- The Illuminist financial MSM is once again proclaiming that the Illuminist central banksters have saved us. The stock market has rallied. Everything is going to be A-OK! This is nonsense. It is propaganda. The idea that the ECB will QE to infinity but sterilized (ie. no net increase in the monetary base) the act is BS! They will not be able to sterilize their unlimited buying in the short end of the curve by selling the long end. In the end, it will be hyperinflation and the destruction of the Euro! Do not be taken for a ride!
Desperate Maladies Require Desperate Measures!
by Mark J. Grant, author of Out of the Box, via http://www.zerohedge.com/
Acts of Desperation
“Government has no other end, but the preservation of property.” -John Locke
One of the primary purposes of a government, any government, is to sustain itself. In its final hours it will do almost anything possible for its self-preservation. If the rumors are to be believed and Draghi is going to propose unlimited bond buying in the short end of the curve for the nations of Europe in maturities up to three years then it must be said that Mario Draghi, personally, has re-written the treaties for the European Union which specifically forbids what he is apparently about to undertake. In my mind, this is an act of desperation that makes me quite nervous because my thinking extends out past the announcement that will be made later today as I consider its consequences, ramifications and where the focus will shift which will be to the recession in Europe and to the fundamental financial health of the nations in the European Union and then to the fundamental financial health of the European Central Bank itself.
It was in January of 2010 when the yield on the Greek ten year was a 4.38% that I first stated that Greece was going bankrupt. It was several months later that I added Portugal, Ireland and Spain to the list. Three have gone and Spain is about to go and now I would add Italy to my list. The firewalls that were supposed to protect the Continent have failed miserably as exemplified by the current financial condition of both Spain and Italy. Now, in what I consider to be an act of desperation, the ECB is not only violating its mandate but putting the economics of the Continent in a perilous state and the markets are totally focused on the next few hours and not at all upon the consequences of the ECB’s decision. I am not surprised by this but I am reminded of the moments before the Lehman disaster when the relative calm did not predict the firestorm which was to ravage the world. The echoes remain; “WE SHOULD HAVE KNOWN,” and I am fearful that we may have another of these moments as people consider the consequences of the ECB’s actions incorrectly.
Unlimited bond buying in the short end of the curve means that not only will the yield curve steepen significantly but that all of the financing will take place in the “ECB Funding” part of the curve. This then means that a tremendous amount of debt accrues to the front-end of the yield curve and must be rolled regularly while the amounts will be increasing not only because of the placement of the maturities but because Spain and Italy, as examples, need to borrow ever larger amounts of money to finance themselves as they sink into worsening recessions. Since the ECB apparently is proposing to sterilize their purchases then the money supply will not be expanding and so as the debt load increases the primary funding, the national debt auctions, will have an increasing difficulty finding buyers.