Economist Shayne Heffernan looks at the European Master Plan
The European Central Bank agreed to launch a new and potentially unlimited bond-buying program despite the fact that they are operating with very limited reserves, what does this mean? It means the ECB will begin the biggest Money printing exercise in History.
"No ex-ante quantitative limits are set on the size of outright monetary transactions," said Draghi as he readies the printing press.
The more conservative Bundesbank chief Jens Weidmann rightfully had expressed concern that intervening in the bond market would break the ECB taboo of financing euro zone member states. Other ECB policymakers see a greater urgency to stop a collapse in Spain and Italy and prevent the euro zone crisis from deepening.
And is the Money printing was not enough, Draghi tied the whole deal to the IMF Austerity plan that has helped to exacerbate the EuroCrisis, Draghi said the ECB would only help countries that signed up to and implemented strict policy conditions, with the euro zone's rescue fund also buying their bonds, and preferably with the IMF involved in designing and monitoring the conditions.
But not even Draghi is a believer, he added a clause that preempts further defaults by European States.
Not bad enough yet, don't worry it gets worse, Draghi said all bond purchases would be "sterilized" by taking in an equivalent amount in deposits from banks to avoid any risk of inflation, from that statement we can conclude Europe's Banks have unlimited funds to match the unlimited Bond buying.
Asked about ECB bond buying and a conflict of interest between Spain and Germany, Rajoy told Germany's Frankfurter Allgemeine Zeitung: "It is good to have principles in life. But sometimes it is also good to be flexible."
And his statement sums it up, this is a trick to disguise the rampant and unlimited printing of Euro, it does not address growth in the region and it back-ends it to the cash strapped banks of Europe, in short it is a new Crisis in the making.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service