The ECB has already done quite a bit of bond buying, which it has disingenuously dressed up as a way of helping the "monetary transmission system". The sophistry of this explanation is ridiculous. No, what the ECB has been doing is trying to drive bond yields in the distressed single currency nations down to more tolerable levels.Even so, the numbers have been very low against what the Federal Reserve has been doing in the US, and the Bank of England in the UK. As long as Germans believe that bond buying by the central bank is essentially monetisation of public debt – the sort of stuff that led to the Weimar hyperinflation of legend – it will be blocked from meaningful action. Mr Draghi's challenge is therefore to persuade Berlin that bond purchases are for a different purpose – demand management. This is essentially the justification that underpins QE in Britain and the US. In both cases, the intention is eventually to sell the accumulated bond holdings back to markets, or to run down the positions by allowing the bonds to mature. To better support this justification, ECB bond purchases would have to be much more widely spread than at present. It would have to include German bunds in proportion to the size of the German economy alongside Italian, Spanish and Portugese debt. But as I say, Mr Draghi faces an uphill struggle. Germans would prefer to suffer, or even see the euro collapse completely, than tolerate such an unconventional approach
Access Investments-Building Awareness - European Union-ROMANIA
Tuesday, November 1, 2011
The ECB has already done quite a bit of bond buying, which it has disingenuously dressed up as a way of helping the "monetary transmission system". The sophistry of this explanation is ridiculous. No, what the ECB has been doing is trying to drive bond yields in the distressed single currency nations down to more tolerable levels.Even so, the numbers have been very low against what the Federal Reserve has been doing in the US, and the Bank of England in the UK. As long as Germans believe that bond buying by the central bank is essentially monetisation of public debt – the sort of stuff that led to the Weimar hyperinflation of legend – it will be blocked from meaningful action. Mr Draghi's challenge is therefore to persuade Berlin that bond purchases are for a different purpose – demand management. This is essentially the justification that underpins QE in Britain and the US. In both cases, the intention is eventually to sell the accumulated bond holdings back to markets, or to run down the positions by allowing the bonds to mature. To better support this justification, ECB bond purchases would have to be much more widely spread than at present. It would have to include German bunds in proportion to the size of the German economy alongside Italian, Spanish and Portugese debt. But as I say, Mr Draghi faces an uphill struggle. Germans would prefer to suffer, or even see the euro collapse completely, than tolerate such an unconventional approach
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There is no doubt that the decision of the Greek Prime Minister has added to the instability and uncertainty in the eurozone when what we’re trying to do is trying to create stability and certainty [...] it is up to Greeks to make their own decisions, but it is also extremely important that the eurozone implements the package that was agreed at the EU summit last week.
More analysis on the Greek referendum, this time from international business editor Ambrose Evans-Pritchard, who has labelled the move by the Greeks a Revenge of the Sovereign Nation:
Greece’s astonishing decision to call a referendum – "a supreme act of democracy and of patriotism", in the words of premier George Papandreou – has more or less killed last week’s EU summit deal.
Unless the European Central Bank step in very soon and on a massive scale to shore up Italy, the game is up. We will have a spectacular smash-up.
It's time for a lunchtime poll.
Many fear that Greece's call for a referendum increases the risk of a "disorderly default" and ultimately Greece's future in the euro. But what do you think?
Merkel: Ein was?
Sarkozy: Un referendum
Merkel: Was ist das?
Sarkozy: Je ne sais pas.
Merkel: Ach scheisse.
Sarkozy: Oh merde alors.
Jean-Claude Juncker, head of the so-called eurogroup (the EU finance ministers' group) has said that Greek PM George Papandreou's decision to hold a referendum on the bail-out package was taken without consulting other European leaders."
One scary comment!
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