Tightening Comes Even to Ridiculous ECB Sooner, Faster as Seven EU Countries Hit by 10%-16% Inflation, Four by over 9%

The ECB created the greatest corporate bond bubble ever. Now junk bonds get crushed, yields already doubled, set to double again, and again, cleansing out the zombies.

By Wolf Richter for WOLF STREET.

The end of QE “is very likely to happen in the course of the third quarter with a high probability that it will be early in the quarter if numbers continue to be the way we have seen them,” President Christine Lagarde told CNBC in an interview today.

“But we have to be data dependent and we will be sequential,” she said.

This moves the end of QE to the early part of the third quarter, so July, and maybe August. In the ECB policy statement last week, the ECB only said that QE “should be concluded in the third quarter,” and that had moved the end of QE to September.

With “data dependent” she means the ECB will watch with stunned open mouth how inflation is now raging further and deeper and more insidiously into the economy, tearing up the ECB’s philosophy that NIRP and QE don’t destroy the monetary system.

And with “data dependent” she also means that the tightening schedule will keep getting sped up – as they have been doing it all year – because the inflation data keeps getting worse.

With “sequential” she means that QE will end first before rates are being hiked. So if QE ends early in Q3, rates could be raised starting in Q3, rather than Q4.

And now it’s not just once before year-end. “How much, how many times, remains to be seen,” she said, leaving the number and size of the rate hikes up to our imagination.

This has now been the crescendo all year: Every time someone at the ECB says something, it’s a little more hawkish – if that’s the right term – than before, and everything is getting moved forward. The taper has already been sped up. Now the end of the taper is being further sped up. And the rate hikes are being sped up.

The ECB’s deposit rate is still negative (-0.5%), and some banks are charging their customers, even retail customers, for their deposits, thereby turning interest rates into ECB-inflicted punishment rates.

Now the bets are lining up that the ECB will abandon NIRP this year, and raise its policy rate above 0% before the end of the year, something that ECB Governing Council member Pierre Wunsch suggested this week.

Raging inflation in Europe.

While the raging inflation in the US is terrible, with CPI inflation at 8.5% in March, in numerous EU countries, it is much worse.

In seven of the 29 EU countries, the “harmonized” (calculated the same way for all countries) inflation rate is in the double digits topping out in Lithuania at 15.6%. In four more EU countries, including Spain, the inflation rate is above 9%. Germany’s inflation rate of 7.6% is sending shockwaves through the country.

In many of the non-euro countries in Europe, central banks have for nearly a year jacked up interest rates to slow down the surge of inflation, including some shock-and-awe surprise rate hikes by the Czech National Bank, the National Bank of Poland, and the Central Bank of Iceland (here’s my February update on this). The ECB gas been the laggard.

But this inflation shock is not kidding around:

EU countries by inflation rates, for March
Lithuania 15.6%
Estonia 14.8%
Czechia 11.9%
Netherlands 11.7%
Latvia 11.5%
Bulgaria 10.5%
Poland 10.2%
Spain 9.8%
Romania 9.6%
Slovakia 9.6%
Belgium 9.3%
Hungary 8.6%
Greece 8.0%
Luxembourg 7.9%
Germany 7.6%
Croatia 7.3%
Ireland 6.9%
Italy 6.8%
Austria 6.7%
Sweden 6.3%
Cyprus 6.2%
Denmark 6.0%
Slovenia 6.0%
Finland 5.8%
Portugal 5.5%
France 5.1%
Malta 4.5%

Greatest corporate bond bubble of all times pops.

The ECB’s NIRP policy, and its policy of buying not only government bonds and housing bonds, but large amounts of corporate bonds — echoed by other central banks in Europe that had similar programs — has created the greatest corporate bond bubble of all times, with even the average euro junk bond yield falling to a ridiculously low 2.1% in November 2017. And still in September 2021, it was back at 2.25%, for an average junk bond!

These companies have a considerable chance of defaulting on their bonds – that’s why they’re junk rated. And now the holders of these bonds are not only confronted with credit risk (default), but also the end of the ECB’s corporate bond buying orgy, and higher interest rates that will make it more difficult for these cash-flow negative companies to borrow to fund their negative cash flows and keep operating.

And now, for these hapless bondholders, the cherry on this toxic cocktail is raging inflation that is pushing the real yield of these junk bonds, based on the yields that buyers locked in when they bought the bonds, deeply into the negative.

Many of these junk bonds, purchased in the years when the ECB’s policies whipped them into frenzy, will turn out to be breath-takingly painful instruments. Bad deals are made in good times.

Prices of these euro junk bonds are now tumbling as investors are trying to shed them before if gets even worse. And yields are surging.

The average junk-bond yield has more than doubled in six months, from 2.25% in September last year to 4.65% now.

And that’s just the beginning, because the ECB is still buying a smattering of bonds, and its deposit rate is still negative. Those yields have a long way to go, and investors that had been chasing yield in NIRP zone where the central banks did everything they could to kill yield, well, they will find out once again that chasing yield is one of the most expensive hobbies out there.

These junk bond yields are set to double again, and they could then double again, which will jack up the cost of borrowing for junk-rated companies, and that will cause a lot of cleansing out of the zombies at investor expense.

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  133 comments for “Tightening Comes Even to Ridiculous ECB Sooner, Faster as Seven EU Countries Hit by 10%-16% Inflation, Four by over 9%

  1. phleep says:

    Blows right past “buyer’s market” to “fire sale.”

    Do these countries have low unemployment like the USA?

    • Johnny Reb says:

      phleep, found this on the web. I don’t know how accurate it is: https://tradingeconomics.com/country-list/unemployment-rate?continent=europe

    • Gattopardo says:

      I must say I’m disappointed in the US. We’re barely above the average in that list of inflation rates by country. The shame! We can do better, I just know it.

      At least Euro equities haven’t rallied the way US equities have, so maybe their pain will be more limited. Then again, what lies ahead for their bond side may more than make up for that.

