Do you know what you can buy with 750 Billion Euros? You can buy an immediate 4.5% rise on the ftse and an immediate 4% rise on the Dow. You can get 29 of 30 stock on the Dow to go up, MarketWatch breathlessly informs us.
Hurrah all is saved!
Or is it.
Take a look at the Euro. Friday it hit its low of 1.26 to the dollar. Its year high was 1.52. After we said that our plan for saving the economy was that we were going to borrow 750 Billion euros the euro went up to 1.31 for a few hours. The it began to drop all the way back to 1.28 where it is now. 2 cents from its low point.
Now the ECB when asked where all this new borrowing was going to come from, mumbled that this would not be inflationary new money, not printing or borrowing, because they would ‘sterilise it’. Ooh. By which they mean they will withdraw the same amount form somewhere else. Where somewhere is, they didn’t say. Because they don’t know.
In fact they will only withdraw it IF all the debtor nations stick to their ‘ambitious and drastic austerity measures’. Which is not likely.
Basically we indebted ourselves vastly in order to get a boost in stocks and create liquidity. You have to wonder what happened to all the previous liquidity we have injected. Liquidity my arse! It’s gone because it never was liquidity. It was indebtedness and that money is gone.
So now we have the stock market cheering but the currency markets and bond markets are waiting. Waiting to see if governments force the austerity measures upon their people and force them under those measures with an iron fist. If not then the euro is going to sink further.
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