Euro Mess

On July 26th, ECB President Mario Draghi promised to do “whatever it takes” to defend the euro. It may take a lot, especially to keep Spain in the euro zone. The latest data compiled from original central bank sources, show that non-performing Spanish bank loans rose to a record 9.9% during July. Spanish bank deposits continued to fall sharply in July, down €74.2 billion m/m and €207 billion y/y. The ECB lent Spain €411.7 billion through August, mostly through the LTRO facility. Pour another glass of sangria for Mr. Draghi.

The TARGET2 imbalances continued to worsen in August as capital flowed from the south to the north of the euro zone. Last month, Spain had a record debit balance of €434.4 billion. Italy’s debit balance was a record €289.3 billion. Germany’s credit balance rose to a record €751.4 billion. The M2 monetary aggregates continued to fall y/y during July in Greece (-15.0%), Spain (-6.8), and Portugal (-6.1 in June). M2 was up in Germany (9.0), France (5.1), and Italy (3.8).

Today's Morning Briefing: QE3: A Very Brief History. (1) John Williams told us all about QE3 on 7/23. (2) QE3 boosted bullish sentiment and thinned out the correction camp. (3) Junk thrives in QE3 sunshine. (4) Demand/supply ratio bearish for oil. (5) Open-minded on open-ended. (6) Fed cleverly positioned to get credit for housing recovery. (7) How QE3 could boost earnings. (8) Time for another glass of sangria. (More for subscribers.)