      I’ve always wanted a house in Italy or Southern France. I figure the Euro only needs to go to about 0,75 to make that happen. Their tightening isn’t going to help that. :-/

      • Nacho Bigly Libre says:

        I doubt these inflation numbers capture the relentless asset price inflation of the past decade.

        Can’t hide from reality any longer.

        War is the only trick left.

      • Anon1970 says:

        But will you be able to afford the airfare to get to Europe?

      • GSH says:

        Don’t know how these “harmonized” inflation rates are computed, but Italy having a lower inflation rate than Germany is very surprising. This would imply a big change in their national characters. The former profligate “spenders” in the south have now become “savers” and the conservative Germans are now freewheeling consumers?

    • Corto Maltese says:

      Yes, unemployment is very low and improting of workforce from Asia/Africa is in full swing, but can’t keep up due to low qualifications.

      Inflation on the ground is 3% more then above figures IMHO.

      • c_heale says:

        Not sure about the low qualification bit. When the Iron Curtain came down, many Eastern Europeans came over to Western Europe. A lot of them were really smart (personal experience).

        Normally the best qualified are the ones that leave.

        Anyone leaving from East Asia may well have had a better education than many in Western Europe. I live here, and young people here seem much more knowledgeable than those in Western Europe (I am Western European).

  2. Putter says:

    Sovereign debt will be the next Lehman Brothers, but on a much larger scale.

  3. John Apostolatos says:

    “The ECB’s NIRP policy, and its policy of buying not only government bonds and housing bonds, but large amounts of corporate bonds, has created the greatest corporate bond bubble of all times, with even the average euro junk bond yield falling to a ridiculously low 2.1% in November 2017. And still in September 2021, it was back at 2.25%, for an average junk bond!”

    It seems evident that Draghi (aka “Dragula”) and Bernanke (aka “Helicopter Ben”) overplayed their hands. Not that they will pay the price for any of it.

    Wolf, you have not said much about Russia’s assault on the dollar, which China is stealthy following. The rest of the BRICS are more obvious about it.

    Putin has said for years that to bring down the house here is to bring down the dollar and send up inflation. He is keenly aware of how vulnerable assets bubble have become in the West. Not that he can crash it all on his own, but at least he is more aware of it than any other Russian politician in history and is definitely doing something about it.

    • Wolf Richter says:

      John Apostolatos,

      Russia’s economy is way too small and the ruble is just a shaky unstable tiny currency and they can never do an “assault on the dollar.” That’s just nonsense. And let’s not drag out Russian production of oil and gas. The US is a larger producer of both and doesn’t need Russia’s exports. If Russia wants to assault the dollar, the dollar won’t even notice it.

      In terms of China, well, in a few decades, it may have a currency strong enough to do some damage. Right now, the dollar is crushing the renminbi.

      • Vsevolod says:

        Western Europe can’t survive without Russia’s oil/gas/fertilizers. We can live with old phones but need food and energy every day. We don’t need money but goods and services. Without energy you can produce nothing. What can do US without Western Europe and Japan?

      • norths says:

        Wolf, it’s more about the de-dollarisation trend that Russia is starting. Not Russia’s outright capacity to influence.
        Oil being sold in Yuan by OPEC is a direct affront to the Petrodollar. This was started by Russia selling oil in currencies other than USD.
        Any country that has surpluses and is not tight with the US (most of the world by pop.) would be wise to diversify their reserves and also de dollarise their trade to whatever extent they can. The weponisation of dollar and euro reserves is a games changer for many sovereign nations.

        • LL says:

          I think most people think about currencies in 1920’s way. World exchange of goods is maybe worth 20-30 trillions dollars. Exchange between countries. Capital markets are much bigger. Everyday there is 6 trillion dollars exchange. Do you follow me? There is no dedollarization happening. Any changes how we pay for products or commodities is minuscule comparing to capital markets. Right now markets are the deepest in USA. Nothing compares.

    • Nathan Dumbrowski says:

      Wasn’t the goal of Osama who had no actual chance of fighting us in a financial war. But a war of attrition.

      “We are continuing this policy in bleeding America to the point of bankruptcy. Allah willing, and nothing is too great for Allah,” bin Laden said in the transcript.

      He said the mujahedeen fighters did the same thing to the Soviet Union in Afghanistan in the 1980s, “using guerrilla warfare and the war of attrition to fight tyrannical superpowers.”

  4. Xaver says:

    The central bankers on our planet have created a mess and we’ll all have to bear the consequences.

    I only hope the zombies will disappear and less money will be wasted.

    • Wisdom Seeker says:

      It’s not just central bankers that created the mess. They were aided and abetted and allowed to abandon the TRIPLE mandate.

      Everyone who wasn’t protesting those insane policies that led to the bubbles is complicit in the consequences. That list is loooong.

      The zombies won’t be slain until there are political sea-changes which drive out the underlying corruption. The central bank bubbles are only a symptom of the larger rot.

      The errors go back to 2011 (failure to fix the Euro debt crisis)…

      No, back to 2009 (failure to fix the causes of the GFC)…

      No, back to 2001 (instigation of the housing bubble after the dot-com bubble, failure to stabilize federal finances)…

      No, back to the 1990s (repeal of Glass-Steagall, letting speculative finance loose)…

      No, back to the 1980s (whole buncha Reagan admin decisions favoring finance over real economy; that crazy Japan bubble…)…

      No, back to 1971 (Nixon abandoned gold standard)…

      No, back to the 1960s (policies which led to Nixon needing to abandon gold standard)…

      • BuySome says:

        1947-48, when Ford took the new Mercury design and changed it to the basic Ford lines while upgrading that Merc. to baby Lincoln levels. It was the start of convincing the general public that base level must be higher and they could finance it further out rather than saving up for a purchase. They began to buy what they did not “need”, but rather what they “want”. It has been a mental illness ever since in every sector of the economy. Mr. Toad’s Wild Ride on an “E” coupon, bought now and paid for later. The postman has the final demand notice, and he always knocks twice.

