Wait, How Much In LTRO’s?

Over the interim, the ECB has offered three additional LTRO’s, the middle two of which (September and December) were relatively small and thus reflation-arily encouraging (along the lines of how banks didn’t seem to want a lot more in long-term central bank funding). Then the third, conducted on March 24, 2021, suddenly big demand again.


Everything was awesome in 2021, allegedly, and by March with global reflation in full game there was every (mainstream) sunshine and rainbow given for the world to believe full recovery if not too much of one (inflation). Yet, here was a surprising 425 bidders demanding an unhealthy €330.5 billion more on top of the €1.5 trillion in three-year financing the ECB had already delivered at the prior four operations. And I haven’t even added QE’s here (you can see their additions on the chart above).

Collateral in euro repo still that messed up?

Obviously, we cannot directly answer such a question because, even though the Europeans are leading the investigation into what they’ve called Secured Financing Transactions (SFT), of which repo is the big part, their snail’s pace has meant for over half a decade officials have stated they recognize just how much of a systemic issue collateral can be, yet have done so very little about it. Barely even gathering minimal information.

But we know all about the LTRO’s and what’s on the ECB’s balance sheet. If you weren’t keeping track of them, I did it for you: since March 25 last year, there’d been an obscene €1.863 trillion in “money printing” and “liquidity”, with the last serious dose arriving not quite two months ago. An amount large enough that it actually sticks right out on the chart above.

Surely inflation in Europe is out of control, worse than it is in the US?

According to Eurostat’s final calculations for April 2021, the Harmonized Index of Consumer Prices (HICP) rose 1.6% year-over-year. While that’s up from 1.3% in March, and it counts serious base effects by being made in comparison to the index in April 2020, not even 2% with a huge energy/oil headwind likewise contributing.

Whatever must be hidden negative factors are displayed perfectly by the so-called core inflation rate which for April – the very month following the huge €330.5 billion latest “money injection into the economy” – tumbled to just 0.7%. Not only was that down for the third consecutive month, this was among the lowest in European history (again!)

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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