasingly evident that Russia “is not interested in a peaceful resolution of the conflict” in Ukraine in light of events in Mariupol. >> Read More
About 30 people have been killed in the eastern Ukrainian city of Mariupol as fighting escalated to the worst level in months. Pro-Russia separatists had announced they were launching an offensive on the strategic city.
The death toll from rocket fire attacks in eastern Ukraine climbed on Saturday, with an estimated 30 people killed and dozens more wounded in a residential area of the city of Mariupol.
“The walls were shaking, the window frames were shaking, paint started to crumble off the house. I hid in the basement. What can you do? I took the dog and the cat. In the basement you can hear the earth tremble,” 76-year-old pensioner Leonid Vasilenko told Reuters news agency by telephone from the eastern suburbs of Mariupol.
While authorities in Mariupol have blamed the separatists for the attack, the separatist leaders denied responsibility. They had, however, announced they would move towards taking over the strategically important city, which is controlled by the Kyiv-based Ukrainian government.
“Today an offensive was launched on Mariupol. This will be the best possible monument to all our dead,” separatist leader Alexander Zakharchenko was quoted as saying by the RIA Novosti news agency at a memorial ceremony being held in the separatist stronghold of Donetsk. >> Read More