Daniel Gros writes: Within the eurozone, where until recently external accounts were nearly balanced, a similar creditor/debtor spectrum has emerged, with Germany and the Netherlands at one end, and much of the eurozone south at the other. This partly explains both the hostile stance toward QE adopted in the German financial press and the over-indebted periphery countries’ increasingly desperate calls for more action by the ECB.

In the eurozone, however, QE is a questionable response to such calls. QE is a special instrument used when a central bank’s short- and medium-term policy rates are already at zero and it wants to lower long-term interest rates. This implies that QE can be effective only in economies in which changes in long-term (market) interest rates play an important role in the private sector.

But this is not the case in Europe, where most investment is financed via bank loans that typically do not have long-term maturities – often less than five years – because banks themselves have little secure long-term financing. Moreover, the interests rates charged on these loans are not linked to market rates, but rather to the bank’s refinancing cost, which is already close to zero     Credit and Debt

EconMaters writes:  We are not talking about raising the Fed Fund’s Rate to 4% we are just talking about raising rates more in line with basically a normal functioning economy growing at 2 plus percent on an annual basis with an unemployment rate in the fives. If the Federal Reserve cannot raise rates after 7 long years, this either says a lot about their lower rate and QE strategy in the first place, i.e., it hasn’t worked, or they need to quit making excuses and raise the freaking rate already. This has gone on long enough; I want the Federal Reserve out of financial market manipulation with absurdly idiotic interventionist policies. There is something seriously wrong if the Federal Reserve cannot raise the Fed Fund’s Rate a measly 100 basis points after 7 longs years of ZIRP! Seven years is an entire business and economic cycle, shoot the economy has been at ZIRP for so long it literally could cycle back to recession just because it has been so long, and business cycles have normal patterns of growth and contraction, we did study this in business school, this is economics 101!

Russia companies face a looming credit crunch unless sanctions imposed by the west are relaxed and access to international capital markets is regained, according to Moody’s, the rating agency.

Debt issuaance by Russian companies in July when EU and US tightened sanctions.  Analysts said crunch would hit metals and mining, real estate and construction sectors could suffer most.

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Central bank statistics show that of $220bn in loans disbursed to non-banking corporates and households in Russia last year, almost $93bn came from jurisdictions that are home to large numbers of Russian offshore holdings but are not typical sources for large amounts of bank lending, including Cyprus, Ireland, Luxembourg and the British Virgin Islands.

European Central Bank President Mario Draghi is set to push the ECB to buy junk-rated Greek and Cypriot bank loans, a move that may increase tensions betweenGermany and the bank.

The central bank’s executive board will propose that current requirements on the quality of assets accepted by the bank be relaxed to allow the ECB to buy repackaged debt, or safer slices of Greek and Cypriot asset-backed securities, the FT reported, citing people familiar with the matter.

If the proposal is accepted by a majority of the ECB’s governing council, the central bank will be able to buy investment instruments from all 18 euro zone member states, the newspaper reported.

As part of its stimulus, the ECB plans to buy top tranches of certain asset-backed securities. The central bank said it would also ‎buy riskier tranches if governments guaranteed them, an idea swiftly rejected by France and Germany.