Thread by @Amdalleq

It's been 4 weeks since the last European Central Bank policy meeting. I think this is a good time to sum up the most important developments over this period.
MEGA THREAD 1/
bloomberg.com/news/articles/…

The most important decision of the ECB was to cut deposit rate to -0.5% (from -0.4%) and the announcement of the new asset purchase programme(Quantitative Easing - QE) for an unlimited period ,at a monthly pace of €20 billion as of Nov. 1. 2/
ft.com/content/9b2c29…

The ECB has also announced the so-called tiering system which exempts part of banks’ money (excess liquidity) parked at the ECB account from negative rates. The total relief for the banking system is about 1.7 billion euros, an average of just 2.5% pre-tax profits. 3/

The decision came despite the"unprecedented revolt"
QE resumption was opposed by representatives from France, Germany, Netherlands, Austria, Estonia and members on the Executive Board including Sabine Lautenschlaeger and markets chief, Benoit Coeure. 4/
bloomberg.com/news/articles/…

Mario Draghi in his speech during the conference said that "We really think that this package is adequate to re-anchor inflation expectations."
As history shows ECB QE actually had no effect on inflation expectations. 5/

https://twitter.com/ecb/status/1172218360144306177

No wonder why this decision has faced unprecedented criticism, few examples:
Austria’s new central-bank governor said that the ECB's latest easing package was possibly a mistake and can be changed after incoming President Lagarde takes over from Draghi 6/

bloomberg.com/news/articles/…

@Schuldensuehner pointed out that even newspapers like ZEIT & SZ, who were previously in favour of the ECB's Monetary Policy, criticize Draghi. Tabloid BILD calls him Count Draghila in reference to Count Dracula, who sucks our savings. 7/

@Schuldensuehner @dlacalle_IA, one of the most influential economists in the world wrote that The New ECB QE Is A Mistake

"The ECB is creating a dangerous bubble and should not have cut rates by 10bps nor added a new purchase program of €20 billion per month. " 8/
app.hedgeye.com/insights/77925…

@Schuldensuehner @dlacalle_IA In the meantime, the most senior German official at the ECB unexpectedly resigned more than two years before her eight-year term amid a conflict over a move to restart the bank’s giant bond-buying program. 9/
wsj.com/articles/germa…

@Schuldensuehner @dlacalle_IA After this decision prof. Tuomas Malinen @mtmalinen listed ECB's bad policy decisions in his thread, starting from the 'Outright Monetary Transactions' (OMT) program to bring down the borrowing costs of countries during the 2011/2012 debt crisis. 10/

https://twitter.com/mtmalinen/status/1177120265240756224

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth rightly asked why Draghi launches QE Eternity to raise inflation expectations when his first attempt failed to deliver (as showed in the charts above and in her tweet). 11/

https://twitter.com/DiMartinoBooth/status/1179021477393379328

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth Head of Germany’s Bundesbank, who for several years has been the leading opponent of the ECB’s bond-buying programme warned that he would oppose any attempts to lift limits on its programme of bond purchases. The limit stands at 33% of country's bonds 12/
ft.com/content/5fb1a4…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth Also recently @mtmalinen emphasized that "QE increased the financial fragility of the banking system in Europe. In essence, negative interest rates and the OMT and QE -programs were a ‘triple whammy’ for the European banking sector." 13/

gnseconomics.com/en_US/2019/10/…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth Looking at the European Banks Sector index price, investors do not see EU banks as attractive. Remember when the financial sector has problems then the entire financial system either. 14/

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth @DiMartinoBooth in one of the interviews said about the ECB: "It appears that Quantitative Easing and lowering interest rates beyond the zero bound, in the negative territory, actually has a backwards effect. It can actually slowdown economic growth." 15/

bnnbloomberg.ca/video/there-we…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth Former Credit Suisse CEO and UBS top executive, Gruebel recently called: “Negative interest rates are crazy. That means money is not worth anything anymore. As long as we have negative interest rates, the financial industry will continue to shrink.” 16/
bloomberg.com/news/articles/…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth Oliver Bäte, chief executive of Europe’s biggest insurer Allianz in an interview with the FT hit the ECB saying that:
“The reason why we’re not doing fiscal [reforms] is because you’re making it easy for people to spend money they don’t have,” 17/
ft.com/content/03c8f1…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth And the last one:
"A group of former senior European central bankers has published a memo attacking the loose monetary policy of the European Central Bank, which they argued was “based on the wrong diagnosis” and risks eroding its independence." 18/
ft.com/content/71f90f…

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth As you can see, the criticism of ECB's policies is huge and it is very justified. At the end, let's look what does the market say. Despite significant easing package, inflation expectations have reached new all time low (market doesn't believe ECB). chart: @AndreasSteno 19/

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth @AndreasSteno It is even more clear, looking at @fwred chart, second vertical dashed line shows the moment of the ECB rate cut and QE announcement. 20/

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth @AndreasSteno @fwred @AndreasSteno from Nordea Markets commented on this occasion what we can expect from the ECB in the coming months which inspired me to write a short ECB guide: 21/

https://twitter.com/Amdalleq/status/1179726146734366721

@Schuldensuehner @dlacalle_IA @mtmalinen @DiMartinoBooth @AndreasSteno @fwred To sum up:

"QE, which the Bank for International Settlement recently agreed does not flow to the real economy, but pours more liquidity into asset markets, making the rich richer. Unless QE allows governments more room for fiscal spending - which is de facto debt default." /END

@mtmalinen @dlacalle_IA @DiMartinoBooth @AndreasSteno @tyillc @fwred @biancoresearch @lisaabramowicz1 @danieljohnsalt @jsblokland @hussmanjp @chigrl @oliviabvoz @CNBCJulianna @CNBCJou @GeoffCutmore @SaraEisen