How central banks work - post financial crisis

Discussion in 'World News, Current Events & Politics' started by notimp, Jun 24, 2019.

  1. notimp
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    notimp GBAtemp Addict

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    Sep 18, 2007
    Thanks @fefe (blog.fefe.de (german)) for pointing out this one. And Gaby Weber for the research and writing it up.

    I'll translate on the the fly.

    As Bayer bought Monsanto, everyone (not even kidding) thought that this was a - bad - amoral, high risk deal and financing ought to have been problematic. So who has financed the deal?

    Turns out, the ECB (European Central Bank) financed it, under advisement of Jens Weidmann of the German federal bank, who is now in the running for next head of the ECB.

    The deal then turned out to be a disaster of course, with Bayer having to pay large settlement fees, and their stock tanking. Now there is talk, that they could be on the brink of bankruptcy, with again - the german government possibly jumping in to pick up some of the risk. Thats taxpayers, again, btw.

    Weidman - who caused the german federal bank to also have to book considerable losses in this case, took the money to finance the takeover deal from a bonds buying program the ECB has bootstrapped.

    Tranditionally central banks were not supposed to invest in private firms, but rather to lend commercial banks money, so they could leverage that into private credit (1:10) and thereby get the economy going. Apparently this has changed after the world economic crisis.

    There now exists a not very openly known program to buy up bonds from private (!) businesses.

    They now do that to "keep the economy going", because - simplified - they are trying everything thats possible in a 0% interest economy, that is an analogue to 'quantitative easing'.

    By now they are buying up shares in McDonalds. No joke.

    Turns out, there is a public .csv list of what private companies they have bought bonds from - and its freaking astonishing.

    - they financed the takeover of Anheuser-Busch by Inbev (making Bud Light a belgian product)

    they bought bonds from:

    - Coca Cola
    - Nestle
    - John Deer

    - which arent even european companies -

    - Heineken
    - Heidelberg Cement
    - Daimler
    - SAP
    - the german stock exchange
    - Allianz
    - BASF
    - Siemens
    - Hochtief (construction),
    - Linde
    - german Telekom
    - EnBW
    - E.ON
    - Merck
    - EWE
    - Bertelsmann
    - Volkswagen
    - Bosch
    - BMW
    - Shell
    ...

    All of those private companies got cheap money infusions directly from the ECB.

    *grindteeth*

    Anyone of you interested in some free money? Just get big as a company. They will literally print it for you.

    edit: The name of the program (funds that have been used) is the CSPP (corporate sector purchase program) see: https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016d0016_en_txt.pdf?0240957ff3a5d0b909a9482628799777 (PDF on the decision of the ECB towards implementing it in 2016.)
     
    Last edited by notimp, Jun 24, 2019
    Xzi and alexander1970 like this.
  2. notimp
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    notimp GBAtemp Addict

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    Sep 18, 2007
    Addendum: To be fair - the total amount of the ECBs investments into Bayer is outstanding. So it can not be argued that the european tax payer bought Monsanto for Bayer, with free ECB money - yet.

    He (we) might have only financed about 10% of the purchase price. There is ongoing litigation, to find out. The article mentions only "a large part".
     
    Last edited by notimp, Jun 24, 2019
  3. notimp
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    notimp GBAtemp Addict

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