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ECB Getting Infusion ready to Steer Euro Away from Deflation.
I'm thinking disappointment. Expectations are so big at this point that even if the ECB actually comes through and delivers some real QE, I'm just not sure they're going to be able to even meet expectations. I'm hoping to buy European stocks on weakness as a result and if they Euro strengthens in any meaningful way I'd be happy to sell more than I already have.
This move has been pretty heavily advertised (and therefore discounted by the markets) for about a week now. Also, since many nations have to be involved in the planning, chances that details have leaked out to interested parties are great.
So the actual announcement may be greeted more with a whimper than a bang.
(Should have followed the Swiss model: "Wham Bam! ......" )
Bloomberg is reporting that the ECB will provide €50 billion a month until December 2016. That is a big chunk of euros. In fact, that is €1.1 trillion.
@Old Joe: That's what the dots are for. (Technical term is "ellipsis marks" and they're used to show where you edited out words - but I won't get too fancy with you here, OJ.)
A message from Davos: Quantitative easing alone won't solve Europe's ills BY NOAH BARKIN DAVOS, Switzerland Wed Jan 21, 2015 4:18pm EST Axel Weber, now chairman of Swiss bank UBS (UBSG.VX), raised questions about whether the single currency could survive unless politicians stepped up and reformed their economies.
"I have not seen enough reforms in Europe and the ECB will not fix this issue," Weber said, stressing the need for "heavy lifting" changes to labor market rules and pension schemes.
He said that if European politicians continued to rely on loose monetary policy alone, the euro project would become "increasingly difficult" to run.
Former U.S. Treasury Secretary Larry Summers said he was strongly in favor of ECB action, but added that "necessity should not be confused with sufficiency".
QE had worked in the United States, he said, because it came as a surprise and at a time when there was scope to reduce long-term U.S. interest rates -- both conditions that Europe does not fulfill.
Two in depth looks at the real problems in the Eurozone ARGUMENT The ECB’s Damned-If-You-Do QE Moment BY PHILIPPE LEGRAIN Philippe Legrain, who was economic advisor to the president of the European Commission from 2011 to 2014, is a visiting senior fellow at the London School of Economics’ European Institute
JANUARY 21, 2015 Europe needs stimulus. Mario Draghi has promised to "do whatever it takes." But quantitative easing won't make the eurozone's real problems go away. At the very least, QE would need to be huge — potentially even unlimited. But even if he wanted to, Draghi can’t do that, because of political opposition in Germany and legal constraints. The German policy establishment, including the Bundesbank, Chancellor Angela Merkel’s administration, and the German Constitutional Court, is implacably opposed to QE. Among other things, the Germans fear that if, for instance, the ECB starts buying lots of Italian government bonds, it will take the pressure off Rome to reform and put its public finances in order. They reason that this could eventually put the ECB in an impossible position: keep buying the bonds of a by-then-insolvent Italy or precipitate a default in a 2.1-trillion-euro bond market — the eurozone’s biggest — that may impose hefty losses on the ECB’s shareholders, not least the German government, and doubtless shatter the euro. http://foreignpolicy.com/2015/01/21/the-ecbs-damned-if-you-do-qe-moment/
ARGUMENT Europe’s Three-Way Game of Chicken BY NICHOLAS SPIRO
Nicholas Spiro is managing director of Spiro Sovereign Strategy, a consultancy specializing in sovereign credit.
JANUARY 21, 2015 Syriza wants debt relief. Germany wants austerity. Can anything the European Central Bank does keep the most important players in the eurozone happy? Syriza heads to power. The radical-leftist coalition is still seeking the same thing it was in 2012: an end to five years of growth-sapping austerity and debt forgiveness by Greece’s creditors.
That these problems have replicated themselves so completely says as much about the enduring political and economic governance problems of the eurozone as it does about the fear that Syriza still strikes into markets. The currency union remains locked in a bitter standoff between a German-led group of countries reluctant to share more financial risks and a French-led one wary of ceding more economic sovereignty.
Not having your own national currency but one shared by other countries poses a problem as I see it. Some countries feel they are left out as countries like Germany and Switzerland benefit from Euro policy.
