MARC FABER: Beware The Unintended Consequences Of Money Printing

Marc Faber: I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing and once you choose that path you’re in it, and you have to print more money.

If you start to print, it has the biggest impact. Then you print more – it has a lesser impact unless you increase the rate of money printing very significantly. And, the third money printing has even less impact. And the problem is like the Fed: they printed money because they wanted to lift the housing market, but the housing market is the only asset that didn’t go up substantially.

In general, I think that the purchasing power of money has diminished very significantly over the last ten, twenty, thirty years, and will continue to do so.

via MARC FABER: Beware The Unintended Consequences Of Money Printing.

Living In A QE World | Jim Bianco

Central banks are ruling markets to a degree this generation has not seen. Collectively they are printing money to a degree never seen in human history.

So how does this process get reversed? How do central banks pull back trillions of dollars of money printing without throwing markets into a tailspin? Frankly, no one knows, least of all central banks as they continue to make new money printing records.

…..When/If these central banks go too far, as was eventually the case with home prices, expanding balance sheets will no longer be looked upon in a positive light. Instead they will be viewed in the same light as CDOs backed by sub-prime mortgages were when home prices were falling. The heads of these central banks will no longer be put on a pedestal but looked upon as eight Alan Greenspans that caused a financial crisis.

via Living In A QE World | The Big Picture.

Quick Overview

Looks like something positive is brewing in Europe, but I don’t want to jump the gun. China looks weak, US probably through its worst, Europe still faces plenty of pain even if fiscal reform and euro-bonds introduced. Game changer would be QE/asset purchases by Fed and ECB.

ECB Expected to Unleash QE Money Printing after Launching of Euro-Bonds :: The Market Oracle

In return for surrendering fiscal policy to Brussels, – Berlin and Paris, the key paymasters of the Euro-zone, would agree to the creation of a common Eurobond that would pool the credit ratings and collateral of all participating Euro-zone countries into a single fixed income instrument. Chancellor Merkel says that German borrowing costs will jump higher because of the creation of a Eurobond, though she is prepared to consider Eurobonds, if the legal framework is in place to ensure all countries in the zone observe the rules.

…..Once fiscal integration is agreed upon, Berlin is expected to agree to the creation of Eurobonds issued by member states that could be purchased in massive quantities (monetized) by the ECB. Countries would be liable for each others’ debts, but the ECB could make much of their debt disappear with its electronic printing press. Eurobonds would either be financed with higher taxes on the working class, through austerity measures, or through the inflationary effects of the ECB’s money printing machine. With French banks alone holding more of their debts than the entire €440-billion European Financial Stabilization Fund, a default by these countries would likely bankrupt the French financial system. Thus, Paris has been pushing hard for the ECB to monetize debt on a massive scale.

via ECB Expected to Unleash QE Money Printing after Launching of Euro-Bonds :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website.

Germany’s economic and political generals are fighting the wrong war – Saul Eslake

The role which the European Central Bank needs to be allowed to play in resolving the European sovereign debt crisis needn’t amount to sustained financing of government deficits. It is perhaps better conceived of as being akin to central bank intervention in the currency markets.

When, in moments of one-sided speculation, or panic, foreign exchange markets push a currency to what by any reasonable yardstick appears to be extremely over- or under-valued levels, it’s not unusual for central banks to sell or buy that currency in sufficient volume to push it back in the opposite direction. If the central bank concerned is perceived as ‘credible’, the volume of purchases or sales required to achieve its objective will often be quite small. And if its judgement as to what constitutes ‘reasonable’ is correct, it will usually end up making a profit.

via Germany’s economic and political generals are fighting the wrong war – On Line Opinion – 24/11/2011.

Quantitative Easing!!! – Andy Lees, UBS | Credit Writedowns

The BoJ announced today that it will expand its asset purchase programme by JPY5trn (USD66bn), with all the purchases being directed at JGB’s. Add that to the GBP75bn (USD120bn) by the BoE, CHF50bn (USD57bn) by the SNB and the EUR341bn (USD477bn) expansion of the ECB balance sheet since the end of June, and it collectively adds up to USD720bn. Clearly this explains the market rally from the low.

via Quantitative Easing!!! | Credit Writedowns.