Whaat puzzles me in the non stop media comment re possible demise of the Euro is how the ECB could help improve the situation and the fact that the owners of the ECB are the 17 member states most of which are in financial difficulties. I am sure thee must be a simple answer that escapes me
European Central Bank ability to lend
- Thread starter dewdrop
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I'm with you on that one Dewdrop.
My head is addled trying to keep up with the whole thing.
I thought I heard on the radio this morning that because the Germans are refusing to let the European Central Bank issue more bonds to shore up the dodgy countries like Greece, Ireland etc. they (the ECB) are instead loaning large sums to the IMF so they (the IMF) can do the shoring up.
But then I might have imagined it!
My head is addled trying to keep up with the whole thing.
I thought I heard on the radio this morning that because the Germans are refusing to let the European Central Bank issue more bonds to shore up the dodgy countries like Greece, Ireland etc. they (the ECB) are instead loaning large sums to the IMF so they (the IMF) can do the shoring up.
But then I might have imagined it!
The ECB is an institution that is not, and should never be, directly controlled by governments. It is set up as an independent body that is governed by strict laws, and one of those laws is that debt monetization is not legal.
You are also making the mistake of believing comments that state tat the ECB can solve the problem by printing money. If printing money was all it took to solve debt problems and increase economic activity, then why are the poor countries on earth? Why is Zimbabwe not filthy rich? Why did Weimar Germany fall apart?
The answer is that inflating away debt makes things worse, not better.
You are also making the mistake of believing comments that state tat the ECB can solve the problem by printing money. If printing money was all it took to solve debt problems and increase economic activity, then why are the poor countries on earth? Why is Zimbabwe not filthy rich? Why did Weimar Germany fall apart?
The answer is that inflating away debt makes things worse, not better.
Because ignoring all the rights and wrongs of ECB intervention, they are the only entity with the firepower to put manners on the market and to stop the panic. They have a limitless balance sheet. You will see QE of some sort next year if politicians get their act together and manage to bring national budgets under greater European scrutiny.
Every day i hear this mention of the "firepower" and "limitless Balance Sheet". What is the security behind all this. Is it like the Guarantee of the Irish Government which if called on for payment could not do so as they would have to borrow the money and no one would lend it.
It's a central bank. It can 'create' money like the FED or BOE. (I am not suggesting that this is a wise thing to do)