Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

The European Central Bank is about to do something very stupid

The European Central Bank is about to do something very stupid

Back in 2012, European Central Bank President Mario Draghi declared that "the ECB is ready to do whatever it takes to preserve the euro." He has apparently already forgotten that promise.

The ECB didn't even begin to make good on that vow until March 2015, when it kicked off a quantitative easing (QE) program worth $60 billion a month. In plain English, that means the ECB started creating a bunch of euros out of thin air and using them to buy up various financial assets. In March 2016, it kicked things up a notch, to $80 billion in purchases a month.

The results have been middling, with Greece, Italy, and Spain stuck in varying degrees of depression. Greece has an astonishing 23 percent unemployment rate and a debt load that's grown in four years from 159 percent of its economy to 183 percent. Italy's unemployment rate is stuck at 12 percent, and its debt increased from 123 percent of its economy to 133 percent. Spain's unemployment rate is still a little over 18 percent.

This is all a big problem. "Just as an individual will struggle to pay off a punishing credit card bill if her salary stays flat or falls, a country cannot reduce its debt pile without expanding its economy," The New York Times recently observed. Until those economies are repaired, the eurozone remains in danger of tearing itself apart.

Yet Draghi and Co. seem to be looking at this situation and thinking "mission accomplished."

Since at least October, there's been talk that the ECB might wind down QE. A decision is now expected in March. The Times reports that international financial markets are already getting jittery, and yields on Greek and Italian bonds in particular are rising as demand for them falls.

To continue reading please click link http://theweek.com/articles/679060/european-central-bank-about-something-stupid