Massive QE by the ECB is coming on Monday.

[roamer65]

Source: Reuters

Massive purchases of Italian and Spanish gov't bonds by the ECB is coming on Monday.

Read more: http://mobile.reuters.com/article/topNews/idUSTRE7762PE20110807

---

IMHO, this is going the be the issue of the day on Monday, not our S & P downgrade.

[xchrom]

1. Recommend

[elleng]

2. Hope so, and hope 'world' reads this positively for U.S.

[DJ13]

3. I thought Germany was saying they werent in favor of the ECB plan?

German Government Thinks Italy Too Big For EFSF To Save -Spiegel

Aug 5, 2011

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201108061248dowjonesdjonline000231&title=german-government-thinks-italy-too-big-for-efsf-to-save--spiegel

[bluestateguy]

4. Little too much jargon there

A little help with the translation please!

[roamer65]

6. QE = Quantitative Easing

ECB = European Central Bank.

[The Magistrate]

8. European Central Bank, Sir, Will Buy Spanish and Italian Treasury Bonds, In Great Quantities

This will support their price, and thwart in some measure the speculating vultures trying to profit by driving down the price.

[dipsydoodle]

10. I know this was QE2

[roamer65]

5. Gold market opens in 1 minute.

Let' see where that goes.

[roamer65]

9. Up $27 at the open to $1690

[Ghost Dog]

7. Here's the full ECB statement

1. The Governing Council of the European Central Bank (ECB) welcomes the announcements made by the governments of Italy and Spain concerning new measures and reforms in the areas of fiscal and structural policies. The Governing Council considers a decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits.

2. The Governing Council underlines the importance of the commitment of all Heads of State or Government to adhere strictly to the agreed fiscal targets, as reaffirmed at the euro area summit of 21 July 2011. A key element is also the enhancement of the growth potential of the economy.

3. The Governing Council considers essential the prompt implementation of all the decisions taken at the euro area summit. In this perspective, the Governing Council welcomes the joint commitment expressed by Germany and France today.

4. The Governing Council attaches decisive importance to the declaration of the Heads of State or Government of the euro area in the inflexible determination to fully honor their own individual sovereign signature as a key element in ensuring financial stability in the euro area as a whole.

5. It equally considers fundamental that governments stand ready to activate the European Financial Stability Facility (EFSF) in the secondary market, on the basis of an ECB analysis recognizing the existence of exceptional financial market circumstances and risks to financial stability, once the EFSF is operational.

6. It is on the basis of the above assessments that the ECB will actively implement its Securities Markets Program. This program has been designed to help restoring a better transmission of our monetary policy decisions taking account of dysfunctional market segments and therefore to ensure price stability in the euro area.

/... http://www.guardian.co.uk/business/blog/2011/aug/07/debt-crisis-markets-chaos-live-blog

[dipsydoodle]

11. Seems to be conditional on governments indemifying the ECB

that's from later tv news on the subject here in the UK. Considered likely to throw a spanner in the works.

[Safetykitten]

12. I bet Germany is loving this. not

[formercia]

16. They always wanted to be Top Dog in Europe

I think they're having a bit of 'Buyer's Remorse.'

[DallasNE]

13. Several Months Ago

When Greece was going through this same thing I posted that the EU central bank needed to use quantative easing to finance the debt service. If that was the right call for Greece it certainly is also the right call for Italy and Spain.

[Turbineguy]

14. This is good news

it buys time. In the end the economies have to grow. And hopefully nobody will take any more advice from American investment banks.

[Doctor_J]

15. I thought quantitatuve easing meant printing money

:shrug:

[Fool Count]

17. With what money do you think ECB will be buying those bonds?

Fresh from under the presses.

[drm604]

18. I think it does.

As I understand it (and I'm certainly no expert) that's what was done here in the two recent QEs by the Fed.

I don't know if that's how the ECB will do it or not, but it's how Wikipedia defines QE.

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

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money.

[roamer65]

20. QE is just a fancy name for what they are acutally doing...

It is actually DEBT MONETIZATION. That name just sounds too negative...lol.

Here's how wiki explains it.

Monetizing debt
In many countries the government has assigned exclusive power to issue or print its national currency to a central bank. For example, in the USA a "federal system, composed of a central, governmental agency—the Board of Governors—in Washington, D.C., and twelve regional Federal Reserve Banks" does this.<1> The government must pay with currency already in circulation, or else finance deficits by issuing new bonds, and selling them to the public or to their central bank to acquire the necessary money. For the bonds to end up in the central bank it must conduct an open market purchase. This action increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt.<2> Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public. The public is left with an increased supply of base money.

[roamer65]

19. They don't even have to print it anymore.

They just type the amount they want into the computer systems and it is ready to go.