It starts to look that the europe crisis is "starting" to cool down, the ECB has lent today 500 Billion euros to banks for 3 years for 1%, that's a fload of cash the banks will have to do somthing with it for the next 3 years. Buying 6 mo. 12 mo, 2 year bonds is an option for healthier banks, or they will lend to someone for 1.5% & that person will buy some bonds. Mabye time to buy some EWP or EWI...
I am honestly surprised to see that some people believe that you can get over a crisis by using monetary easing and Ponzi schemes. In the best case scenario, Sarkozy's plan would be to have ECB pushing so much liquidity in the market so that national banks can keep buying sovereign debt idefinitely. Until this process becomes 'ordinary' and then...? More money printing to provide collateral, or insolvent bank debt as collateral? Is this the beginning of the end of the crisis? Am I and all those who think that there is no way out else than a 'global default' missing something?
We all know what this is about -- TIME! Anyone faced with a crisis that is likely to sink the ship figures out a way to prevent the ship from sinking in the next 20 minutes so they have time to figure out their next steps and time for circumstances to bail them out. This is a very large kick of the can. The run on Europe's banks was becoming very close to unsustainable. It was at the point where on any given day a tipping point could be reached forcing them to try to counter punch their way out of a breaking situation that was collapsing in minutes not days. They have done something here of importance. But it is a a step and I suspect that the next steps will be politically unpalatable. To wean the public off the teat they suck on every day is a tough bit of work.
Exectly, dosent solve the problem, but gives them a lot of time. Is also reducing the risk of a "self fulfiling" crisis for some nations.
This is not a liquidity crisis. It is a solvency crisis. If the money lent isn't repaid, it is just can-kicking. Something the politicians are good at. They are hoping they can grow their way out of this. But it's simply not going to happen.
You are probably correct. It is that rare situation in the course of history where the civilizations that have led are now insolvent and unable to continue to lead. That said, time can be an important -- even the most important -- factor in how the shift occurs. Given some smart political judgements -- unlikely at best -- the legal and financial framework can be put in place to allow for somewhat less trauma. Sovereigns will go down, fiat currencies will revert to their intrinsic value (zero) and the unimaginable will become reality. But on a scale of 1 to 10 having it be an 8.5 is better than a 10. Using the time the bank recap has provided wisely is not likely but if they do it right they can mitigate the coming pain. If you want to get a feel for what I think is coming see the movie TAKE SHELTER. It is probably the most important financial flick in a generation or two.
It actually IS a liquidity crisis for some countries, while it's, indeed, a solvency crisis for others.
How is time going to help, if production and consumption are declining? (Talking about Europe, mostly)