      • John H. says:


        “They were aided and abetted and allowed to abandon the TRIPLE mandate.”

        Was the abandonment of the triple mandate the problem, or is the impossibility of the mandate THE problem?

        The mandate directs a committee of former bankers and career technocrats to manipulate the economy through the blunt-edged tools of interest rate policy and balance sheet jiggering. The modest aim is to control employment levels, inflation, and interest rates.

        That the mandates and tools exist begs for an omniscient wisdom that does not exist among mere mortals… however well educated, honest and qualified they are. The result is dithering and unintended consequences.

        The flower that springs from the ashes of the impending financial firestorm might just be a sober rethink on our current centrally controlled money and banking system.

        We can hope.

        • Wisdom Seeker says:

          I hear you – I was responding to Xaver’s comment about central bankers.

          The question of how to minimize corruption in an economic system is a deep one, although maybe not so deep: “power corrupts, and absolute power corrupts absolutely” seems like a good starting point. Minimizing corruption may be as simple as limiting the concentration of power. Federalists FTW.

        • 91B20 1stCav (AUS) says:

          JH/Wisdom-decentralizing then begging the MUCH older question (my Latin has rusted solid, here-): “…who guards the guardians?…”. (that cussed eternal problem of entropic human nature).

          may we all find a better day.

  5. Stéphane says:

    How could one play this, from an investment perspective? Is there an ETF or inverse ETF out there that tracks high yield corporate bonds?

    • Old School says:

      Looking in the rear view mirror people could have taken their Euro savings out of the bank 1 year or five years ago and bought gold for preservation of wealth. Euro down 22% vs gold in 12 months, yikes.

      • Jos Oskam says:

        @Old School

        Living in France I did just that in 2014 and have been mocked and laughed at for years. Now these voices are remarkably silent.

        “Schadenfreude is auch Freude” our German friends say, but I don’t feel any pleasure at all about what’s going on.

        On the contrary, I find it extremely worrying.

    • Bobbleheadlincoln says:

      VCLT for one. I’m sure you can Google more.

    • andy says:

      How many months is your investment perspective?

    • End of the world says:

      Symbol: SJB. Short junk bonds….

  6. historicus says:

    The Yellen spin will be in full bloom

    “We werent wrong. It was the models we chose that were wrong.”
    And this is how the government works. But not the real world.
    YOU Janet and other central bankers….were wrong. You, and Bernanke, and Powell, and Legarde and the BOJ were wrong. Not only did you not take the punch bowl away when you should have, you went swimming in it.
    So it will be Putins “black swan” event that will be to blame. But we were headed in this direction anyway…and it was the central bankers who took all the slack out, painted themselves into a corner and asked for more paint. And now the BOJ is swimming in a massive portfolio that will be devalued by what they finally must do.
    Don’t fight the Fed may be true. But the Fed should not fight the economic realities that eventually prevail.

    • Old school says:

      I doubt if they were wrong. Welfare/ warfare state were well funded. Politicians get first dibs on spending even if you have to eat rice and beans.

      • economicminor says:

        The state just might not have been able to spend as freely if interest rates had been allowed to normalize

        • andy says:

          Really? Do they take interest into calculation when they pass their trillion dollar spending bills? Which party does that?

      • c_heale says:

        Welfare enables people to survive and make a contribution to society. However, they can’t do that if all the jobs are exported. Thanks, Bill Clinton.

  7. Kenny Logins says:

    “Don’t call the fire brigade yet, that house fire might yet put itself out” said no one before, ever.

    Well, until you had these psychopaths running the Euro CB policy.

    And Wolf thought the Fed were slow.

  8. Augustus Frost says:

    The EU and Eurozone are in worse shape than the US which has awful long-term fundamentals.

    Not sure what the ECB and the nanny crats in Brussels are going to do except for one thing.

    I am confident that they will throw everyone and everything under the bus in an attempt to save the “European project”. It’s no different than the “Deep State” doing likewise in the US to preserve the Empire. At some point, the two are going to come into conflict.

  9. Depth Charge says:

    “With “data dependent” she means the ECB will watch with stunned open mouth how inflation is now raging further and deeper and more insidiously into the economy, tearing up the ECB’s philosophy that NIRP and QE don’t destroy the monetary system.”

    Hahahaha! One of your best lines ever, Wolf!

  10. Swamp Creature says:

    The Dow is off 1000 points as we speak. As I have been predicting for months when this bubble pops as it is starting to do, everything will go down together, Bonds, stocks, real estate, and even precious metals, There will be no investment that will be safe. Europe will take us down in a sinking ship like they did in 1931.

    Junk Bonds – forget em
    Corporate Bonds – same
    Stocks – Bear market
    Real Estate – done for
    Cash – getting killed by inflation

    • Putter says:

      Cash is worth more as assets vaporize. I am sitting on lots of it. All assets will be on sale. Bring it on! Watch 118-120 DXY.

    • Gattopardo says:



    • historicus says:

      Watch out Monday

      • Anthony A. says:

        I wonder if the FED clowns will try to smooth things over Saturday or Sunday to stop the market meltdown. I can’t wait to hear what they say if that really happens.

  11. Michael Gorback says:

    I trace it back to Draghi’s “Whatever it takes” speech. Without the Draghi “put” the meltdown would have occurred 10 years ago.

  12. Harvey Mushman says:

    How is Switzerland able to keep their inflation so low?

    • Wisoot says:

      Hadron Collider – 3 months time new dimensions sewn

    • Augustus Frost says:

      The had the opposite problem. Their QE was (or is if still happening) to suppress the value of the CHF.

      I owned the CHF in 2011 when it briefly exploded to $1.40 but lost about half of my gain in a few days because I could not get out fast enough.

      The SNB instituted QE at that time subsequently creating a monstrous balance sheet to keep the CHF pegged to the Euro at 1.20. As usual, it failed and was abandoned. The two currencies are now near parity.

      I don’t believe this QE will be cost free. At some point in the future, the SNB is going to be left as a bag holder when their QE assets collapse in the upcoming major bear market. Don’t know exactly what they own but read they bought NASDAQ stocks including AAPL.

