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Sources say the ECB is considering purchases of Italian and Spanish sovereign paper on a massive...

Sources say the ECB is considering purchases of Italian and Spanish sovereign paper on a massive scale. Such a move would be a significant change in policy, turning the ECB into a Fed-like lender of last resort, and taking lead responsibility for fighting the crisis away from the EU governments.
Comments (49)
  • Anything to prevent banks from trading losses, I suppose.


    More socialized losses.
    7 Aug 2011, 02:41 PM Reply Like
  • No, to prevent a recession.


    The masochism of guys like you who are in favour of letting the global banking system collapse is a mystery.


    You just don't get it ...
    7 Aug 2011, 04:14 PM Reply Like
  • AIP,


    Funny, you probably were making the same comments in 2008, when some said "Kicking the Can down the Road"


    And, Here we are again.


    BTW, It won't and has not prevented a recession, only postponed it until the next big crisis.


    Until somebody mans up and takes their well deserved haircut, it will come back, just like a tumour.


    Hopefully you won't be comming back, We're all better off with you in Paris.
    7 Aug 2011, 04:22 PM Reply Like
  • AIP,


    I see we're back to the old "You must Bail us out to Save the Economy Threats" from the likes of you, along with the Crony Capitalist Banksters.


    Tell us then.


    What did the Bailouts achieve last time, besides record 2009 Bankster bonuses along with all the so called money to stimulate the economy now sitting on reserve at the Fed?
    (See the Greenspan video link I provided)


    Common sense not rocket science says, you don't reward bad behavior, that is, unless you want more of it.


    These Crony Capitalists, just like cancer need to be eradicated or incarcerated, otherwise we will be talking about this again in the near future.


    That prediction you can Bank on.
    7 Aug 2011, 05:10 PM Reply Like
  • Italy has a budget surplus. They can pay off their debts. But they wouldn't be able to pay them off if interest rates stay up too high. A massive bond purchase program would lower interest rates, so they could pay their debt. Italy is not Greece.


    Right now, futures are down huge, but when the ECB does come through with massive bond buying, the crisis will be over and stocks will go up again.
    7 Aug 2011, 06:22 PM Reply Like
  • Lebargo,


    Problem is is that if GDP growth goes negative, all bets are off.
    7 Aug 2011, 06:32 PM Reply Like
  • Keep dreaming.
    7 Aug 2011, 07:00 PM Reply Like
  • Neither Europe nor the US is in recession. Both are still expanding albeit slightly less than before.


    The bond buying program might still fail if they are unable to change the psychology. Fear is feeding upon itself. But just follow the yields on Italian debt and the spread with Germany to see if they come down. If they do, it will be time to move into stocks.


    7 Aug 2011, 07:10 PM Reply Like
  • Nah, no worries there just wont be any supply chains and in the mass die off guys like Paris will never be found. The irony is that France and Germany are probably two of the most dangerous places in the world for what is going down.


    I always thought American in Paris was a total dickhead. I probably have said such a phrase publically toward an individual four times in my entire life so I really, really think this guys a dickhead.
    7 Aug 2011, 08:55 PM Reply Like
  • AIP -


    I'm with you on this unless and until someone can conclusively show (and I very much doubt that this is possible) that the banking system can be allowed to collapse but only the shareholders and bondholders of the banks in questions be adversely affected.


    Free Enterprise purists that take the theoretical high ground by saying 'let the banksters pay the price of their folly' conveniently neglect to consider what a total destruction of credit granting institutions in a modern society would entail.
    7 Aug 2011, 10:11 PM Reply Like
  • Last I saw, Italy's debts were over $1.1 trillion. They cannot pay them off. They may be able to restructure. But they cannot repay.


    They owe France big time > $500 billion. If I were France, I would be very nervous right now. It won't take much to collapse the system in the EU.
    7 Aug 2011, 10:28 PM Reply Like
  • 1980 GDP growth all over the world will go negative. So all one can do is get ready as best one can.
    7 Aug 2011, 10:29 PM Reply Like
  • Please don't think that just because some government organization declared the recession to be over it actually is. Not!
    7 Aug 2011, 10:30 PM Reply Like
  • Bob,


    If what you say is true, then it is a "national security interest" that the system be changed, and not just bailed out. If I were the big man, I would instantaneously raise the capital requirements for ALL banks. Go raise some money or get ready to get acquired.


