Thank you, Mario

George Yacik - Contributor - Fed & Interest Rates

I don’t know if Mario Draghi’s “historic” quantitative easing program announced Thursday will do anything to help the flat-on-its-back euro zone economy.

I’m not a trained economist, so I’m not sure exactly how buying massive quantities of already overpriced bonds is supposed to raise inflation and boost the economy, although it has been very successful in devaluing the grossly overpriced euro. But how is a cheaper currency going to help countries in the euro zone when they do most of their trading with each other?

What I am sure of is that the program will make U.S. Treasury and corporate debt securities a lot more attractive to investors, further lowering long-term interest rates here, and giving our economy, now the envy of the rest of the world, another boost.

It’s about time Europe did something for us. Continue reading "Thank you, Mario"

Can The ECB Learn From Its Own Mistakes?

Lior Alkalay - Contributor - Forex

This week, investors believe that they may have finally gotten the green light for ECB easing. With Eurozone inflation officially turning to deflation, investors believe that Mario Draghi and the ECB have been backed up into a corner with no escape, thus they will be forced to initiate a Quantitative Easing program that will balloon its balance sheet. In fact, the buildup towards this move started a few months back with Mario Draghi sending ever clearer signals of the ECB’s intent toward a full blown QE that will probably involve purchases of government bonds in a Federal Reserve-like manner.

If you will recall, Mario Draghi had also outlined the ECB’s intent to balloon its balance sheet back to its 2012 record of roughly €3.1 trillion. With the ECB’s current balance sheet at €2.216 trillion that means an estimated €884 billion in additional liquidity coming to the markets. As would be expected, the Euro has been in utter meltdown over the past few months, sliding to a low not seen in more than 9 years; of course, all this comes on the back of the impending liquidity injection and especially now as deflationary fears were confirmed with the Eurozone’s CPI at -0.2%. So far, this is par for the course, yet for me, this dredges up old memories of 2012.

The Big Mistake

Just by stating the obvious, that the ECB has to increase its balance sheet by a jaw-dropping €884 billion in order to increase its balance to the size it was a little more than two years ago, shows just how big a mistake the ECB has made in its policy since then. Across the “pond,” the Federal Reserve’s balance sheet has been growing since 2012 and its size has only now stabilized, as the US enjoys above-trend growth, a hair’s breadth of full employment and core inflation at a decent 1.7%. In the meanwhile, as the ECB was aggressively shrinking its own balance sheet, Eurozone growth came to a virtual standstill, unemployment remained stubbornly high, exports slowed, manufacturing weakened and, of course, the Eurozone moved into deflation. Continue reading "Can The ECB Learn From Its Own Mistakes?"

ECB cuts benchmark interest rate to 0.5 percent

European Central Bank President Mario Draghi isn't ruling out more central bank action to help the lagging eurozone economy even after the bank cut its key benchmark to a historic low.

Draghi said Thursday that the central bank for the 17 countries that use the euro would monitor all indicators and officials "stand ready to act if needed."

He did not specify what action might be taken but the remark appeared to leave open the possibility the ECB could cut rates even further.

The bank lowered its benchmark refinancing rate Thursday by a quarter-point to 0.50 percent at a meeting in Bratislava, Slovakia.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below. Continue reading "ECB cuts benchmark interest rate to 0.5 percent"

Draghi announces no immediate action

European Central Bank head Mario Draghi says the bank is ready to intervene in the bond market to drive down countries' high borrowing rates, and urged European leaders to get their bailout fund ready to intervene as well.

Draghi said Thursday the bank could buy bonds if the borrowing rates stop the ECB in its efforts to spread its low interest rates throughout the 17 countries that use the currency. Continue reading "Draghi announces no immediate action"

Poll: Is the ECB going to deliver and save the Euro?

Based on the way the market is closing today, I would say that you're not going to see QE3 or any major announcements coming from Europe tomorrow. Just my take.

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Is the ECB going to deliver and save the Euro?

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