      I also expect the CHF they created to flood back into the country triggering a major inflation problem.

      They made a huge mistake in my view. They should have either done nothing or better yet, imposed capital controls to prevent rampant speculation by nonresidents. Presumably, they wouldn’t do it because of the financial sector. If so, once again another economy sacrificed for financialization.

      • Wolf Richter says:

        The SNB doesn’t do QE. It prints Swiss francs to sell for foreign currency to then buy foreign-currency denominated assets with. This pumps up asset prices in other countries and holds down the exchange rate of the franc.

        The SNB only discloses what it is forced to disclose: by US regulations, it has to disclose its US holdings. So we see those in SEC filings.

        It will be interesting to see those holdings go through a big long stock-market sell-off. There will be a lot of discontent in the cantons.

    • Wolf Richter says:

      It’s already hugely expensive and overpriced?

      • Gattopardo says:

        Ha! So true. RE prices were absolutely shocking 3 years ago. Same for everything else, like $60 mediocre lunches.

        I don’t get why the CHF even matters. Talk about a tiny economy and tiny currency…

    • Flea says:

      Wolf why is China,Russia,and Middle East not on inflation charts . Are the immune

      • Wolf Richter says:

        Inflation in Russia = 16.7%

        Inflation in China = 1.5% (lockdowns and the slo-mo collapse of the housing construction and development sector have crimped demand)

        Inflation in the Middle East: you need to look it up by country. Some of the inflation rates are astronomical. For example, Turkey = 61%.

    • wakarimasen says:

      They are not in EUR zone. And the value against the EUR increases continiously since years particulary after Dhraghi and the debt crisis of the southern countries. If you check the charts you can see it clearly. 2001 at the invention of the EUR cash the exchange rate was 1.55, now it 1.02.
      If the DM would exists still you would see the same.

  13. Dan Romig says:

    NIRP = Negative Interest Rate Policy. This brakes the rules of money.

    I had four rules of business. I never broke those rules.

    But, Central Banks have done an amazing job of breaking the rules — for years!. How have they done so? By printing money; more money on top of more money; ad infinitum. This is like the roadrunner cartoon where the coyote is stopped momentarily before Mr. Gravity inevitably applies the Rules of Physics.

    I studied physics. I know its rules very well. And, I’ve hustled for money on the streets since turning fourteen. I know the rules of money just as well.

    Rule #1) Money must have value. Money cannot be given out for nothing (Dire Straits song not withstanding).

    Rule #2) Future money must have value greater than current money.

    What is the price paid for breaking the rules of physics? Wiping out on a motorbike. I have done that once in forty years. Every time get on the saddle to ride, I try not to repeat that mistake.

    What is the price for breaking the rules of money? Inflation, human suffering and conflict. The bill is now due for breaking the rules.

    Thank you Wolf for your, “I’m fuc#king warning you!” reports on the policies of the “The most reckless Fed ever” over the last two years. Oh yeah, the Fed has been reading this fine website, and its leader understood the consequences of their actions, but did not care to heed the warnings. Until, like the coyote, it’s time to fall. Time’s up. We’re falling.

    “Road Runner, Road Runner runs down the road all day
    Even the coyote can’t make him change his ways
    Poor little road Runner never bothers anyone,
    Just runnin’ down the road’s his idea of having fun.”

    -Geococcyx Califorianus, DanBob’s alter ego.

    • Old school says:

      If you are a Buffet fan you know the key is buying quality at the right price. Anyone that bought the SP500 thirteen years ago at 666 got a good buy and I think dividend payout was 3% plus.

      You could have got the 3% plus dividend that has grown at about 7% and never sold a share. So what if SP500 goes to 2000 or 1000 for a while, you made a gutsy wise purchase. It’s all different if buying now.

    • Carl M. Fernstrom says:

      I have the same experience
      Great review
      I would like to add if you go outside the boundary of physics the road rash is very painful

      • Dan Romig says:

        My price was two cracked ribs on left side mid torso & a new rear view mirror on the café bars. High siding is a low down experience when you get up off the road.

  14. Depth Charge says:

    ““The last duty of a central banker is to tell the public the truth.”
    -Federal Reserve Board Vice Chairman Alan Blinder, Nightly Business Report, 1994”

  15. Sams says:

    A spread in inflation between 15.6% and 4.5% in an area with the same currency is interesting. Is there a leveling of prices in process?

    • Wolf Richter says:

      There are various reasons that I can see. One is that some of the countries are just a little bit behind, other are ahead. We’ve seen that throughout. Then there’s the energy portfolio. For example, France gets much of its energy from nuclear and doesn’t rely that much on natural gas and coal, whose prices have spiked massively. Then there is the issue of demand… if there is less consumer demand, there will be less inflationary pressure. This varies widely in the EU.

      • Jos Oskam says:


        Also, in France the presidential elections are in full swing, the final round being this Sunday.

        Mr. Macron is hanging on by a thread and although he will probably win, he is not about to wreck his chances by letting unpopular things happen. So car fuel price hikes have been limited by the government by reducing fuel tax, and electricity prices have been kept in check by blocking EDF (the national supplier) from raising prices (thus throwing them under the bus by forcing them to incur massive losses).

        Beginning Monday, if and when mr. Macron will have been re-elected, it will be open season. Better batten down the hatches…

      • SpencerG says:

        Thank you for this comment Wolf… I was looking at that chart and couldn’t see any obvious patterns

    • Tom S. says:

      The top of the list (Baltics) are also more impacted by the war in Ukraine and associated energy/food price increases.

  16. sunny129 says:

    “that will cause a lot of cleansing out of the zombies at investor expense

    Long overdue!

    The KARMA of CBers is chasing them now and soon bite their ‘behind’
    I hope it takes a big chunk to make them remember a long time!

    But again, this is the same gang who brought us already two – boom-bust cycles in this century and now claim they can do a ‘soft landing’!