    To permit the banking system the indulgences that have allowed them to carry the future or the world in their hands is criminal.
    7 Aug 2011, 10:33 PM Reply Like
  • Right now, futures are down huge, but when the ECB does come through with massive bond buying, the crisis will be over and stocks will go up again.
    First they were coming through yearly
    then semi yearly
    it seems they are coming trough monthly for now
    7 Aug 2011, 11:13 PM Reply Like
  • WMARKW -


    I agree with the thrust of your comment. Reform, however, is necessarily a complex process to be implemented over time (i.e. in stages to prevent disruption of either the banking system or the economy generally). For what its worth, here is what I would suggest for discussion purposes.


    Arguing from the perspective of those seeking a better structural and regulatory framework for the US banking sector, the following changes are suggested:
    1. Segregate ‘boring banking’ from investment banking by creating and implementing a modern version of Glass-Steagall or Volcker Rule of sufficient force and effect.
    2. This need for segregation need not forbid a ‘boring’ bank from engaging to a limited extent in an investment banking activity but must preclude it from doing so to a degree that changes the risk profile of the bank as a whole. Further, consolidation to weed out the ‘too small to survive’ banks at a reasonable pace and without creation undue regional or national concentration of ‘boring’ commercial banking should be encouraged.
    3. The objective should be that investors in investment banks should not be protected by public financed depositor insurance and insurance for investment banks and their satellite institutions should be obtainable through the private and not public sector. By contrast, boring banks, being in many ways like public utilities, should continue to be subject to public insurance, including that for deposits.
    4. A regulatory and governance framework broadly analogous to those in Canada and Australia should be created for boring banks.
    5. A regulatory and governance framework for the banks, hedged funds, shadow banks and other ‘near banks’ dedicated to investment banking and for insurance bodies that back-stop investment banking needs to be devised and implemented through cooperative and coordinated efforts, where possible in a timely manner, among the nations that are the primary centres of global investment banking.
    6. Because the actual demarcation line between investment and boring banking is somewhat arbitrary this line should be defined arbitrarily by the new modern version of the Glass-Steagall Act.
    7. Given the nature and extent of risk involved, the terms of the new the regulatory and governance framework for investment banking must reflect the fact that if a bank, hedged fund or other near bank dedicated to investment banking or one of their insurers becomes insolvent this can not be allowed to endanger the solvency or ongoing functioning of the system generally. The allowed size, governance, capitalization, regulation, allowable risk exposure etc. for participants in investment banking must therefore be crafted to reflect this need.
    8. While it would be preferable if the banks and near banks etc, themselves split and reorganized voluntarily to transition into the new Glass-Steagall Act regime and the size limits envisage above, in light of the current insolvency of many of them absent the current support from the US authorities it would be appropriate and advisable to employ the current and new legislation and the capacity to bring FDIC proceedings to achieve restructuring expeditiously if needed.
    7 Aug 2011, 11:33 PM Reply Like
  • coddyo....sounds like the recipe for that special home brew called....hyperinflation.
    7 Aug 2011, 11:38 PM Reply Like
  • Bob...well said. So I ask this question. Me, being rather short on brain cells, and you being rather long on brain cells....get this...but the best and the brightest running the world and the associated financial systems....don't. What's wrong with that picture?
    7 Aug 2011, 11:41 PM Reply Like
  • I should have been more exact. Italy's primary budget is in surplus. The primary budget is its budget minus the debt payments. The debt payments are what is making its budget a deficit. By lowering interest rates on its debt, it will be able to have a budget surplus.
    8 Aug 2011, 12:16 AM Reply Like
  • WMARKW -


    We are all in uncharted territory (from a perspective going back several generations at least) and the natural tendency of us all is to be very cautious (probably a good policy for the most part in unfamiliar circumstances) or even to pretend it's almost 'business as usual' and no real change is needed (i.e. marginally delusional possibly and not too healthy an approach).


    That's what's wrong with that picture.
    8 Aug 2011, 01:32 AM Reply Like
  • My Fellow Germans,


    Welcome and embrace the US type economy.
    You have no choice anyway.


    Going short Euro tomorrow.
    7 Aug 2011, 02:46 PM Reply Like
  • Should this be the case, it will temporarily quiet markets but will further morph a monetary union into a transfer union under which there is greater transfer of wealth between rich and poor.


