Monetary madness in the Eurozone

[admin]

Peripherally, yours

Joseph Cotterill | Sep 02 09:43 | 3 comments | Share

An interesting pair of charts to juxtapose on a Monday morning, and a PMI day… courtesy of Societe Generale. They point out that the eurozone is straggling to recovery, though apparently in spite of the ECB failing to shore up money growth:

When you look at the manufacturing PMIs for August — there’s everything from Italy and Spain rising above 51 (the first time Spanish output’s increased since April 2011), to output in Greece falling at the lowest rate since December 2009. Even in the Netherlands, supposedly the most weakening core eurozone member, it’s not too bad.

So what does the ECB say on Thursday?

[admin]

The dramatic fall in bank lending embodies a severe policy mistake. After the 2008 crisis, US banks were forced to recapitalize themselves but little of that happened in the eurozone, so we are now saddled with Japanese like zombiebanks of the 1990s, as you can see in the graph, banklending to the private sector is still contracting.

Also, M3 growth is very moderate (partly, of course, as a result of the weak banklending), the ECB has much more room to ease, they should embark on substantial QE, but of course they won't.