    • Augustus Frost says:

      It’s the same cycle. One mania in the 21st century dating back to the 1990’s.

      I date the beginning to either April 20. 1994 or sometime in November 1994. The DJIA was at 3570 on the first date and about 3675 in the second.

      This was when “normal” US stock market behavior ended.

      • unamused says:

        ‘This was when “normal” US stock market behavior ended.’

        Agreed. In September 1995 I predicted to several dozen expensive suits that the DJIA would go over 10,000 by 2000, nearly tripling in five years. They thought I was nuts. All those guys with Good Hair laughed at me – even though they all agreed with my stolid, detailed rationale.

        They took my bets. Heh heh heh. I wasn’t nuts. Equity markets were going nuts. I just happened to be looking.

      • sunny129 says:


        And very few act on the facts on the ground until they pop up on every body’s radar. HOPIUM is eternal

  17. Lone Coyote says:


    I’ve seen in various articles that Producer Price Inflation is extremely high in Germany (north of 30%). I would think that is going to translate to much higher consumer prices in the next few months, how long does it usually take PPI to “convert” to CPI?

    I should also do some research to see how terrible PPI is in other parts of Europe.

    • Wolf Richter says:

      The German PPI that you’re referring to measures inputs for industrial companies — including energy, raw materials, etc. Some make consumer goods and some of the inflation will push through that way. Many others are making industrial goods (machinery, equipment, robots, components, chemicals, etc.), and when they pass on higher prices it’s not going directly to consumers. The labor cost component in Germany hasn’t gone up that much. So that softens the throughput of inflation. But yes, Germany is facing much bigger consumer price inflation than what they’re seeing right now.

    • OM says:

      As fresh as it can be, some March data is in already, looks like average Ppi for March will be at 5% EU wide, it’s 60% per year if continues at same pace. Looks terrible, and real inflation close to at least 50% higher than official figures, at least in Spain

      • Lone Coyote says:

        OM, thanks for providing that link, and as you said it does look very bad. Norway managed to go from 181.7 to 212.4 in a single month.

    • wakarimasen says:

      In Germany you had no stimuli at all and wages are not increasing so far.
      So all inflation must come from commodities and delivery chain problems.

  18. Michael Engel says:

    NDX weekly reached the bottom of the cloud, on it’s edge, x2.5
    the size, on slightly higher volume, scaring investors.

    • andy says:


      did you know that most bubbles are more or less simmetrical, up and down. Do they teach this in chartology school?

  19. Wisoot says:

    Estonia Gov – Turns out the small country of 1.3 million has emerged as a global leader in e-government operations. Its electronic ID push has created a more connected society, made public and private services more personalized and convenient.
    Consequence – high inflation. Turns out humans dont want to be slaves after all.

    Lithuania Gov – The current government of Lithuania is the 18th since the declaration of independence on 11 March 1990. Turns out having one Gov per year has consequence of high inflation. Turns out humans struggle with stability.

    • Apple says:

      Your conclusions make no sense.

    • Sams says:

      Or, the high inflation is there until price levels in Estonia matches the neighbours Sweden and Finland. A lot of Estonians work in other European countries, that forces wages to rise to match. Prices follow.

  20. unamused says:

    “tearing up the ECB’s philosophy that NIRP and QE don’t destroy the monetary system.”

    That’s how they pretended to clean up the last mess in 2008. But they didn’t clean it up. They simply papered it over with debt and kicked the can down the road. Now they have an even bigger mess just as they’ve run out of road.

    It gets worse:

    – Last time they didn’t have supply chain disruptions and shortages of stuff.
    – Last time they didn’t have an invasion in eastern Europe with the attendant petro shortages.
    – Also fertilizer shortages, sure to ramp up food shortages in the coming months. – Also the ongoing Plague, seriously compromising China, which is quite opaque about its problems, and those aren’t likely to have easy solutions.
    – And then you have radical conservative extremists preparing to take over here and there, who are generally of a mind do their worst, which can be pretty bad.

    This gives rather a lot of material to those who have been warning that civilization may have already begun to collapse. My guess, that process could wait until around 2030, may have been overly optimistic. I never could get these things quite right.

    • Michael Engel says:

      Some old people think that when they are gone the world will go to hell.

      • sunny129 says:

        In 1973, a computer program was developed at MIT to model global sustainability. Instead, it predicted that by 2040 our civilization would end. Many in history have made apocalyptic predictions that have so far failed to materialize. But what the computer envisioned in the 1970s has by and large been coming true. Could the machine be right?

        IMHO many places will become UNLIVEBLE by 2050, depletion of natural resources. famine and Pollution. Much faster if there is WW3!

        • Anthony A. says:

          The Great Dying happened 250 million years ago and we are certainly in the cards for another event like that, especially if we can get a few big volcanoes to erupt continuously for a million years or so. Inflation won’t be such a big deal if that starts again.

        • andy says:

          Well, many places are unlivable now. And I don’t even need an app to figure this out.

        • Anthony says:

          Anthony A

          It only takes one biggish volcano to go off to cut world food production by huge amounts. They expect the Tonga eruption to drop world temps by 0.3C over the next year…..

      • Michael Gorback says:

        This old person thinks it’s already well down the tracks of the Hellbound Train and has been for years.

        It’s just that now even the most incomprehensible posers, er, posters, on this blog are waking up as if they made a new discovery.

        The older folks know they made mistakes and that one of the worst mistakes was raising a generation or two of narcissists who have never seen a real and grinding long term bear market, let alone stagflation, and who babble cryptic nonsense on a daily basis.

      • John H. says:

        “Our earth is degenerate in these latter days; bribery and corruption are common; children no longer obey their parents……. and the end of the world is evidently approaching.”
        – Assyrian clay tablet, c. 700 BC

    • Augustus Frost says:

      No reason for you to worry. Left-wing extremists have already beat them to it, both in Europe and the US. They are definitely fully in-charge now.

      in the US during my entire life, there have been two choices at the polls, Tweedle-Dee or Tweedle-Dum.