    I cannot been to grasp why Germany would risk euro billions and its own credit rating to save the eurozone. Each time Germany agrees to additional ECB bond purchases, there is a further pooling of risk working to the advantage of the peripherals and the detriment of the core.


    Germany will eventually get drawn into a fiscal union which will prove to be nothing more than a transfer union, with a steady transfer of resources from those who work and produce to those who idle about while consuming.


    I hope Merkel is defeated before she has the opportunity to further damage her country under the spell of Sarkozy.
    7 Aug 2011, 02:51 PM Reply Like
  • is Spanish, Greeks and Italians that buy expensive BMWs, Mercedes, Wolkswagen and other German goods (maybe with money borrowed from German banks) so Germans have no other choice than to provide financial aid.
    Actually Germans already delayed too much ECB's intervention (with money loss).
    By the way it is very clear that any aid will imply that the EU will increase its ability to force better behaviors in high debt Countries; actually this is already happened: Italy debt is over 100% since years (from 1980?), and it is not doubled during the 08/09 crisis thanks to unpopular things (such as higher pension age reform) that were made possible by telling "the EU is asking us these reforms and we must do, sorry".
    7 Aug 2011, 03:34 PM Reply Like
  • CautiousInvestor,


    Your postings suggest you are clueless about Europe. Europe is a project, an idea, not just a conglomeration of States. No country has played as important role in the development as Germany.


    And yes, if Germany leaves the Euro, then they must leave the European Union.
    7 Aug 2011, 04:16 PM Reply Like
  • I seldom engage in responses to my comments but I'll make an exception for you zio because your arguments do not make a convincing case.


    For those who embrace the eurozone, they make the same case as you do. But lets take Greece, for example, because after bailout I they failed to enhance revenues, they failed to make the promised cuts, they failed to eliminate endemic corruption, they failed to implement labor market reforms and they failed to sell-off state assets; but they did take the monies and they will take the monies from the second bailout and promise the moon.


    Before the July 21 agreement, the Commission forecast that Greek debt to GDP ratio would rise from 142.8 in 2010 to 157.7 percent in 2011 and then to 166.1 percent in 2012. With the second bailout in place, they think it will be 10 percentage points lower by 2020. But when the ECB quits buying their bonds and interest rates spike to 7%, then what?


    Clearly the bailouts are palliatives but are not working and Greece, and maybe others, need to default on their debt and/or depart from the EZ and adopt a depreciated drachma as their currency. Because they are unwilling to seriously reduce their standard of living, it's the only way they can regain competitiveness.


    With respect to Mercedes, I knew that Germany, the US and China are the company's three largest markets. I did a quick google and it confirmed what I thought.


    In 2010, Mercedes-Benz set new sales records every month in its third-largest single market, China (incl. Hong Kong), posting higher rates of growth than its key competitors. The original sales target of 120,000 units had already been exceeded at the end of November. Deliveries for full-year 2010 in China totaled 148,400 passenger cars, or more than double the number of units (+112%) sold in the prior year (70,100 units). A total of 18.300 customers opted to purchase a passenger car from the brand with the star in December, an increase of 94 percent from December 2009 (9,500 units).


    Mercedes-Benz also recorded very high growth rates in many other markets besides China. The premium segment in India for example was marked by dynamic development in 2010. Mercedes-Benz sales reached the record level of 5,800 units, an increase of 80 percent, which was well above expectations. Mercedes-Benz achieved record sales in Russia as well (19,700 units; +64%). In Brazil, deliveries increased by 46 percent to 7,500 units. Record sales were also posted in South Korea (16,500 units; +86%) and Turkey (12,300 units; +27%). In South Africa (22.300 units; +16%), Mercedes-Benz was the market leader in 2010. Mercedes-Benz was also very successful in Australia (18,900 units; +19%) and Taiwan (7,200 units; +49%).


    They don't need the PIIGS market.
    7 Aug 2011, 04:21 PM Reply Like
  • No they need the US and Asian growth markets, hence the need to save the Euro.


    See the last 6 mins of the Greenspan interview I have posted.
    7 Aug 2011, 04:46 PM Reply Like
  • American,


    Fully 33% of Germans are opposed to aid to the periphery so they must be as clueless as I am about this work in progress.


