The Secret Pipeline Pumping Your Money into the ECB

30.06.2017 • Switzerland

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Henry Bonner – Strategy and Council Letter (Switzerland) –

Calm on the stock market for now …

After a fall of 2.2% yesterday on the CAC 40, the market seems to be stabilizing … taking 0.16% in the opening hour of the market …

On the other hand, the trend remains downward … the CAC 40 has now lost 4.9% since May 5th …

In the absence of news about companies, or about the ECB’s policy, the market prefers to protect itself …

As we reported yesterday, the second quarter of 2017 is closing today … and companies will take a few weeks to publish their results.

We should have movement again – up or down – by mid-July.

Meanwhile, the VIX index, which measures whether investors are protecting themselves against volatility, remains low … In other words, investors do not seem to care.

In a few weeks, they believe, we will have results that will justify their expectations …

Will they be right?

For its part, the largest bank in the United States, Bank of America, issued a message noting that markets underestimated the impact of the Fed …

In other words, the market does not see that the record levels it has reached depend on the “easing” policies of the Fed, the ECB, and the Bank of Japan …

So, this market could quickly fall if these withdraw their support …

Herlin: We Have a ‘Fragmentation Bomb’ in the Euro

 

As a reminder, Dr. Herlin and I launched the “Letter Strategy and Advice” in early 2017 …

In the dossier we will publish for our subscribers in early July, Dr. Herlin explains “what’s wrong” with the euro …

In particular, Dr. Herlin explains that ALL payments between member countries of the euro area pass through the ECB …

This system which allows the ECB to control all our payments is called “TARGET 2 …”

As Dr. Herlin explains, the equivalent of the GDP of the euro zone transits through TARGET 2 every 5 days …

What is the problem?

Well, all the countries in the zone use TARGET 2, but some of them receive far more transfers than they emit …

For example, our neighbors the Germans have a surplus of 700 billion euros … while Italy is in deficit of 300 billion euros …

This system works as long as all the countries remain in the TARGET 2 … but if one of the members decides to leave this system, then all the countries of the zone see their balances change from one day to the other …

This is why our leaders have tried so hard to curb the exit of Greece from the euro zone …

If even one of the small members leaves TARGET 2, then all this infrastructure we depend on can drop …

Herlin:

“… if Italy decides to leave the euro, it would of course refuse to pay the 300 billion euros of debt and this would be lost to the German financial system … Here is the fragmentation bomb which lodges at Heart of the European currency. ”

What to do…?

We do not know better than the others when we will see the crisis looming …

However, these crises occur from time to time …

Why?

Well, to answer it, we need to ask another question.

What is the use of having a market in which shares are traded?

Well, we have a market because it allows us to know what things are worth …

In other words, the market allows us to “discover” the prices …

Now, at this moment, we do not “discover” anything …

We are all convinced that the market will only rise … and that the crises will not happen again …

In other words, we already believe we know everything the market can teach us …

Maybe in the next few months, we will find out where our error lies …

-Read more at www.lettre-strategie-conseil.com (French)-

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