Tuesday, June 7, 2011

European Central Bank Has Massive PIIGS Exposure

So that's where they have been sticking the PIIGS paper.

In a report entitled 'A House Built on Sand', by the think tank Euro One, the ECB has a total exposure of approximately €444 billion to the troubled Euro zone countries, and levered 23 to 24 times due to the bailout provided for Greece, Ireland, Portugal and Spain, reports UK's Telegraph. (To all Euro zone countries, the ECB has a total exposure of €1.9 trillion)

The ECB, according to Euro One,  has a total exposure of approximately €444 billion to Euro zone countries, and levered 23 to 24 times due to the bailout provided for Greece, Ireland, Portugal and Spain.

So the big question becomes, who has financed the ECB purchases? Since it is a central bank, did ECB just print the euros? Or have the funds been borrowed from Euro bank members who likely will never see their money again, unless the ECB prints it out of thin air, if they haven't done so already?

In any event, this puts the PIIGS crisis in perspective, the ECB is stuffed with PIIGS paper and it appears only ECB money printing from here will prevent the PIIGS from turning into bacon.



  1. My understanding is the ECB conducted Fixed Term Deposits (similar to the Fed's largely unused Term Deposit Facility) to sterilize the sovereign bond purchases. I don't know if they have continued to be rolled over, however.

  2. Slight typo, the ECB has a total exposure of 1.9 trillion to Euro zone countries, 444 billion of which is PIIGS exposure.

  3. Even if the term deposits have to be rolled over, isn't that merely a formality? Aren't the member banks pretty much obligated to do whatever the central bank tells them to do?

  4. There are those who say that Libertarians/Austrians/Paleo-Conservatives/ Whatever have no religious sensibilities.

    This is not so.  We have a Mantra.

    The Crackup Boom Prayer ... (Der Katastrophenhausseandacht)

    It is this:

    "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." 

    I say this repeatedly, lovingly, reverently.  It calms my mind and projects my soul to another realm ...

    Like the Westerners with their Rosary Beads and the Easterners with their Prayer Ropes ("Oh Lord Jesus Christ have mercy on me a sinner") this is OURS!

    Is that man you see on the street corner mumbling?  Does he have no bluetooth in his ear?  Well then, he is an Austrian reciting ...

    What is the difference between a Libertarians prayer rope and that of a Paleo-Conservative?  Well, the latter has reinforced connections between the beads and his rope is suitable for use as a garotte - no stinkin' non-aggression oath for him!


    En masse they say their beads. A dull but sonorous roar arises from the crowd of devotees.

    Then ... then ... then ... the recitation ends in the excitement that washes over the crowd ...the band begins to play ... "The Austrian Economists March" (The Badenweilerlied having gone out of style) the crowd parts to allow Von Mises and Rothbard to ascend to the podium ...

    The crowd breaks into a chant ...

    First haltingly ... then full throatedly ...


    The Economists wave to the crowd ... the crowd quiets ... They begin to speak ...

    Ah, that we are alive to see this day ... !!!

    Say your prayers!

    Say them every day ... to prepare us for what is to come.

    As Saint Paul says:  "Pray Always!"

    In the Name of Von Mises, Rothbard, and What is to Come ...

  5. Looks like the ECB is only rolling between $60-$75 in liquidity draining in the weekly FTDs.


    @Allen: it might be the other way around :->

  6. John Galt- thanks for posting that quote. I've been pondering it today, and the implications.

    Not a pretty scenario. Eschalatogical actually.