Draghi announced QE of €60 billion a month starting this March through Sept. 2016.
Edited to correct time frame.
....And that gave the market a nice boost for about an hour. Again, QE does not create a sustainable recovery. It buys time for politicians with no other ideas. Someone on ZH in the comments section said it well: "Desperation is usually reserved for market lows, not all time highs."
Comments
Still not assured much can be done with "X" amount of money to "cause" folks to borrow money for whatever, personal or business.
Apologies to all.
So the actual announcement may be greeted more with a whimper than a bang.
(Should have followed the Swiss model: "Wham Bam! ......" )
http://mobile.bloomberg.com/news/2015-01-21/ecb-said-to-propose-qe-of-50-billion-euros-a-month-through-2016.html
... wasn't there a bit more to that??
Carry on!
A message from Davos: Quantitative easing alone won't solve Europe's ills
BY NOAH BARKIN
DAVOS, Switzerland Wed Jan 21, 2015 4:18pm EST
Axel Weber, now chairman of Swiss bank UBS (UBSG.VX), raised questions about whether the single currency could survive unless politicians stepped up and reformed their economies.
"I have not seen enough reforms in Europe and the ECB will not fix this issue," Weber said, stressing the need for "heavy lifting" changes to labor market rules and pension schemes.
He said that if European politicians continued to rely on loose monetary policy alone, the euro project would become "increasingly difficult" to run.
Former U.S. Treasury Secretary Larry Summers said he was strongly in favor of ECB action, but added that "necessity should not be confused with sufficiency".
QE had worked in the United States, he said, because it came as a surprise and at a time when there was scope to reduce long-term U.S. interest rates -- both conditions that Europe does not fulfill.
http://www.reuters.com/article/2015/01/21/us-ecb-policy-qe-davos-idUSKBN0KU2M620150121
Two in depth looks at the real problems in the Eurozone
ARGUMENT
The ECB’s Damned-If-You-Do QE Moment
BY PHILIPPE LEGRAIN Philippe Legrain, who was economic advisor to the president of the European Commission from 2011 to 2014, is a visiting senior fellow at the London School of Economics’ European Institute
JANUARY 21, 2015
Europe needs stimulus. Mario Draghi has promised to "do whatever it takes." But quantitative easing won't make the eurozone's real problems go away.
At the very least, QE would need to be huge — potentially even unlimited. But even if he wanted to, Draghi can’t do that, because of political opposition in Germany and legal constraints. The German policy establishment, including the Bundesbank, Chancellor Angela Merkel’s administration, and the German Constitutional Court, is implacably opposed to QE. Among other things, the Germans fear that if, for instance, the ECB starts buying lots of Italian government bonds, it will take the pressure off Rome to reform and put its public finances in order. They reason that this could eventually put the ECB in an impossible position: keep buying the bonds of a by-then-insolvent Italy or precipitate a default in a 2.1-trillion-euro bond market — the eurozone’s biggest — that may impose hefty losses on the ECB’s shareholders, not least the German government, and doubtless shatter the euro.
http://foreignpolicy.com/2015/01/21/the-ecbs-damned-if-you-do-qe-moment/
ARGUMENT
Europe’s Three-Way Game of Chicken
BY NICHOLAS SPIRO
Nicholas Spiro is managing director of Spiro Sovereign Strategy, a consultancy specializing in sovereign credit.
JANUARY 21, 2015Syriza wants debt relief. Germany wants austerity. Can anything the European Central Bank does keep the most important players in the eurozone happy?
Syriza heads to power. The radical-leftist coalition is still seeking the same thing it was in 2012: an end to five years of growth-sapping austerity and debt forgiveness by Greece’s creditors.
That these problems have replicated themselves so completely says as much about the enduring political and economic governance problems of the eurozone as it does about the fear that Syriza still strikes into markets. The currency union remains locked in a bitter standoff between a German-led group of countries reluctant to share more financial risks and a French-led one wary of ceding more economic sovereignty.
http://foreignpolicy.com/2015/01/21/europes-three-way-game-of-chicken-ecb-germany-greece-qe/
Draghi announced QE of €60 billion a month starting this March through Sept. 2016.
Edited to correct time frame.