Tao Dong: "Q" And "E" Of The European Central Bank

Monetary policy is out of control, and Germany is unwilling to pay for the financial overdraft of other countries in the purchase of treasury bonds.

The Bank of Japan has recently launched a new quantitative easing policy unexpectedly, and the yen exchange rate has dropped sharply, believing that it is a stimulus to the European Central Bank.

Japan and Germany have a high degree of coincidence in the structure of export products. The depreciation of the yen has hit Germany's export competitiveness in a disguised way, which has made new uneasiness for the future of European economic growth.

Even if Europe does not do QE for the time being, the central bank also needs to make verbal or even substantive intervention on the euro exchange rate.

I believe that the ECB will become more proactive in trying to influence exchange rates, and Delagi's exports are more frequent.

The author estimates that the European Central Bank will launch the US QE in the first half of next year or even earlier, and the euro will further depreciate.

As far as the policy is concerned, the help of the real economy may not be ideal, but the capital market will get a stir.

This article is originally published in this week's report. It is a personal view, not investment advice or persuasion. The results of the Asset QualityReview were published by the European Central Bank. 25 of the 130 European banks failed to pass the stress test at the end of 2013.

After raising 15 billion 200 million this year, 13 banks failed to go through the border, with a total capital shortfall of 9 billion 500 million.

Italy and Greece are the worst hit areas.

Another 259 banks barely passed the test, but less than 1.5 percentage points from the pass line.

This figure should be in line with market expectations, but I think the test is only a new chapter in the European debt crisis.

It is almost certain that banks need further fund-raising, and the European economy is facing further deleveraging.

So far this year, European banks have been earning 57 billion 100 million euros of capital, which is a big step forward compared to bank reform in previous years. This is also the reason for the easing of the European debt crisis.

However, the cost of this is that banks are very cautious in lending and continue to stabilize their accounts by reducing the risk rights. As a result, the real economy is seriously ill and has not benefited from the European Central Bank's blood pfusion.

The ECB meeting in November must face a choice between "Q" and "E".

In recent years, the European monetary authorities have launched several loose measures in succession, but the focus is on "E" and the implementation of crediteasing.

Regardless of the initial LTRO, or the TLTRO announced in spring, or the initial purchase of CB, and the subsequent purchase of ABS, the core is to deliver liquidity to the bank, hoping that the bank will turn it into the real economy.

Compared with "E", the ECB is obviously more cautious on "Q".

This is related to the position and authority of the European Central Bank, and checks and balances with Germany.

ECB's balance sheet has been shrinking since 2013. It failed to carry out QE in the same way as Fed did. It failed to expand its balance sheet and, through unlimited supply of liquidity, put long-term interest rates at ultra-low levels.

The European Central Bank released the results of the Asset QualityReview. 25 of the 130 European banks failed to pass the stress test at the end of 2013.

After raising 15 billion 200 million this year, 13 banks failed to go through the border, with a total capital shortfall of 9 billion 500 million.

Italy and Greece are the worst hit areas.

Another 259 banks barely passed the test, but less than 1.5 percentage points from the pass line.

This figure should be in line with market expectations, but I think the test is only a new chapter in the European debt crisis.

It is almost certain that banks need further fund-raising, and the European economy is facing further deleveraging.

So far this year, European banks have been earning 57 billion 100 million euros of capital, which is a big step forward compared to bank reform in previous years. This is also the reason for the easing of the European debt crisis.

However, the cost of this is that banks are very cautious in lending and continue to consolidate their accounts by reducing the risk rights.

Severe ischemia has not benefited from the European Central Bank's blood pfusion.

The ECB meeting in November must face a choice between "Q" and "E".

In recent years, the European monetary authorities have launched several loose measures in succession, but the focus is on "E" and the implementation of crediteasing.

Regardless of the initial LTRO, or the TLTRO announced in spring, or the initial purchase of CB, and the subsequent purchase of ABS, the core is

At present, Delagi's TLTRO plan is not successful. Banks are not active in obtaining the liquidity of the central bank and are less interested in lending to the real economy.

