Waiting for ECB ...Godot?

Great expectations from the ECB on  QE. The world waits with bated breath for ECB as there are global markets that will be impacted.

• The ECB's Executive Board  has reportedly proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month from March.

·         The ECB has already cut interest rates to record lows

·         It bought private sector assets.

·         It routed billions of euros in cheap loans to banks, in the hope that they would on lend the money to add to the circular flow of funds.

• Now the much delayed  QE, a policy that the U.S. Federal Reserve, Bank of Japan and Bank of England have used to revive growth is to be adapted.
• Euro zone policymakers  want to avoid what happened in Japan - low interest rates-fall in prices- expectations of further falls- deflation- price harakari.
• So ECB wants to avoid a Japanese style price destruction.
• ECB could buy sovereign bonds, and push up prices at home and crowd out some of the portfolio holders by selling European assets so that the euro is weak and not so strong  enough to cause despair to the European exporters.

The French, the Italians and the World want it. But ECB is modelled after BUBA who are obsessed with inflation fighting. In their rule book, nothing is advisable to trigger inflation.

In 2010, the ECB triggered off QE by buying bonds of afflicted countries like  Greece. The BUBA had then disagreed. Greece just deferred its troubles.  The Germans are not prepared for sacrificing for wealth redistribution. There is just no euro bond. Among Sovereign debt only Germany and Luxembourg have top ratings. 

The Canadian  interest rate cut by a quarter point caught markets by surprise - the Canadian dollar went lowest in 6 years to the USD but the Toronto stock market's main index went up 1.8 percent. The Swiss National  Bank's de-pegging and the Danish moves to defend the peg are all adding to the uncertainties of the market. With none except USA doing well and with China faltering, it is quite a tall order to expect ECB to deliver a panacea that it could not deliver all these days. The German influence appears just too strong to let Draghi have his full way. Half-hearted attempts do not satiate a market. 

Book profits. In safe haven flight to quality,  when in doubt, flee to US Dollar, Swiss Franc and Japanese Yen.

From Waiting for Godot by Samuel Beckett

Vladimir:

I thought it was he.

Estragon:

Who?

Vladimir:

Godot.

Estragon:

Pah! The wind in the reeds.

Vladimir:

I could have sworn I heard shouts.

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