Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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DO WHAT WE MUST: EUROZONE THEATRICS © Leo Haviland January 3, 2015

In the relatively near future, the European Central Bank probably will declare it will embark on more extensive quantitative easing (money printing) via purchasing Eurozone sovereign debt in secondary marketplaces. Assorted intertwined variables invite dramatic action. First, the ECB’s creative measures of the past several months have accomplished little. Think of negative policy interest rates. Marketplace response to the Targeted Longer Term Refinancing Operations (TLTRO) has been uninspiring. The ECB underscores its determination to significantly expand its balance sheet. Nevertheless, its current money printing scheme, which purchases asset-backed securities and covered bonds, thus far appears relatively modest to most audiences.

Moreover, the ECB’s fear of insufficient inflation (the deflation spectre) has increased in recent weeks, partly due to the continued bloody tumble in the petroleum complex. In its early December 2014 meeting, it underlined the Eurozone’s mediocre economic growth realities and prospects.

Potential for notable social unrest on the European scene exists. Unemployment remains stubbornly elevated. Difficulties, especially in Greece, but potentially elsewhere, recall the European periphery crisis. Greek political troubles erupted again, with a crucial election being held in late January 2015. Greece’s leading left-wing opposition party has a significant chance of winning that contest. That party wants to renegotiate and reduce the nation’s monstrous debt. Will it continue reforms of the economy and state administration desired by creditors? At times, though less so recently, this leftist group has displayed some hostility to the country’s remaining in the Euro FX circle.

Despite the Eurozone’s noble struggle to create adequate inflation (avoid deflation), its success on that front probably will be limited. Inflation and long term government interest rates in key nations such as Germany probably will not sustain substantial increases even if the ECB races down the path of massive money printing via buying of government debt securities. Keep in mind Japan’s history. The United States still falls short of the Federal Reserve’s inflation target despite sustained massive easing. Remember as well America’s experience after it ceased (or steadily “tapered”) quantitative easing rounds; the 10 year United States Treasury note yield declined.

In recent months, the Euro FX has weakened, both against the United States dollar and on an effective exchange rate basis. This currency relationship and bear trend will continue. Nowadays, part of the ECB’s inexorable determination to “do what we must” pursuant to its interpretation of its mandate involves a willingness to let the Euro FX slump. In any event, even if massive ECB money printing and currency feebleness manage to achieve an inflation goal (and higher interest rates), they likely will not generate enduring significant Eurozone economic growth.

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Do What We Must- Eurozone Theatrics (1-3-15)