The European Central Bank agreed on Thursday to launch a new and potentially unlimited bond-buying program to lower struggling euro zone countries' borrowing costs and draw a line under the debt crisis.Warning: you are entering the sarcasm zone.
Unlimited bond buying means unlimited power!
Now, what Draghi says and what he does may end up being different. The ECB announcement also said that the buying would be sterilized, meaning reserves are reduced or assets are sold to keep to the total money supply the same. The announcement also said the buying would come with conditions. Of course, Greece hasn't lived up to those conditions and money keeps flowing, so the conditions may be mere suggestions.
In response to the ECB bazooka, the S&P rose over 2% to multi-year highs. A lot of paper wealth was created today based on the ECB statement. What I wonder is why no financial geniuses in the past ever came up with the idea of monetizing bad debts of a government to make everyone wealthy. I bet the citizens of Spain, Italy, and Greece are feeling really wealthy now that all of their problems have been solved.
A lot of paper wealth was created today based on the ECB statement.
ReplyDeleteThe ECB can now tap that wealth to buy the bonds. Genius!
Warning: you are entering the sarcasm zone.
Me too! Small world! ;)
I told my girlfriend that all the world's problems were solved today. I really did. No joke.
(There may have been extra sarcasm in my tone though. Too bad you weren't here to hear it for yourself. Now you'll just have to make assumptions, lol. Sigh.)
Stagflationary Mark,
ReplyDeleteThe ECB can now tap that wealth to buy the bonds. Genius!
So true. What is confusing is why no one figured this out during the Great Depression to create massive wealth for everyone and keep stocks are record highs. I guess people weren't as smart back then. They could have prevented all the recessions that have happened since then. Also, why isn't the Fed using unlimited bond buying to make everyone in the US rich? It's so easy.
Unlimited Power!