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Ecb To Protect Europe By Buying Bonds

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http://www.telegraph.co.uk/finance/financialcrisis/8680281/ECB-to-protect-Europe-by-buying-bonds.html

The European Central Bank is expected to signal it is stepping into the eurozone debt crisis on Thursday by reopening its purchases of government debt, amid fears the turmoil will claim the economy of a nation that is "too big to bail".

Officials on Wednesday night said the ECB's monthly meeting was expected to see a reversal on the buying of sovereign bonds after 18 weeks of staying out of the markets, because of an EU institutional vacuum that threatens to drag down Italy and Spain, the region's third and fourth-largest economies.

With EU officials scrabbling to fine-tune changes to allow the eurozone's €440bn (£384bn) bail-out fund to intervene in the markets, central bankers are expected to reluctantly accept the precedent of allowing ECB bond buy-backs in May 2010.

Clearly this will finally fix the problem.

Wow a whole 18 weeks they've managed not to have to buy.

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http://www.telegraph.co.uk/finance/financialcrisis/8680281/ECB-to-protect-Europe-by-buying-bonds.html

Clearly this will finally fix the problem.

Wow a whole 18 weeks they've managed not to have to buy.

Where does the ECB get their money from ? Do the banks give them it after they've sold Bonds ? :lol::lol::lol::lol:

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Where does the ECB get their money from ? Do the banks give them it after they've sold Bonds ? :lol::lol::lol::lol:

Well yes, I think that is how the European Stability fund or whatever it was called, is supposed to work. You buy these bonds, and the ECB uses that money to buy bonds of bankrupt countries. It wont take long for all that money to be used up.

Once used up, they then have to print money to continue the game, which leads to hyper-inflation.

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as a banker, its very easy to imagine all the money you could ever need.

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Well yes, I think that is how the European Stability fund or whatever it was called, is supposed to work. You buy these bonds, and the ECB uses that money to buy bonds of bankrupt countries. It wont take long for all that money to be used up.

Once used up, they then have to print money to continue the game, which leads to hyper-inflation.

EFSF - European Financial Stability Fund.

Issued 440 billion Euros of bonds. Apparently the bonds are AAA rated because they are guaranteed by AAA rated sovereign's like Germany and Holland etc.

The mandate is for the fund to buy bonds in the open market, so they buy distressed Greek debt. Then they lend money to Greece to allow them to buy back their bonds for far less than they issued them for, and Greece has an obligation at a much lower rate of interest, theoretically meaning that the reduced debt repayments means that they can repay what they owe.

Mind you, the moral hazard all over this means that it is going to end in tears.

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EFSF - European Financial Stability Fund.

Issued 440 billion Euros of bonds. Apparently the bonds are AAA rated because they are guaranteed by AAA rated sovereign's like Germany and Holland etc.

The mandate is for the fund to buy bonds in the open market, so they buy distressed Greek debt. Then they lend money to Greece to allow them to buy back their bonds for far less than they issued them for, and Greece has an obligation at a much lower rate of interest, theoretically meaning that the reduced debt repayments means that they can repay what they owe.

Mind you, the moral hazard all over this means that it is going to end in tears.

That sounds a complete headf***. I'm reading that as the EFSF buy the bonds, they then lend the Greeks money to buy said bonds, so in effect the EFSF is buying these bonds twice, once from the open market and then from itself via the Greek govt? So they buy say 1bn Euro of bonds on the open market, and then lend the Greeks another 1bn Euro to buy them back? I'm sure in wrong here but that would appear to mean 1bn Euro worth of bonds has suddenly cost 2bn Euro?

I'm sure with clever accounting it only a 1bn Euro liability and I'm just getting this wrong.

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It's going to be interesting to see what these bonds trade at relative to greek debt.

Cos that price difference is the markets estimation of how much the eurozone guarantee is worth ?

We know from history what consequences a country faces if it defaults on its debt.

What consequences does the EFSF face ?

Hmmm...

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Seems as though it has started. From twitter

A clear change and it looks like that with a sense of theatre Mr.Trichet has just announced the ECB is now back buying peripheral govt bonds

@notayesmansecon

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@faisalislam

Any ideas?

They are going to print arent they?

The only really non-standard one is a jubilee, not much chance of that. Here we go, its a print run. (I bet that I am wrong, tis the duty of HPCer to be wrong about anything and everything).

