Germany´s reluctance…

Shortly before the “curtain opened”:

Although some eurozone countries are critical of ECB concessions to Berlin, in Germany itself there is still strong opposition to the very idea of QE. Speaking in front of Mr Draghi and hundreds of other guests at a finance industry reception on Monday, Ms Merkel warned against using monetary policy to let governments in vulnerable economies off the hook over reforms.

She said: “One must prevent the dealings of the ECB from easing the pressure for improvements in competitiveness.

In fact she wants to “keep them thirsty”:


And when the “curtain finally opened”:

Twenty percent of the additional purchases will be subject to risk-sharing arrangements, designed to limit the amount of risk the ECB takes on to its balance books. The majority of risk will remain with euro zone national central banks.


4 thoughts on “Germany´s reluctance…

  1. Ooh, you are too tough. The limited risk sharing is a detail. These central banks are all in the hook for each other. The ECB-watcher pros firmly believe the ECB a is in total control of the QE. The devil was going to be in the detail but these are clever and robust. Once the Euro technocrats decide on something it t will be done well. The big number of €1.1tn or more is really impressive and the relentless power of €60bn a month will have a huge impact on expectations over time, both financial and on Aggregate Demand. The defintion of “price stability” is so vague as to give the right man, Draghi, huge discretion. Of course, this would be dangerous in the hands of the wrong man, say Trichet, but very good for the next several years. A proper level target would be better, and a NGDP LT best. But this is good, and has been good enough to get the US back to near full employment, although nowhere near full participation as you rightly show.

  2. I’m not a day trader … but, the currency keeps falling, so we can keep smiling.

    It also puts the Fed in a hole (a Jackson Hole?), as the US$ rising is de facto monetary tightening, I think. Raising rates could push it up further. Isn’t it up enough for the Fed, already?

    As our Ben Cole might say, “I love a currency war, there are only winners”.

    • Yeah, Ben would say that! I remain skeptical. They´ve been going down for so long that anything that breaks the monotony brings out an uff! Lars said he” couldn´t even sleep with excitement”! If the program goes through as planned, by Sept. 16 the ECB balance sheet will be only slightly larger than it was in mid 12 when Draghi said “do whatever it takes” (after which point the ECB balance contracted by 1/3!)

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