It is estimated that in December, ECB will sharply reduce the forecast of growth and inflation in 2015, recognize the possibility of deflation and recession, and Europe needs further measures to stimulate the economy.

But the market value of the entire CB market is only 1 trillion euros, so it is very difficult for us to not buy treasury bonds (6 trillion of the market) if we want to make a big move.

Deliver liquidity to the bank, hoping that the bank will turn it into the real economy.

Compared with "E", the ECB is obviously more cautious on "Q".

This is related to the position and authority of the European Central Bank, and checks and balances with Germany.

ECB's balance sheet has been shrinking since 2013. It failed to carry out QE in the same way as Fed did. It failed to expand its balance sheet and, through unlimited supply of liquidity, put long-term interest rates at ultra-low levels.

At present, Delagi's TLTRO plan is not successful. Banks are not active in obtaining the liquidity of the central bank and are less interested in lending to the real economy.

It is estimated that in December, ECB will sharply reduce the forecast of growth and inflation in 2015, recognize the possibility of deflation and recession, and Europe needs further measures to stimulate the economy.

But the market value of the entire CB market is only 1 trillion euros, so it is very difficult for us to not buy treasury bonds (6 trillion of the market) if we want to make a big move.

The author believes that the ECB will change its policy focus and turn to the management of the balance sheet of the central bank, imitating the Federal Reserve to create liquidity through unlimited purchases of treasury bonds.

Until then, the European monetary authorities have been emphasizing that the size of their balance sheets depends on economic data and the lack of Bernanke's desperate policy wildness.

It is believed that the European Monetary Authority will use the US QE as the last resort. First, we must observe the effect of the current asset purchase plan, and then confirm that the growth and inflation will continue to deteriorate.

After all, the core countries worry that the European Central Bank will change its policy focus and turn to the management of the central bank's balance sheet, imitating the Federal Reserve to create liquidity through unlimited purchases of treasury bonds.

Before that,

The authorities have always stressed that the size of their balance sheets depends on economic data and the lack of Bernanke's desperate policy wildness.

I believe the European Monetary Authority will adopt the American style.

As a last resort, we must first observe the effect of the current asset purchase plan, and then confirm that growth and inflation are indeed deteriorating.

After all, the core countries worry that monetary policy is out of control, and Germany is unwilling to pay for the financial overdraft of other countries in the purchase of treasury bonds.

The Bank of Japan has recently launched a new quantitative easing policy unexpectedly, and the yen exchange rate has dropped sharply, believing that it is a stimulus to the European Central Bank.

Japan and Germany have a high degree of coincidence in the structure of export products. The depreciation of the yen has hit Germany's export competitiveness in a disguised way, which has made new uneasiness for the future of European economic growth.

Even if Europe does not do QE for the time being, the central bank also needs to make verbal or even substantive intervention on the euro exchange rate.

I believe that the ECB will become more proactive in trying to influence exchange rates, and Delagi's exports are more frequent.

Monetary policy is out of control, and Germany is unwilling to pay for the financial overdraft of other countries in the purchase of treasury bonds.

The Bank of Japan has recently launched a new quantitative easing policy unexpectedly, and the yen exchange rate has dropped sharply, believing that it is a stimulus to the European Central Bank.

Japan and Germany have a high degree of coincidence in the structure of export products. The depreciation of the yen has hit Germany's export competitiveness in a disguised way, which has made new uneasiness for the future of European economic growth.

Even if Europe does not do QE for the time being, the central bank also needs to make verbal or even substantive intervention on the euro exchange rate.

I believe that the ECB will become more proactive in trying to influence exchange rates, and Delagi's exports are more frequent.

The author estimates that the European Central Bank will launch the US QE in the first half of next year or even earlier, and the euro will further depreciate.

As far as the policy is concerned, the help of the real economy may not be ideal, but the capital market will get a stir.

This article is originally published in this weekly magazine. It is personal view, not investment advice or persuasion.