    The design of the EMU was flawed at the outset as the EMU has never fully satisfied the conditions for an optimal currency area: synchronized economic activity and growth rates; a high level of labor and capital mobility; fiscal federalism allowing the fiscal risk sharing of idiosyncratic national shocks; and a significant degree of political union. Instead it’s a patchwork of seventeen countries with different languages, different cultures, different ethics and different fiscal and budgetary policies.


    In the end you are the one who will be proven clueless.
    7 Aug 2011, 04:48 PM Reply Like
  • CI:


    A durable common currency requires unlimited Federal power over member states by the central currency-issuing power, as the U.S. Government has over its states in all matters of national finance and currency. In Europe, the choices are either to move rapidly to such all-empowering Federalism or see the demise of a weak uncontrollable union.
    7 Aug 2011, 04:56 PM Reply Like
  • "I cannot been to grasp why Germany would risk euro billions and its own credit rating to save the eurozone"


    This is about more than economics, this is about preventing another bloodbath like world war 2. The German leadership will pay any cost to unify the continent under it's leadership. If you think about it, the cost is only in printed paper, far cheaper than the last attempt that cost 5 million soldiers.
    7 Aug 2011, 05:03 PM Reply Like
  • Something about compulsion in building empires based on the symbolism of a predator, the eagle. Same cultish excuse to murder and steal property in the name of a pyramid (3D) when man is firmly beginning to explore the 4th dimension and close to clinical immortality. Until then, your predator, prey or just trying to get the hell out of the way.


    Monetary union without political union will always fail. Sideline the people and commit mass suicide. But all elites feel 'they are different' throughout history. I have some solutions to possibly extend the shelf life of a Republic but frankly, it is a waste of time until man is rebuilding from the rubble and boy will there be a lot of it this time. See you on the other side in 2021.
    7 Aug 2011, 09:17 PM Reply Like
  • I no longer provide defensible positions to American in Paris.
    7 Aug 2011, 09:29 PM Reply Like
  • "Unify the continent under it's leadership." Didn't they try that before?
    7 Aug 2011, 10:36 PM Reply Like
  • If you play the game you have to be willing to lose. The crash is coming, they can postpone it with financial tricks, but the core problems remain and the crash will only be worse a year from now.
    7 Aug 2011, 02:55 PM Reply Like
  • The Germans are going to go nuts. Think it will work any better than it did in the US? Maybe Mr. Doom and Gloom isn't so far off the mark.
    7 Aug 2011, 02:56 PM Reply Like
  • I didn't think the ECB had the legal authority to do this?
    7 Aug 2011, 02:57 PM Reply Like
  • Whoever has money has legal authority
    7 Aug 2011, 05:39 PM Reply Like
  • you mean, whoever has the ability to print money has "authority".
    7 Aug 2011, 10:38 PM Reply Like
  • Really worked out well for the U.S., didn't it?
    Can't see the Germans (the people not the government) standing for this.
    7 Aug 2011, 03:07 PM Reply Like
  • Germans, don't have much choice, like it or not.


    Worth the watch as to why.

    7 Aug 2011, 03:30 PM Reply Like
  • Well, the Germans have to two choices, both bailouts. They can assist in aiding Italy or they can bailout Germany banks.


    In either case the losses are socialized.
    7 Aug 2011, 04:18 PM Reply Like
  • Like your earlier, above comment?


    So how does socialized loses prevent a recession?


    Moral hazard insures we will be facing it once again, until somebody faces some consequences, other than those not responsible.


    Jailtime, Asset forfeiture, and nationalization, along with liquidation once and for all, are the only thing that can stop it from comming back.


    You are contradicting youself.
    7 Aug 2011, 04:26 PM Reply Like
  • The FT reports today that Merkel has a revolt by her own backers in the Bundestag over the debt deal she signed onto.
    Things may not turn out so well after all.
    10 Aug 2011, 09:10 AM Reply Like
  • Well its been about 4 years of the slow and steady unraveling of the worlds financial systems, who cares what the ECB does tomorrow, how will it be any different then last April?


    All the kings horse and all the kings men and all that jazz.


    Lets just watch the world continue to burn, should be an interesting decade.
    7 Aug 2011, 03:29 PM Reply Like
  • and.... they will indeed....



    more details to follow, no black Monday after all
    7 Aug 2011, 04:35 PM Reply Like
  • The sad thing about all the public-sector financing follies on both sides of the ocean is that, had the right policies been implemented with added capital, we'd have more vibrant economies and better public-sector balance sheets at the same time. Now, we've devolved into two camps, both of whom are wrong and both of whose policies will cause lasting painful damage to world economies.


