The right approach to understanding what’s happening in the euro begins with the observation that a paper currency like the euro is a closed loop system.
It’s not a fiscal cliff we are going over, it’s a money cliff.
The ECB cannot do the governments’ jobs.
The age of truly easy money may be just getting started.
The biggest winners thus far that may have resulted from the newly communicated intentions from central banks are not the euro or the broad stock markets, but rather gold and gold-related investments.
The ECB is now on a slippery slope from which it may have difficulty extricating itself, especially if the ECB balance sheet swells substantially due to OMT.
Despite the overwhelming evidence that money printing doesn’t work, the Eurozone overlords will to do it anyway.
In the past, the German Constitutional Court has not shown itself to be a political pushover.
Will the ECB stop buying as conditions have not been met or will it justify further purchases since the market demands higher premia, because of increased – but intolerable – convertibility risk?
Even if the ECB joins forces with the EFSF/ESM in buying government bonds its mandate, with price stability as the primary objective, will ultimately put a lid on the size of its interventions.
Draghi and Bernanke know that markets need to be talked up, and they continue to do so unapologetically.
I wouldn’t trust anything now until they have a program in place with the ECB.