4 ms·
> with newly created money. No. This is exactly the problem: The echoes of the German hyperinflation of the 1930s are still being heard, so Merkel and crowd
by jpdoctor 14y ago
> with newly created money.
No. This is exactly the problem: The echoes of the German hyperinflation of the 1930s are still being heard, so Merkel and crowd have repeatedly stood against printing.
As for the ECB purchases, those were "sterilized" as opposed to "quantitative easing", which is what the Fed does.
http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-sterilization-and-money-supply/ http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-steriliza...
- pavlov 14y agoThe linked article is about ECB buying government bonds. But the ECB also buys bonds from Eurozone commercial banks, and this is where new money is being created. It does end up on the central bank's balance sheet, but there's no event that would force the bank to ever write it down. Those hundreds of billions in loans can stay unpaid for hundreds of years if necessary.
- justincormack 14y agoAll the lending to commercial banks is secured lending, they have to provide collateral to the ECB. The less good quality stuff is lent by individual central banks, so governments underwrite it. There is no unsecured buying of bank debt (banks can use covered bonds as collateral but again that is secured). And the LTRO is only three years. So it is not like you suggest at all.
- pavlov 14y agoThanks and sorry, I was clearly misinformed. I must have taken some "stuff they say on the Internet" at face value.