Death Star Economics



Wednesday, #43: the money pump

Thanks to the European Central Bank’s LTRO (long-term refinancing operation), €489.191bn were pumped into the banking system this morning. The ECB had lowered its interest rate for banks to 1% a while ago, but this morning’s tender offer was expected to provide three-year loans worth around €300bn to European banks. But as 523 banks came knocking, the ECB ended up lending almost €190bn more. The idea behind this was to avoid an interbank credit crunch, in which case banks stop lending money to each other [and default on their debts]. Also, there is the hope that banks will use the new capital to buy Spanish and Italian government bonds. In response, the euro rose, then fell and then settled [up] at $1.3101. read article

British consumer confidence is down again; Christmas shopping didn’t help. Meanwhile, minutes of the Bank of England showed something we kind of already knew: there’s very likely going to be another quantitative easing package in February [especially now the AAA-rating is on the line]. read article

In late addition to Monday’s Economist chart, Robert Frank of the Wall Street Journal explains what being ‘high-beta-wealthy’ (having your wealth move with the market [volatility]) means and why it leads to an unavoidably high turnover [of people] in the top 1%. Money comes quick and in truck-loads, but it disappears just as fast. And that’s a good thing. This is not about putting up tents in city squares. Rather, it’s about something Felix Salmon calls it ‘high wealth velocity’: In a world where it is possible to generate a lot of money from an idea, entrepreneurship enjoys a healthy status in society and helps to drive the economy. read article

This is how a backdoor-bank-bailout works: read article

In case you are debating what smartphone to get and trying to decide between Apple and Samsung, just go with the iPhone, you’ll get both companies’ products in one. view graphic

So long.


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One Response

  1. […] the ECB press conference yesterday: In December, the ECB offered cheap three-year loans to banks to increase liquidity. And jeez, they did, by […]

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