This morning, the European Central Bank announced it would begin quantitative easing (QE) in March by purchasing 60 billion euros or about $70 billion of "bonds" each month until Fall of next year, if not longer. This was more than expected, and almost as much as the $85 billion the Fed was buying before it ended QE last Fall. Dow futures immediately jumped upwards from about 45 point to 125 points, before dropping back as questions arose, such as what kind of bonds and how much of the 60 billion is "new money" in addition to its present bond-buying program. As hoped, the euro depreciated and the dollar appreciated, which is good for European businesses and bad for American businesses.
The ECB is following the well-worn path of the Federal Reserve, the Bank of Japan, and the Bank of England, simply because Germany has been dragging their well-healed feet. The common denominator is that each nation needs budget reform but, since their democratically elected governments are impotent, their central banks are forced to stimulate the economy in any way they can.
Right now, the risky 10-year Spanish government bonds are only paying 1.4% compared to risk-free U.S. Treasuries paying 1.9%. That does not make sense. And, that which doesn't make sense will not last.
In addition, don't forget the election in Greece this weekend. It is expected that the socialist party will win and will put an end to austerity, which could preclude any additional assistance from the European Union, causing Greece to exit the EU. There is a great deal of anxiety as to whether the EU can survive, but I am not one of the worriers. It will be bumpy for a short while, but that is all.
Lastly, all of the world's most beautiful brains are now assembled in Davos, Switzerland -- setting a very high standard for "group-think" . . . at least, among the 1%. Pay attention!
The ECB is following the well-worn path of the Federal Reserve, the Bank of Japan, and the Bank of England, simply because Germany has been dragging their well-healed feet. The common denominator is that each nation needs budget reform but, since their democratically elected governments are impotent, their central banks are forced to stimulate the economy in any way they can.
Right now, the risky 10-year Spanish government bonds are only paying 1.4% compared to risk-free U.S. Treasuries paying 1.9%. That does not make sense. And, that which doesn't make sense will not last.
In addition, don't forget the election in Greece this weekend. It is expected that the socialist party will win and will put an end to austerity, which could preclude any additional assistance from the European Union, causing Greece to exit the EU. There is a great deal of anxiety as to whether the EU can survive, but I am not one of the worriers. It will be bumpy for a short while, but that is all.
Lastly, all of the world's most beautiful brains are now assembled in Davos, Switzerland -- setting a very high standard for "group-think" . . . at least, among the 1%. Pay attention!
