Monday, May 10, 2010

Germany Blinks


I admit I am shocked (but not awed). The Euro Nations have put together a large ($1 trillion or so) contingency fund to defend their common currency and stock markets are so far rejoicing.

But what shocks me is the fact that the ECB (European Central Bank) is now going to be directly buying government debt.

In other words, goodbye Central Bank Independence, hello Weimar 2.0???

I would call this Wow and Yikes, not Shock and Awe.


Anonymous said...

What was the ecb buying before?

frabuk said...

It is not what they were buying, it is from whom!

In classical open market operations they buy bonds (usually government securities) from Banks. Not directly form the government who issued the bond.

If i am wrong here please feel free to disabuse me of the above notion.

First they started accepting non-investment grade securities as collateral, now this.

This all seems like one discretionary cluster f***!

In the face of ever expanding money supplies I am not that confident about independent central banks anymore.

I sure hope you are wrong about the Weimar 2.0 part.

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