When will the Eurozone countries begin to face reality and dump their currency.
Germany, won't keep picking up the bills while those with problems won't take
the medicine needed to survive. Its far to much debt for the ECB to take, and
something has to give. I just think it's time we cut loose from the mad house
altogether.... Both the German and Greek developments are interesting, but I
think that the real debate is going to be over how Draghi's "sterilization" is
going to work. He is going to create unlimited amounts of new cash to buy
peripheral Bonds and if all that cash gets into the economy, it could be
inflationary, so the claim is that he is going to find ways to suck it back in.
But that means the ECB selling assets, and there Draghi doesn't have any good
choices. If he tried selling PIIGS Bonds that the ECB owns, it would just cancel
out the effects of OMT. If he sells core country Bonds, he dilutes the quality
of the ECB balance sheet even more, and he pushes the price of the core country
Bonds down, and yields up, and so harms the core country taxpayers. The third
way that has been proposed won't even work. That proposal was to persuade
commercial Banks to convert their cash deposits at the ECB into one-week term
deposits that technically aren't cash. But a one-week term deposit is similar
enough to cash that Banks will behave as if it's cash. So at the end of the day
the commercial Banks will get the new OMT cash and retain their existing cash as
one-week deposits, which could lead to the Banks creating a credit bubble....Pro
austerity or pro tax-and-spend? That is the question to which the electorate do
not have a clue as to the answer. They are waiting for their political guides to
provide it: on the left the Labour Party and the Trade Unions and on the right
the Conservative led coalition and business; none of them capable of delivering
- except by invective - the magic bullet to cure the problem. Instead the
electorate are reduced to booing the Tory Ministers at the Games for attempting
to solve the problem (the structural deficit) that they did not cause, and
cheering the representative of the left who did. Politics is a deep and murky
world,isn't it?
Access Investments-Building Awareness - European Union-ROMANIA
Friday, September 14, 2012
When will the Eurozone countries begin to face reality and dump their currency.
Germany, won't keep picking up the bills while those with problems won't take
the medicine needed to survive. Its far to much debt for the ECB to take, and
something has to give. I just think it's time we cut loose from the mad house
altogether.... Both the German and Greek developments are interesting, but I
think that the real debate is going to be over how Draghi's "sterilization" is
going to work. He is going to create unlimited amounts of new cash to buy
peripheral Bonds and if all that cash gets into the economy, it could be
inflationary, so the claim is that he is going to find ways to suck it back in.
But that means the ECB selling assets, and there Draghi doesn't have any good
choices. If he tried selling PIIGS Bonds that the ECB owns, it would just cancel
out the effects of OMT. If he sells core country Bonds, he dilutes the quality
of the ECB balance sheet even more, and he pushes the price of the core country
Bonds down, and yields up, and so harms the core country taxpayers. The third
way that has been proposed won't even work. That proposal was to persuade
commercial Banks to convert their cash deposits at the ECB into one-week term
deposits that technically aren't cash. But a one-week term deposit is similar
enough to cash that Banks will behave as if it's cash. So at the end of the day
the commercial Banks will get the new OMT cash and retain their existing cash as
one-week deposits, which could lead to the Banks creating a credit bubble....Pro
austerity or pro tax-and-spend? That is the question to which the electorate do
not have a clue as to the answer. They are waiting for their political guides to
provide it: on the left the Labour Party and the Trade Unions and on the right
the Conservative led coalition and business; none of them capable of delivering
- except by invective - the magic bullet to cure the problem. Instead the
electorate are reduced to booing the Tory Ministers at the Games for attempting
to solve the problem (the structural deficit) that they did not cause, and
cheering the representative of the left who did. Politics is a deep and murky
world,isn't it?
Subscribe to:
Post Comments (Atom)
1 comment:
On Wednesday, Michel Barnier, the EU's commissioner for internal markets and services, said it would not be a "serious approach" to expect the ECB to supervise all banks by early next year. Instead, the supervisor would "go and look at certain aspects of a given bank which may pose a risk," with the biggest banks monitored on a regular basis.
However, as Bruno highlighted on Thursday, the paper argues that limiting the banking union could lead to "gaming behaviour and other distortions":
...seeking to limit the banking union merely to the largest banks, or cross border banks could lead to gaming behaviour and other distortions. There is also ample precedent to suggest that it is not only the largest banks that may cause systemic instability. The examples of the Spanish Cajas and German Landesbanks illustrate the fact that small and medium-sized banks may in aggregate pose significant risks to Euro area financial stability, and medium sized institutions may do so individually in times of stress.
Post a Comment