    On one side, we have the Big Government worshippers, who only understand and believe in endless expansionary Government, whether funded with debt, taxes or both. This cripples private-sector growth under added costs, regulations, mandates and a general lack of accessible capital, so growth slows to a crawl, or worse.


    On the other side, we have the Austerity worshippers, who think that sack-cloth-like flagellations and induced pain is the road to health and "purity." These policies, too, will lead to violent deflationary worldwide economic contraction that will neither reduce deficits or allow available capital for economic growth.


    The correct policy should have been (should be) to increase the money supplies, as has occurred, but to have provided incentives --through tax credits, cuts, other incentives, etc.-- for private-sector businesses to invest, grow, hire, tackle big challenges and make as much money as possible. This was the exit route to prosperity that was never embraced by the Government lovers and is unappreciated by the "take-your-medicine" crowd.


    Consequently, it appears that in the U.S. and Europe, alike, we'll replace (if not immediately, soon) the Big Government's failed policies with contractionary policies intended, almost by design, to induce pain, as if some "colonic" for the economy, uncoupled with other nutrients, will lead to immediate robust health. Instead, it will lead to a different kind of sickly economy and a lot of dead bodies along the way.
    7 Aug 2011, 04:43 PM Reply Like
  • Luckily oil came down a little bit such that I finally could afford a can of WD40 which was all that I needed to get my own printing press in my (de)basement up and running again.


    My debt/income was hitting 120% and my creditors where getting worried. I already had the FED's ok and now that the ECB has given me an implicit OK as well, I am happy to inject massive liquidity in my own situation.
    7 Aug 2011, 05:07 PM Reply Like
  • ECB statement:



    7 August 2011 - Statement by the President of the ECB


    1. The Governing Council of the European Central Bank (ECB) welcomes the announcements made by the governments of Italy and Spain concerning new measures and reforms in the areas of fiscal and structural policies. The Governing Council considers a decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits.


    2. The Governing Council underlines the importance of the commitment of all Heads of State or Government to adhere strictly to the agreed fiscal targets, as reaffirmed at the euro area summit of 21 July 2011. A key element is also the enhancement of the growth potential of the economy.


    3. The Governing Council considers essential the prompt implementation of all the decisions taken at the euro area summit. In this perspective, the Governing Council welcomes the joint commitment expressed by Germany and France today.


    4. The Governing Council attaches decisive importance to the declaration of the Heads of State or Government of the euro area in the inflexible determination to fully honour their own individual sovereign signature as a key element in ensuring financial stability in the euro area as a whole.


    5. It equally considers fundamental that governments stand ready to activate the European Financial Stability Facility (EFSF) in the secondary market, on the basis of an ECB analysis recognising the existence of exceptional financial market circumstances and risks to financial stability, once the EFSF is operational.


    6. It is on the basis of the above assessments that the ECB will actively implement its Securities Markets Programme. This programme has been designed to help restoring a better transmission of our monetary policy decisions – taking account of dysfunctional market segments – and therefore to ensure price stability in the euro area.
    7 Aug 2011, 05:09 PM Reply Like
  • ECB will actively implement its Securities Markets Programme. This programme has been designed to help restoring a better transmission of our monetary policy decisions – taking account of dysfunctional market segments – and therefore to ensure price stability in the euro area.


    How clever:


    ECB mandate: price stability
    Problem: dysfunctional market segments
    Solution: ECB will actively implement its Securities Markets Programme


    The logic fails in the problem definition. I would argue that the markets are not dysfunctional at all.. They finally perform their function, it's just that TPTB do not like the direction in which it is moving..


    If intervention is deep enough, which I doubt, bond markets will move to next weakest target...
    7 Aug 2011, 05:13 PM Reply Like
  • ECB implying "massive" buying may only signal their desperation to stifle any collapse. Anyone that's followed the ECB will understand verbiage doesn't necessarily carry real weight. Its what they do that matters, not what they say. This could be delayed for months as the Italian government tries to find their focus on pertinent austerity measures. They move slowly in Italy. It may not happen till after the next election. Politics first has the way of life in Italy. Doing otherwise would dishonor the Nero tradition.
    7 Aug 2011, 07:39 PM Reply Like
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