INTRODUCTION

It's LTRO[1] that I’m talking about this time! LTRO the latest version of “economic life support those” crackpot surgeons in the Central Banks and Treasuries of Europe have come up with. What is the issue with it? As LTRO2 approaches, to on the leap day (29/2/2012) I present a number of theses about LTRO;

1.      LTRO is a workaround for Crowding Out

2.      LTRO is executed via a process called 'Round Tripping' or known as a ‘Carry Trade’

3.      Hedge Funds are intrinsic to the success of LTRO

4.      This makes governments dependent upon Hedge Funds (& not just the banks)

5.      LTRO creates a cash balloon which props up the equity market

6.      LTRO is a high-risk central bank strategy which could deflate at a stroke

7.      Ironically the very Hedge Funds and Asset Managers who are intrinsic to the success of LTRO are already freaked out by the high risk nature of the policy,

Failure to push through reforms of the banking sector could lead to another financial crisis, Bank of England governor Mervyn King has warned.

this intro page updated / edited 7th July 2012
(the paper probably needs a re-write & update too)

At the beginning of asymptotix, explaining our philosphy here, I said;-

Back in the day; the Monetarist / Keynesian debate, bursting out in the US when Reagan was elected, the Keynesians (e.g. Cowles Commission) could attack monetarists by saying that monetarists had no theory [the monetarists were 'Logical Positivists']. The monetarist response (Chicago School and Berkeley) was that the Keynesians did not understand science and particularly did not understand data.