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They are going to print arent they?

The only really non-standard one is a jubilee, not much chance of that. Here we go, its a print run. (I bet that I am wrong, tis the duty of HPCer to be wrong about anything and everything).

Well about time I say !

Here is my cunnning plan. The ECB buys up to 50% of the Greek and Portuguese sovereign debt (and some Irish and Spanish), re-schedules in a series of complex deals to gain time and ensure that structural reforms are implemented, until most of the outstanding debt is simply written off.

Obviously, this will become public at which point taxpayers of the solvent Eurozone members receive 'consumption' vouchers whose total value will equate the amount of debt written off.

These vouchers will not be redeemable for cash and will have a short validity so as to provide an instant economic 'boom'. The trick will be to ensure that the 'salvaged' countries make the most of this mass spending (Greek Retsina all round !!)

What could possibly go wrong?

German taxpayers would love it .....

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Congratulations. You're right. They are not.

It's good to know I am not right.

Mind you, if they buy bonds that subsequently default, leaving them 'insolvent', the difference is money that they have created which is now unbacked by any debt. An accidental print if you like. At least that is how I think it works.

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This is cut from the Telegraph live blog on the Eurozone Crisis.

The ECB is to provide unlimited cash to banks for six months in an effort to calm markets.

What on earth is that all about? Are they going to dole out cash with rubbish collateral? That would mean banker fraud on an epic scale. Are the German's going to put up with this? Will it set a precedent for other nations including the UK?

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It's good to know I am not right.

Mind you, if they buy bonds that subsequently default, leaving them 'insolvent', the difference is money that they have created which is now unbacked by any debt. An accidental print if you like. At least that is how I think it works.

Accidental perhaps but still designed.

To make a housing analogy to my cunning plan (see previous post), it's like the Govt bailing out insolvent BTL'ers whilst at the same time giving rental vouchers to tenants.

Nobody loses out and the 'system' is kept in place. Brilliant or what?

Don't worry about mass printing, it's the only option left and nobody seriously expects a return of hyperinflation (not for a while anyway ....)

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It looks as though things are not going well for the European Central Bank and its bond buying.

The ECB inspired rally looks as though it may have had a very short half life....
Can anybody explain to me why the European Central Bank felt that reinstating a policy which had previously failed would do some good?

@notayesmansecon

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This is cut from the Telegraph live blog on the Eurozone Crisis.

The ECB is to provide unlimited cash to banks for six months in an effort to calm markets.

What on earth is that all about? Are they going to dole out cash with rubbish collateral? That would mean banker fraud on an epic scale. Are the German's going to put up with this? Will it set a precedent for other nations including the UK?

they dont need collateral...they buy duff "assets" outright...all the bankers has to do is buy a duff asset...the duffer the better.

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The ECB is to provide unlimited cash to banks for six months in an effort to calm markets.

What on earth is that all about?

It is a continuation of the 'special liquidity' measures that the ECB was trying to end.

Are they going to dole out cash with rubbish collateral?

Yes

That would mean banker fraud on an epic scale.

Isn't that obvious?

Are the German's going to put up with this?

Of course. How do you say bend over in German?

Will it set a precedent for other nations including the UK?

They're already in it up to their necks, the ECB is just catching up.

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Isnip

Of course. How do you say bend over in German?

snip

I thought Ben Dover, was a UK porn producer in the 90's

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I thought Ben Dover, was a UK porn producer in the 90's

I wouldn't know anything about this of course...

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This is cut from the Telegraph live blog on the Eurozone Crisis.

The ECB is to provide unlimited cash to banks for six months in an effort to calm markets.

What on earth is that all about? Are they going to dole out cash with rubbish collateral? That would mean banker fraud on an epic scale. Are the German's going to put up with this? Will it set a precedent for other nations including the UK?

Can they please provide unlimited cash for the proles, giving it to the bankers solves nothing. Not that giving free cash to the proles will solve anything but we might as well even the playing field and get everyone competing for worthless fiat.

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I thought Ben Dover, was a UK porn producer in the 90's

He's still going but according to the wiki entry he's trying to break into straight films.....

He has had sexual intercourse with 1,792 people

http://en.wikipedia.org/wiki/Ben_Dover

Although the way things are going the ECB has already got footballers as collateral perhaps they'll expand into accepting porn?

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  • 343 Brexit, House prices and Summer 2020

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