Wednesday, April 28, 2010

Pritchard: ECB May Have to Turn to 'Nuclear Option'

Ambrose Evans-Pritchard is reporting that "the ECB may no longer have any choice [other than to print money and buy up the bonds of the PIIGS ]. There is a growing view that nothing short of a monetary blitz — or 'shock and awe' on the bonds markets — can halt the spiral under way."

For me, it is hard to see this happening. Germany, a key player, would most assuredly be against it, for the obvious inflationary repercussions. Any such move would send the euro into a nosedive that it quite possibly would never recover from. There are likely players in the EU that would like to see the nuke money printing button pushed, but Germany most likely has a strong enough influence to stop this.

Our view of Germany's posture right now is that they will continue to nod in favor of a Greek direct bailout--as long as the bail out continues to be "a few weeks down the road," rather than today.


1 comment:

  1. At first, I thought the following was from THE ONION. But no, it's real.

    Dean Baker has a blog called "Beat the Press" dedicated to the idea that the MSM does not understand economics because it often expresses doubts about Keynesian nonsense and deficits. Baker is all for the "nuclear option":

    "The European Central Bank (ECB) could make the money available to these countries to sustain their economies through this downturn. (They would print it.) The ECB has opted not to go this route because of peculiar superstititions about inflation. It would be worth pointing out to readers that this crisis is largely the result of superstitions by Europe's central bankers, not fundamental economic problems."

    Superstitions" about inflation? Such as the suggestion that it's bad, is a form of theft and fraud and causes the boom/bust cycle?