EFTA01771519.pdf

From: Jes Staley Sent: Wednesday, December 28, 2011 1:59 AM To: Jeffrey Epstein Subject: Fwd: Re: something I wrote =oday Begin forwarded message: From: =/b>"Zuccarelli, Jennifer R" Date: December 27, 2011 5:13:49 PM =ST To:" . ></=iv> =div style="word-wrap: break-word; -webkit-nbsp-mode: space; =webkit-line-break: after-white-space; "> This is good. I really like it. But =epends where you want to say it. Is this for a closed press =peech? From: Jes Staley IImailtol =br> Sent: Tuesday, December 27, 201105:08 PM To: =uccarelli, Jennifer R Subject: =/div> This is something I wrote up. What do you think =div> =div> " =ast week, with the European Central Bank's extension of three year =unding to any and every European bank, backed by almost any and all =ollateral, even collateral with short maturities, Paul Krugman has now run the table. =nbsp;For with this move, the ECB has joined the Federal Reserve Bank of =he United States in adopting the most aggressive monetary policy =e have seen in our life time. Between QE2/twist, and now the move =y the Europeans, we are going to witness an enormous, expansive, and =ctive push by the world's two great Central Banks to get the economies =f the world going. It is part of Paul Krugman's plea that governments in Europe =nd the U.S. do whatever is necessary, to get economic growth. =nbsp;While Krugman may sound, in his weekly pieces in the New York =imes, like he is fighting a losing battle with cold hearted rightest =nd economic fundamentalists, he actually has been winning in the bigger =icture. While the firscal outlook may not be great in Europe, it =till has one of the greatest safety nets of any modern society. =nbsp;And if you missed it, in the U.S. we have generated one of the =ountry's biggest annual deficits with a little fiscal push of our own. =nbsp;And now, both Continents are about to try the greatest exercise of =riniting money that modern democracies have seen. =div> EFTA_R1_00083245 EFTA01771519  =div>It =s what Merkel has said she fears most. When you visit Germany, everyone =ill tell you three things when it comes to the European crisis. =nbsp;First, Germany owes an enormous debt to Europe. Second, =outhern Europe must control their budgets. And third, and dont =iss this one, Germany can never let the European Central Bank print =oney. For every German believes that part of what led to the =irst issue, was the hyper inflation of the 1930's created by German's =rinting money. German's are terrified of inflation. And =nflation starts with printing money. r/span> Its a point I have some sympathy for, as I lived in the hyper =nflation world of Brazil in the 1980's. It is no wonder that two =onsecutive, leftist Presidents in Brazil, starting with the labor =eader known the world over, as Lula, ran a governement who's fiscal and =onetary policy would make the farthest right leaning, German.... proud. =nbsp;For Lula witnessed the reality of inflation in his early =ears. Inflation is a brutul tax on the poor. Throw human =ympathies out the door, inflation is a government tax to pay down debt, =here the burden is carried almot totally by the least able to afford =t. Run-away inflation is a crushing and relentless charge on a =ocieties poorest. And it is caused, primarily, because =overnments print money to avoid difficult choices. =div> =div>Paul Krugman's =conomics contemplate extraordinary deftness by high officials pushing =he right economic buttons. Right now, our Fed has bought over $2 =rillion dollars of US debt to fund almost every penny of deficit =pending of the last two years (where did they get that money from?). =nbsp;And now the Europeans are doing something similiar. Central =anks are not supposed to lend without strong, bullet proof collatoral; =ts called secured lending. Remember how the market tricked =tself with triple AAA securites. So how secure is a three year =oan collatoralized by a one year piece of paper. What would you =ay if a bank gave you a three year loan, and said that you only had to =how proof that you could pay your loan back in the first =ear. Last week the ECB held its first auction for this type of =ransaction. Over 500 banks in Europe borrowed over $600 billion =n one day. And I would wager, unchecked, this will grow by =nother $1 trillion early next year when they do it again. =div> =div>What both the Fed and =he ECB are doing, is dramatically growing their balance sheets by =utting money into the public markets. What all economists know is =hat at some point, they will have to take this money back. =div> =div>if the heads of our =entral Banks are indeed the true "Masters of the Universe", they will =how a level of self control and card counting, like the very best card =harks of all time. And Paul Krugman will have helped save the =orld's economy. But it is a huge gamble, and one can only hope, that the =orlds economists haven't forgotten the early lesson of economics: There =s no free lunch." =/blockquote> This email is confidential and =ubject to important disclaimers and conditions including on offers for =he purchase or sale of securities, accuracy and completeness of =nformation, viruses, confidentiality, legal privilege, and legal entity =isclaimers, available at http://www.jpmorg=n.com/pages/disclosures/email. =/span> 2 EFTA_R1_00083246 EFTA01771520 3 EFTA_R1_00083247 EFTA01771521