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Here They Come:

With British mood turning sharply negative toward remaining in the Eurozone according to recent polls, and Brexit suddenly looming, the worst case scenario for the scaremongers is starting to play out: with the endless doomsday scenario postulated by pundits, economist and central bankers, among which BOE governor Carney himself warning of a potential recession, a collapse in Sterling and a sharp drop in capital markets and David Cameron going so far as threatening with war, this may be about to play out. And, if anything, the passage of Brexit would test just how bad at forecasting all the supposedly smartest people once again are.

However, these ridiculous predictions of fire and brimstone will not happen. The ECB has made sure of that.

According to a Reuters report, the European Central Bank would publicly pledge to backstop financial markets in tandem with the Bank of England should Britain vote to leave the European Union.

In other words, Brexit is now the most bullish thing conceivable, something we first hinted a month ago…

because it would unleash another major central bank intervention to prevent precisely the outcome that was predicted so many times by the central bankers themselves.

As Reuters adds, the preparations illustrate the heightened state of alert ahead of the June 23 referendum, which will help determine Britain’s future in trade and world affairs and also shape the EU. The pound and euro have lost value on fears a Brexit could tip the 28-member bloc into recession.

An announcement from the ECB would come on Friday, June 24, if the early-morning result showed that British voters had chosen to leave the EU, Reuters says citing sources whose job is to preserve market stability at all costs. Indeed, “the aim is to underpin investor confidence across Europe and contain further market jitters.” Because clearly investors are not terrified enough of a world in which every asset price is now entirely a function of central bank backstops.

How will the ECB “backstop” assets? Simple: by using a tried and true approach: “there will be a statement to do whatever it takes to maintain adequate market liquidity,” said one senior central bank official, who spoke on condition of anonymity.

The ECB’s pledge would involve opening so-called swap lines with the Bank of England, allowing euros and sterling to be exchanged and effectively making unlimited funding in both currencies available to European banks, the sources said.

The Bank of England said last month that possible “heightened uncertainty” due to the vote may make it harder for banks to tap their usual sources of foreign currency and that it would keep its operations, including swap lines, under review.The ECB used similar arrangements with the U.S. Federal Reserve to unlock extra dollars during the financial crisis and after the 9/11 attacks

Providing extra funds to banks after a Brexit vote would ease pressure on them and reduce the potential for panic as financial markets digest the result on Friday, June 24, shortly before closing for the weekend.

Yes, it will help in the very short run. Anything beyond that will simply make banks even more reliant on the daily whims of the ECB, something which as the record low Credit Suisse and Deutsche Bank stock price demonstrate has become a total failure.

What else will the ECB do: as Reuters adds, “the ECB is limited in what it can do, beyond releasing funds for banks. Extending its money-printing program, which has already saturated markets with more than one trillion euros ($1.1 trillion) and is gradually running out of bonds and securities to buy, would likely be contested by some countries such as Germany.”

Such a move could only be considered if the market fallout from a Brexit were to weigh on the regional economy over the longer term.

In the days around the referendum – which is expected to be closely contested – governors of European central banks will hold a series of meetings, some of which were scheduled independently of the vote. These gatherings may present an opportunity to fine-tune their response.

Bank of England governor Mark Carney is due to meet ECB President Mario Draghi and European peers in Frankfurt on June 23, the day Britons cast their vote.

It will all start with a phone call. Governors from across the 19 European countries that use the euro have also scheduled a telephone conference call the following day to decide their response to the vote, two people with knowledge of the matter said. A statement could follow.

Of course, if current polls are any indication, a statement will follow. In the statement, the ECB may have no choice but to say it will be buying up stocks of banks as it cross the Rubicon into supporting the riskiest of assets. Which is understandable: having already crushed price discovery in the corporate bond market, Mario Draghi should just go all the way and determine every single asset price.

And topping it all off will be a meeting at the one place where every global bailout takes place: the BIS headquarters in Basel.

On the weekend after the vote, central bank chiefs from around the globe will gather in Switzerland for the annual meeting of their umbrella body, the Bank for International Settlements.

The Bank of England has already sought to avert any liquidity squeeze ahead of the vote by providing injections of cheap funding for banks ahead of the vote. The first of two such batches was released on Tuesday, prompting banks to request 2.5 billion pounds ($3.5 billion) for six months.

In short: a vote for Brexit is just the catalyst the central banks need to unleash the next, and perhaps greatest, intervention in “capital markets” yet.

And now that the plague, locust and generally apocalyptic outcomes from a Brexit vote have been eliminated thanks to the central planners in Frankfurt, and a Brexit is actually a “good thing” if only for the uber-wealthy, go ahead and vote.

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