ECB Drowns Markets In "Liquidity"

Wednesday, October 10, 2007

The European Central Bank (ECB) has added 55 billion Euros "liquidity" in its latest regular one-week tender on Wednesday. Bids for 218 billion Euros were accepted at a minimum rate of 4.12% and the weighted average rate came in at 4.16%, still above the reference rate of 4%. In so called "other operations" the ECB drained 24.5 billion Euros. As the ECB website information painstakingly avoids to list its money market operations in chronological order (as the Fed NY does) I am at a loss to explain where this was drained from. Single data points only are not exactly the kind of transparency Europe's high priests of ever expanding credit always like to praise so much.
It is ECB policy though. Only a day earlier ECB president Jean-Claude Trichet had told the European Parliament, Euro bankers should apply "verbal discipline." I would say, a sound policy would help more to calm markets which bid cash gold to a new 28-year high at $743.
In order to find out how much "liquidity" is currently chasing too few goods and services we will have to wait for the next weekly financial statement of the ECB.
The latest weekly statement shows a net gain of 2.5 billion Euros in "other assets" and a net drain of 150 million in gold and gold receivables, which was a result of central banks selling and one central bank again buying gold coin.
NOTE: Blogging hiatus until next Tuesday due to a shiny new (push)bike in the basement and perfect weather in Vienna. But a crash, which I expect to happen any day, could change all that. Times are simply way too interesting to leave my laptop behind.

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