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More on the ECB: Mario Draghi appears to have won over at least one Bundesbank member as Jorg...

More on the ECB: Mario Draghi appears to have won over at least one Bundesbank member as Jorg Asmussen tells a German newspaper high peripheral bond yields reflect exchange rate risk, thus "our monetary policy (is) achieved only incompletely." It's crucial wording, suggesting he's okay with ECB bond purchases as long as they're couched in saving EMU, not financing Spanish and Italian governments. "We are working on (a) new program and will deal with it (at the next policy meeting)."
Comments (10)
  • "Deal with it at the next policy meeting." Well, its nice that the policy of trying to fix things later hasnt changed.
    20 Aug 2012, 10:15 PM Reply Like
  • The Financial Times continues to refute this story which, if true, would pit Jorg Asmussen against Jens Weidmann of the Bundesbank and German finance minister Wolfgang Schäuble. With growing political tensions within Merkel's coalition, I doubt she would risk further stress by simply siding with Asmussen against the wishes of other crucial political allies. Further, this all seems a bit premature as Spain has not formally applied to the EFSF for assistance and nor has the German Court ruled on legal challenges to EFSF/ESM, a decision expected on Sept 12th. And then there is the matter of what conditions must Spain an/or Italy accept for assistance with issuance of debt. Even the Telegraph notes:

     

    Chancellor Merkel said last week that the Draghi Plan is “in line” with German policy so long as the conditions imposed on Spain and Italy are tough enough, but Berlin has been sending mixed messages. Finance Minister Wolfgang Schauble said on Sunday that ECB financing of state deficits was anathema: “If we start doing that, we won’t stop. It’s like when you start trying to solve your problems with drugs.”
    20 Aug 2012, 10:19 PM Reply Like
  • The FT is usually right.

     

    On another level, we ought to all question the profiteering via slinging of rumors and inside information by what I like to call the "ECB/Buba Dyad."
    21 Aug 2012, 12:00 AM Reply Like
  • CI,
    Good points. It seems hardly likely that the Bundesbank has reversed their position regardless of what Asmussen is saying to the media. Looks more likely to be more hype and talk to try and talk down sovereign bond yields for Spain and Italy in the short-term.
    21 Aug 2012, 12:18 AM Reply Like
  • My favorite point was:
    "The choice of wording is crucial. If it can be shown that the ECB is acting to avert EMU break-up – known as “convertibility risk” – bond purchases would no longer be deemed a bail-out for Italy and Spain."
    http://bit.ly/QUERzf
    20 Aug 2012, 10:39 PM Reply Like
  • It barely matters who says what any more. The media will somehow contort it into an all-is-well headline for the algo's and idiots.
    20 Aug 2012, 11:38 PM Reply Like
  • Just add any EMU plan to the heap of other failed plans. They will all fail eventually, regardless of any mega rallies or the like. Fundamentals (at any level and in any instrument) can only be distorted so long. Japan, for example, is proving that it may take decades but it too shall face it's time of reckoning.
    21 Aug 2012, 12:18 AM Reply Like
  • The doomers continue to be crushed, new all time highs in equities coming if the ECB prints.
    21 Aug 2012, 10:20 AM Reply Like
  • Better and better entry points for the big short... yum yum... keep er rising...

     

    Stay in high yield and keep massive puts in place. Losing a couple bucks on way out-of-the-money puts is well worth it for the eventual payoff. I'm happy to lose $$ on huge puts for another 10 years. I have no doubt we won't make it 10 years before our next epic collapse.
    21 Aug 2012, 11:16 AM Reply Like
  • so Asmussen believes that peripheral yields are high because of exchange rate risk, not solvency issues... ?

     

    that's like the weimar "economists" who blamed the hyperinflation on the exchange rate decline of the mark, not the money printing...
    21 Aug 2012, 10:23 AM Reply Like
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