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Goldman Calls For Qe In Europe: "how Far Can The Ecb Go In Using Its Balance Sheet. The Short Answer Is: A Lot Further"

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http://www.zerohedge.com/news/goldman-calls-qe-europe-how-far-can-ecb-go-using-its-balance-sheet-short-answer-lot-further

From Goldman Sachs:

Potential and limits of the ECB’s balance sheet

Like other central banks around the world, the ECB has used its balance sheet in various ways over the past couple of years to stabilise the financial system and prevent a systemic event involving either a credit institution and/or the government of an EMU member country. This has led many to ask how far the ECB can go in using its balance sheet.

The short answer is: in principle a lot further. But the ECB has to take into account two constraints: its price stability mandate and its financial health. Neither of these two constraints is currently binding. Moreover, the ECB’s financial health is only a constraint to the extent that it could endanger the ECB’s credibility. While a central bank’s credibility is one of its most valuable assets, the ECB may be forced at some point to risk some of its credibility in order to prevent a serious financial crisis. Moreover, with respect to a further expansion of the SMP, the ECB is already significantly exposed to peripheral sovereign debt through its refinancing operations.

Monetary policy in crisis times

Central banks around the world have resorted to a broad range of ‘non-conventional’ measures in order to support growth and stabilise the financial system. Providing sufficient liquidity to the banking sector, for example, was crucial in the early stages of the crisis and central banks have used their balance sheets aggressively so that

funding problems for banks would not turn into wider problems for the whole financial system.

.....

A central bank’s balance sheet grows over time. This is because a growing economy needs a bigger stock of base money, which in turn implies a bigger central bank balance sheet. It is therefore no surprise that the ECB’s balance sheet has increased significantly since the inception of the Euro (Chart 1). The expansion of the

ECB’s balance sheet, however, hasn’t been steady. While it grew more or less in synch with the overall economy from 2000 until 2008, the increase since the onset of the crisis has been much faster (Chart 2).

Looks like the Giant Squid wants more printy printy.

I wonder what bets they've taken to benefit....

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10 out of 10 point. I've also been arguing the ECB could expand its balance sheet for a long, long time before it ran into serious inflationary headwinds.

It makes me think about going and buying a ton of Greek debt, knowing at the end of the day the ECB can hoover it up.

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10 out of 10 point. I've also been arguing the ECB could expand its balance sheet for a long, long time before it ran into serious inflationary headwinds.

It makes me think about going and buying a ton of Greek debt, knowing at the end of the day the ECB can hoover it up.

...are you serious....?... :rolleyes:

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GS sounds like the voice of the fed.

If Europe doesn't print then the Fed will have to, and business leaders are no doubt already putting the screws to their local senators..

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It makes me think about going and buying a ton of Greek debt, knowing at the end of the day the ECB can hoover it up.

Have to admit, its crossed my mind, if the ECB turn on the tap of liquidity, i know it faces pressures from the Germans, but maybe the Germans will be left with no choice? Or they leave, but if the Greek bonds are allowed to fail to an extent of collasping banks across the Euro, well, ummmmmmmmmm?

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  • 333 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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