      Socialism on the installment method (Republican)

      Socialism on the faster track (Democrat)

      The government always gets bigger, no matter which party is in charge or if they share power. No one who is actually in favor of smaller government has any real influence to change any important US policy.

      There is zero chance of any actual right-wing extremists taking over anything of importance in the US. The globalists and statists are fully in charge.

      • sunny129 says:

        No wonder a Political career lucrative, irrespective of the party, since without on going deficit, no one can promise to their vested interests. The Public will be always the bag holder!

        • Anthony A. says:

          You never see any retired politician at the food bank or in line for food stamps.

      • Juicifer says:

        AF: 100%. Ponder the true lack of political choices we in the US are left with (I include my voting expatriate self in this group) upon strolling down any medium sized US supermarket soft drink aisle:

        For imbibe-ables? Americans have more than 100 varied choices from which to choose. In the ballot booth? You get Coke or Pepsi: which cola do you choose this time, comrade?

        Another point: for those who scream that Obama went into debt more than all else before him, I remind them that Obama merely did what his predecessor, from the other party, did, namely double the total federal debt. Trump was subsequently well on the way to doing that and more, should he have secured a second term. And Biden? Whoo-boy!

        “Extremists” indeed. lol On the contrary- they’re ALL uniformly vanilla in their love of leaving the working American stiffs with the unpaid bill. It’s the New Normal, donchaknow!

      • Hardigatti says:

        Consider the government a living organism. From an evolutionary point of view, it needs to grow in order to survive. It will grow until it has consumed most resources in the immediate ecosystem.

  21. John Apostolatos says:

    One other metric that Wolf has mentioned in his charts is how expensive the market is relative to bonds. So we may be approaching a correction or a bear market soon, but as bond prices rise, the market will still be too expensive relative to bonds. If the Fed raises the discount rate to 3.5% and the ten year reaches close to 6%, how much more will the market need to fall to be reasonably priced for risk when people seek the safety of bonds and CDs?

    Sadly, the whole “market” trades on headlines, speculation, and confidence in the Fed. There seems to be very few long-term investors out there and the day traders could crash the whole thing into oblivion without the Fed’s safety net.

    • unamused says:

      “There seems to be very few long-term investors out there”

      Market conditions have coerced investors into speculation for several years now. ‘Yield chasing’ is how it’s usually described here.

      • Augustus Frost says:

        They aren’t and never were investors but speculators. If you ask practically anyone what the difference is between the two, they either can’t answer or will likely reply it’s the holding period which is completely arbitrary. It’s as arbitrary as the tax code distinction between short and long-term capital gains.

        Buying stocks isn’t an investment, unless you are Warren Buffet who can actually influence or set strategy and monetize the assets and cash flow of the company. That’s what real business owners do.

        For everyone else, there is the disproportionately current pathetic dividend with the majority of the prospective profit price changes which has limited and often no correlation to the underlying business.

        99%+ of “investors can’t do that. That’s why they are buying a piece of paper with a common sent of attributes.

        Calling speculation “investment” is just another rationalization to get people to pay more than they ever would otherwise.

        It sounds prudent while speculation is usually viewed as gambling.

  22. Michael Engel says:

    1) AAPL do nothing all day since Dec.
    2) MSFT dropped to July 7/8 2021 backbone.
    3) A downtrend line coming from Dec 29 high to Mar 3 high supported
    MSFT today at the close, after closing Mar 13/14 gap.
    4) MSFT + AAPL report next week. MSFT on Apr 26, AAPL on Apr 28. AAPL might have been hit by China.
    5) Will AAPL send MSFT lower : we don’t know.
    6) China SSEC might be falling from the neutral zone to the red zone.

  23. fred flintstone says:

    Today…….our Treasury Secretary……Janet Yellen …….told the Japanese…….a hard working honorable people……..that the inflation which is tearing them up due to the crazy 1/4 point rates their central bank is keeping to purportedly keep them out of the abbess……..is all theirs. No central bank cooperation to save the yen……in spite of the yen going down the toilet fast……….why…..because we have to save ourselves from our inflation……and to save the reserve currency dollar from any hint of a reason to sell……..so…….the central bank of Japan will have to choice but to put the brakes on hard to defend the yen……either that or hyper kicks in in Japan……..a near depression might result in Nippon…….the higher rates open the door….finally……to our fed hitting the brakes……hard. The ECB will follow like the pack animals they are.

  24. DR DOOM says:

    I read , I think it was on Reuters, that the German producer price input inflation has hit 30%. The highest on record since the start of the record in post WW2. The post WW2 record started in 1949. If this is true what the F$&k is she and the ECB doing at near 0% interest rate? They do not give a shit. At least Brainard told America that we need to sacrifice and eat tuna instead of caviar. Christina ain’t going foul her tounge with tuna.

  25. Maximus Minimus says:

    Is there a risk of a bank run, or has the risk been outsourced to hedge funds, pension funds and shady lenders?

  26. John H. says:

    Informative article and comments.

    I noticed that the article mentions QE 7 times, but never, unless I missed it, is QT mentioned. Is it just an obvious assumption that QT will follow, or is that not to be assumed?

    Any mention or speculation as to content or timing?

    • unamused says:

      Investopedia claims that central banks, for the most part, have not been able to sustainably unwind their expanded balance sheets.

      “Not been able” means “they can’t.” Not after all these years since the last debacle when they nearly detonated the global banking industry. Not after all these years of asset inflation, bank bailouts, and suspension of accounting rules.

      No wonder the equity markets are nervous.

      • Wolf Richter says:

        None of them had inflation like right now. Back then they unwound – Japan unwound in the 2000s, the ECB unwound, and the Fed unwound (2017-19). But none of them had much inflation to speak of, and there was no pressure to unwind, but lots of pressure from politics (including Trump) to stop the unwind.

        Now it’s an entirely new world with raging inflation, and they’re FORCED to unwind.

        • John H. says:

          Then I guess Milton Friedman was right when he said:

          “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our [economists] basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.” – Milton Friedman

          So crisis-level inflation provides political cover for Central Banks.

