Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants

• Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants
  by Tyler Durden, www.zerohedge.com 
  Last week, we showed a curious thesis by Goldman, which asked if there is a new and “ominous” development in European currency swings, namely the emergence of what may be a “under the table” fight between the ECB and the Bundesbank on which bonds to monetize. This is what Goldman said then: 
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  the average maturity of ECB bond buying is around 8.0 years, in line with what Executive Board member Coeure said in his May 18 speech.However, while Italy and Spain see purchases that have an average maturity above that of the outstanding debt stock, Bundesbank buying has fallen short from the very beginning…. This kind of signal – from the key hawk in the Eurosystem – has the potential to undercut the credibility of ECB QE, since it weakens the portfolio balance channel.
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  After all, it was supposed to be low yields in core Europe into risk assets. If those yields now rise and become more volatile, such portfolio effects will be lessened.
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  Today, in a follow up report by Goldman’s Robin Brooks and company, and one which seeks to validate Goldman’s “top trade” thesis of a weak Euro currency, (recall Goldman top trade #1 for 2015: “Stay long EUR/$ downside via 1-year 1.00/0.95 put spread (originally at 1.20/1.15 with a premium of 70bp EUR at initiation, expiring on 20 Nov 2015, opened at a spot EUR/$ of 1.253 on 20 Nov 2014, currently at 1.135.”) Goldman explains why despite relentless Greek drama, the EUR hasn’t moved and its conclusion is that this is due to“growing question marks over ECB QE” as a result of the surprising bond-buying on the short end (at the expense of reducing longer-term maturity holdings) out of the Bundesbank which has “reduced the maturity of its QE buying.”
  … 
  But if this is correct, Goldman essentially says that it is in the ECB’s, and Europe’s, best interest to have a Greek default – and with limited contagion at that – one which finally does impact the EUR lower, and resumes the “benign” glideslope of the EURUSD exchange rate toward parity, a rate which recall reached as low as 1.05 several months ago before rebounding to its current level of 1.14.  Needless to say, that is a “conspiracy theory” that could make even the biggest “tin foil” blogs blush.
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  A different way of saying what Goldman just hinted at: “Greece must be destroyed, so it (and the Eurozone) can be saved (with even more QE).“
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  Or, in the parlance of Rahm Emanuel’s times, “Let no Greek default crisis go to QE waste.”
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  read more.

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