Marshall Auerback video
Posted by WARREN MOSLER on February 22nd, 2012
Marshall Auerback video
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February 22nd, 2012 at 4:27 pm
Warren ,
Do you agree with his assessment that SP, IT etc yields came down because of the LTRO of last Dec?
If yes, then how long you reckon this is going to last? (taking also into account next weeks new ltro).
You mentioned before that this LTRO is not the solution, because banks always had access to finance from ecb and still have the same restrictions and criteria for their investments.
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WARREN MOSLER Reply:
February 22nd, 2012 at 5:05 pm
I think there was more to it, but not sure what. It may have come at the end of the MF liquidiation, for example, and spreads would have come in regardless
or maybe banks got the nod from the regulators that there would be no more haircuts after Greece.
so I don’t feel like I got enough information to know why they came down, but as a point of logic the ltro’s didn’t alter the risk profile of anything
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BFG Reply:
February 22nd, 2012 at 5:33 pm
@WARREN MOSLER,
Just a guess, maybe they came down because the banks weren’t selling them as opposed to buying them.
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WARREN MOSLER Reply:
February 22nd, 2012 at 10:15 pm
yes, that too
walter Reply:
February 23rd, 2012 at 7:15 am
@WARREN MOSLER,
“the nod… no more haircuts”, Yes, that likely played a role. However how many times we heard before that there will be no default in the eurozone (a.o. Lagarde, now head IMF, repeated that many times). It seems that the Dec ltro went mainly to SP and IT banks. And as Draghi told us the banks that put overnight deposits at ecb are not the same as the ones that took the ltro. This would support the conclusion that IT and SP banks took the ltro and then bought IT and SP govt bonds.
Looks to me they had little choice, already being loaded with these bonds. If regulators don’t punish you either when CAMELS are violated then the rules of the game clearly have changed. I do not know how Basel will look at this all. After all many european banks had to strengthen their capital before July 2012.
You mentioned before (Jan 13th) “The banking system can’t fund all the euro member nations under current regulatory restrictions, including capital requirements and diversification rules”.
“Once the banking system is ‘topped off’ it only buys more national govt bonds to replace maturing issues, or to add to its balance sheet should its capital increase”.
Do you agree that if IT and SP banks are by now probably much closer to being ‘topped off’ then the next IT and SP bond buying should be done by banks from other countries and should the next ltro be much lower than the previous one?
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WARREN MOSLER Reply:
February 23rd, 2012 at 8:19 am
yes, seems like it to me. and the banks that bought the 3 year paper could have just as easily done it without the ltro as it was all eligible collateral in any case.
February 22nd, 2012 at 11:15 pm
Where is Marshall? What I got was a seemingly interminable talking head show about being connected. I couldn’t take but five minutes of that chatter.
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