          Hope their resolve doesn’t dissolve when the markets seek their un-manipulated levels!

  27. Old School says:

    There is the theory that we are at the end of a 42 year cycle where the PE of stocks started at 7. I don’t even know where we are now, even if PE is 21 you get the idea of how far we could fall as the P and the E contract.

    • Dan Romig says:

      Waste Management is a well run company that takes out garbage. The PE ratio is down to 37 to 1.

      I would suggest an address that they might add to their accounts receivable. Lots of trash to remove from there, eh?

  28. Kunal says:

    It’s mostly jawboning. I wonder when these criminals at Fed and central banks will ever be thrown to jail or served mob justice for their unprecedented robbery from 99% of Americans.

  29. rick m says:

    Is there a special situation in the Netherlands? 11.7 percent is a Third World number in a modern Northern European country that lives better than a lot of people in the US do. The numbers are bad enough in Germany and the East. Virtually no living Germans have any direct memory of hyperinflation.(Postwar was grim) Belgium is 9.3, looks like the Dutch are going shopping in Germany. The Germans used to go to France to shop, cheaper and longer hours. Holland has never been cheap in my lifetime, how is anybody going to afford to live in an expensive little drydock of a country with inflation like that?

    • Jos Oskam says:

      @rick m

      I am a Dutchman now living in France, and this move was inspired by some of the things now coming to light in the Netherlands.:

      First of all, housing. For years and years, not enough housing has been built. So, houses have been a scarce commodity for decennia. Now things are getting seriously out of hand because COVID has hampered building activity, environmental restrictions have severely limited places to build, and shortages of materials now exacerbate the problems that existed already. So prices of scarce houses explode which is finding its way into the inflation numbers.

      Second, natural gas. The Netherlands has from the 1960’s onward profited from large natural gas reserves in the north. Contrary to Norway for example, the profits of this windfall have not been saved but largely squandered to polish government numbers. Now these reserves are running out and instead of producing and selling natural gas, the Netherlands will have to start importing and paying for it. In a kind of perfect storm this coincides with the Ukraine and Russia sanctions trouble, driving natural gas prices through the roof, and thus supercharging the inflation numbers.

      So, all kinds of chickens are coming home to roost, and how the Dutch government is going to address these problems will be interesting to watch. As far as I can see, the Dutch inflation problem is not at all “transitory”.

      • rick m says:

        Jos Oskam- I lived in Scheveningen in the spring of ’76, and there were almost no apartments for rent and nothing cheap, much like Bavaria, even there you might find somewhere semi-affordable to live if you got far enough from Munich and the lakes. And didn’t give up. It was very difficult to evict, so many speculator’s properties stood vacant. Holland was certainly underbuilt at that time. There was noticeably little available inland too. Lots of people sharing places, me too. It was still expensive. I can only imagine what it’s like now. The year before that I lived in St.Germain-en-Laye. The building tradesmen made a fortune overbuilding French houses, and took their time, a year minimum. Not generally as expensive as Germany or Holland then but the handwriting was on the wall. You’re right, it won’t change soon, the builders like it fine and they all are big political contributors. The status quo makes them dough. Here too. The average US citizen can’t imagine the bureaucratic obstructions placed in the path of anybody that wants to build anything in Europe today, be it a house, a shop, a car, an industrial machine tool….it was bureaucratically challenging before the EU too, but nothing like now. Europe was booming in the sixties and seventies, with over a dozen currencies and the Soviet menace, borders, surely the best of times. But someone always thinks they know better than you about you. If it’s your mom, that’s one thing. if it’s Uschi van der Leyen, that’s another.
        My brother owns a horse farm outside of Gothenburg, his energy cost has skyrocketed, he’s installing solar to get ahead of it. I doubt his electric meter is smart enough to change his kWh rates when there’s bad news from the Ukraine. Governments are supposed to plan instead of react, and we used to fire incompetent workers. We’re going to pay for this. Don’t we always?

    • wakarimasen says:

      If the inflation by gazoline and energy would go away in Germany the inflation at all would dissapear more or less. Yes, you have elevated car prices but that is basically no problem for you do not need to buy a new car now. The food prices are elevated too but you still get the food at far lower prices when you search for discount offers which are there. Wages were not increased in Germany. Stimuli there were no at all in Germany. Oppositely the government try to get some money back what they handed out to compnies during Covid. Many people had income decreases during Covid time. All that looks not like an income price spiral. But I can see the numbers in the newspapers. This makes people perhaps fear more than what they experience in the real world. So we live in an information society. In my life I traveled a lot and always experienced that things felt different when I was really there as to what were my information which I had about the country before I went there.
      When the FED cracks inflation in the US inflation will goes down in Europe too without the ECB has to increase the rates at the same rate I guess.
      Perhaps still much leveraged speculative money is there pushing up raw materials and whatsoever since the stock market not goes well anymore.
      I guess all that will come down.

  30. nsa says:

    Anthony A: “…the great dying happened 250 million years ago and we are in the cards for another event like that”
    There is a body of thought that the evolutionary purpose of hominids is to transfer the carbon in the earth’s crust to the atmosphere and then go extinct, ushering in a new golden age of plantlife which thrives on atmospheric CO2.

    • DawnsEarlyLight says:

      Dang, those plants think of everything!

    • HowNow says:

      Thanks, nsa. Nice to know that we humans, as a species, served a transitional purpose, and that our gluttony turns out to be a good thing.

    • Anthony A. says:

      Agreed, the Great Dying was long before hominids were even around. Given that the Great Dying didn’t get “all” life on the planet at that time (estimates are 90%), we are very lucky to be here at all. Next time around will be different as we are such a weak species.

  31. Anthony says:

    Home heating inflation has not yet fully hit inflation figures here in Europe. Here in the UK, ( Yes we are not in the EU) home heating went up 54% for many people (not me yet) on April 1st. These numbers won’t hit until April inflation numbers given out in May or June. I expect UK inflation to hit 8.5 % or so, maybe more….

    ps, I received an extra pension in April which will cover my increased costs…case of just in time…lol

  32. Jan de Jong says:

    I wonder what shape and size “whatever it takes” will get when South European bond rates start blowing out again. I fear the transfer union in overdrive.

