Posted Feb 2, 2015 by Martin Armstrong
The ECB’s monthly spending will include its existing programs to buy covered bonds and asset-backed securities. However, of the added purchases, Draghi said 12% will be debt issued by European Union institutions and agencies, and the rest will be government bonds – 88%. Given the problem that the banks use government bonds for reserves and these are NOT marked-to-market, you can read between the lines and see this is buying in bad debt that is not worth the pretend face value to begin with. This is a continued bailout for the banks – NOT a stimulus plan for the economy. This will have ZERO impact upon saving European economy for the money will NEVER create a single job. This is a drop in the bucket for this group of assets amounts to about €2.7 trillion euros. This is reserves and they will swap the bad debts and switch to German bunds. They will be looking to change the way sovereign debt is held without mark-to-market accounting.
You do not have Daniele Nouy, the euro area’s top bank supervisor, coming out saying the loophole needs to be changed without Draghi buying in all the crap first. So sorry, this is a coordinated attack that will by no means create inflation, it is trying to save the banking system that is going down in flames. If Greece defaults, holy hell will be unleashed as a contagion in sovereign debt.