David McWilliams has posted a new article, ‘Memo to ECB: print money ‘
In other words, will the ECB be left holding the can, having lent all this money to the peripheral countries in order to save rich banks in Germany and France, in the same way as insurance giant AIG was destroyed by the sub-prime market?
If you remember back to the Lehman crisis, it was the collapse of AIG that really spooked the world’s financial markets. It had recklessly insured most of the toxic waste of Lehman’s and other banks’ balance sheets – all the sub-prime mortgages and worse.
When they all defaulted, the damage went straight on to AIG’s balance sheet as the insurer of last resort.
The ECB in 2011 is beginning to look Like AIG in 2008. It is certainly also beginning to sound not like an institution that is in control, but an institution that is beginning to panic.
For example, speaking on Thursday, executive board member of the ECB, Lorenzo Bini Smaghi (who, despite sounding like a character from Lord of the Rings is actually an Italian economist) opined that high-debt countries must stick to the terms of their bailouts. If they don’t, they risk having their banks cut off from ECB capital measures. Surely this is not how central banks work?
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A good article well worth the read .
- Ecb Increasingly Isolated in Resisting Greek Default and Ecb Insolvency (birdflu666.wordpress.com)
- ECB Bini Smaghi: ‘Soft’ Greek Restructuring Would Be Disaster (forexlive.com)
- Euro Peering Over the Abyss, What will the E.U. Do? (thepressnet.com)
- ECB Bini Smaghi: Mustn’t Overreact To Current Inflation Rise (forexlive.com)
- ECB official: New Greek aid under study (seattletimes.nwsource.com)
- ‘We’re being played for fools’ (thepressnet.com)
- Why Aren’t EU Protests Aimed at Central Banks? (thepressnet.com)
- Der Spiegel reports on Titanic battle between ECB and German government over the future of the euro (birdflu666.wordpress.com)