  33. My Own Bubble says:

    It seems accepting the criticism from one European is not your strong asset too.

    Btw, to your knowledge and to show how you need to be humble: The ECB achieved the main goal of their policies. Just check the Euro Stoxx Banks Index. The rest is only parroting ideology.

    I agree with these ECB policies? (Because I got affected directly?) No. But monetary policies is not about popular choices anyway. Never was and never will.

    Enjoy your own bubble world.

    • Wolf Richter says:

      My Own Bubble,

      “Just check the Euro Stoxx Banks Index. The rest is only parroting ideology.”

      I’m not sure what kind of idiocy you’re spouting off here because this is the Stoxx Bank Index, and it’s roughly back where it was in the 1990s, and it’s down 74% from the peak in 2007:

  34. That explanation of what Lagarde means was priceless and made me chortle this gloomy morning. with your permission I would like to appropriate the principle where I deem it beneficial .

  35. Ron says:

    I’m a remote observer of interest rate and currency dynamics. Just wondering, the Fed and now the ECB are forcing interest rates up to tamp down inflation. Inflation is caused by too much money chasing too few good, so they are focusing on the “too much money”. What if the problem is the “too few goods”, which I think it is? That’s why inflation is suddenly worse since war began in Europe. For the last year, all we’ve been hearing about are supply chain issues.

    The way out of it would be to increase, not decrease investment, for example to rebuild supply chains. So raising interest rates will actually make the problem worse. No?

    • Wolf Richter says:

      About 67% of what consumers spend money on is SERVICES, not goods. Time to retire the rhetoric about “not enough goods.” There are some goods in short supply, but they’re not the biggies in the spending basket. Services are. And inflation has started to switch to services.

      • Swamp Creature says:

        Speaking of services expenditures, I Just shelled out over 23K for two implants and a new bridge over the past 2 years. Insurance paid about 7K, so that’s 16K for this alone. That’s a lot of money paid for services. My dentists charged above the insurance reimbursable fees. If you want a good dentist for this kind of service you can expect that. Things are just fine now (I can eat like a normal person) and I’m glad I spent the money.

        I think for a lot of people the 67% figure, (consumer services expenditures), is actually on the low side.

  36. fxpoet says:

    I don’t see how the ECB can ever end QE as that will spell the end of the Eurozone when Italy defaults. So in some manner, they will need to continue to support Italian BTP’s and likely GGB’s of Greece else the entire experiment ends.

    • wakarimasen says:

      I cannot imagine that too. But it must end. It is not good for Italy, Greek etc. too. So move from the EUR to the USD perhaps is an option as personal consideration to that insolveable problem.

  37. Mills says:

    Looks like gold will crash if everyone is raising interest rates.
    I was sure it would hit 2200 before it did so, but I guess I was wrong. With a strong dollar I see no reason why gold should be going up anymore.

    Anyone have a reason why I shouldn’t sell my paper gold? (ETFs)

    • wakarimasen says:

      XAU could be sold now but if the FED not manages a soft landing it could be bought later again but not as ETF.

  38. Roger Pedactor says:

    MMT is garbage. Most of Europe over taxes their populations so the debt you see is basically government ownership of their companies. Which employ people. Who are overtaxed. The environmental aspect has been leveraged to anti-humanism at this point. I.E. it costs more for a German to buy a German car in Germany than France. The aristocracy never was overthrown. By agreeing to the EU the member states basically made themselves vassals again. And the implementation of green laws to decommission reactors and basically kill Eurozone fossil fuel extraction has also made them vassals to Putin. I wouldn’t be surprised to see much of Europe, especially Germany, in full-on centralized economies in the next 10 years.

  39. Central Banks freaked out about a minuscule tightening of financial conditions. We might end up doing more damage to the economy from the interventions than COVID.

  40. Mark Robertson says:

    The ECB can, and will, go bust. They say they can’t because they can print euros. But just watch this space. That printing press wasn’t built to German standards.

  41. Thomas says:

    Great article Wolf!
    Your analysis of the European bond market confirms, for me, that the US is leading the world out of the pandemic and the global recession.
    I’m finding that there is a reluctance to admit or even a denial amongst some investors that 2020-2021 was a global recession.
    My observation is that the American Rescue Act mobilized delivery of vaccines and put supports underneath the economy so aggressively and forcefully that the rest of the world fell behind the US, both in the battle to defeat the pandemic AND in the recovery from the recession.
    The year over year inflation comparisons are comparing drastically depressed prices during a recession with recovered prices after the fastest recovery in history.
    Because there are no underlying fundamentals to create runaway inflation, the year over year comparisons are a phantom problem in search of anecdotal confirmation bias.
    Europe lags behind the US recovery, but the inflation numbers show that it is following us, generally.
    The rest of the world has a vaccination rate and a pandemic production shut down and supply chain problem that looks like the problems we saw in the US in 2021.
    What I find intensely interesting is your analysis of ECB’s QE policies.
    Because the Fed is already beyond ECB in the policy change cycle, it will be possible to predict what is likely to happen in the European economy months or even a year in advance by watching what happens in the US.
    This dynamic, in which the US leads the rest of the world into a new economic paradigm, is a historic realignment rife with economic opportunities, especially for US institutional investors.
    I’m predicting:
    * Declining inflation numbers, beginning April or May and continuing for the rest of the year.
    * Rising US Treasury bond yields
    * Strong growth and strong dollar
    * A shakeout in the stock market as tech, and industry begin taking more dominant roles over financialization stocks.
    * Fabulous deals to be had in Europe

    Europe will follow. Their recovery is different, because it occurred much more suddenly, and has not had the slow deliberate end to QE before the recovery really took hold, like it did in the US.
    But there are similarities in the US and European recoveries, as I mentioned.

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