Definition of froth:
noun - A mass of bubbles in or on a liquid; foam
verb - to produce or cause to produce froth
source - Collins English dictionary.
In Boris Vian's great poetic novel, the hero Colin marries Chloé, but Chloé falls ill upon her honeymoon with a water lily in the lung, a painful and rare condition that can only be treated by surrounding her with flowers. One can as well argue that a BSR (Balance Sheet Recession) is a rare condition that can only be treated by surrounding it with liquidities but if credit is not flowing to the real economy which is definitely the case in the Eurozone; a similar fate looms for the European economy as for Chloé in the novel. In the novel at some point, the flower expenses become prohibitive and Colin soon exhausts his funds.
In Boris Vian's book, Colin struggles to provide flowers (credit) for Chloé to no avail and his grief at her ultimate death is so strong his pet mouse commits suicide to escape the gloom. Looking at how the ECB (Colin) is struggling at providing real flowers (credit) to the Spanish real economy (we have long argued that the LTROs provided by Mario Draghi amounted to "Money for Nothing"), we can only wonder about the accuracy of our reference when looking at the deflationary bust unfolding in Spain before our very own eyes - graph source Bloomberg:
"Maintaining lending and credit flows is paramount to avoid a credit crunch which would essentially impair GDP growth in the process." - Macronomics, Modicum of relief - March 2012
Euro Area Bank Lending Survey - source Thomson Reuters Datastream / Fathom Consulting:
When ones looks at the amount of consumer gearing in Europe versus the USA, no wonder that the amount of "frothing" or flowers from the ECB has been staggering. As indicated by Bloomberg in the below graph, the Credit Penetration has been falling from the 2009 highs, courtesy of the BSR and the deleveraging needed but the gearing of private households as fallen in the US whereas it has risen in Portugal for instance!