Monday, January 19, 2015

ECB poised to pull QE trigger on deflation

The Swiss removed the Euro peg because the ECB will begin buying sovereign debt from its member states. While the majority of headlines will likely herald this move as an important step to saving the Euro and Eurozone, they're likely biased. Smart money, ignoring easy conclusions intended to placate the masses, will be unloading as much as the ECB will accept. As long as the ECB assumes the role as the buyer of last resort, it becomes the bagholder of the bond bubble.

Bottom line, seconds after someone blinks - defaults on their debt, the debt considered "safe" will be challenged as junk. Debt once considered reserve quality will be marked to market at significantly lower prices. A wave of insolvency will smash through the European banking system within a blink of an eye. This birth of a crisis and reason why laws enforcing the confiscation of deposits are already in place.

Headline: ECB poised to pull QE trigger on deflation

Frankfurt (AFP) - The stage is set this week for the European Central Bank to unleash its biggest weapon yet in the battle against deflation in the eurozone, analysts said.

Financial markets and ECB watchers are betting that central bank chief Mario Draghi will unveil a programme of sovereign bond purchases known as quantitative easing (QE) at the first policy meeting of this year on Thursday.



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