simple question about the ECB

[jonah35]

so, the european central bank has given out these 3 year loans which has staved off the crisis for now

but, if the ECB can't print money where is it getting the money from and for how long can it do this?

surely it can't be getting it from other countries as they have nothing to give and that just makes it a ponzi scheme?

[Targarama]

They are a central bank, so they can just keep printing money. Just like the US fed. It is all a big con!

[jonah35]

some websites say 27 banks from various countries such as germany lend the money but this can't be right because in essence germany is then paying for the other countries and eventually german voters would vote against this.

is the ecb taking assets from banks as collateral? surely though they could be toxic and if this is the case could the ECB go bust in the end if it doesn't 'print' money?

[jonah35]

Targarama said:

They are a central bank, so they can just keep printing money. Just like the US fed. It is all a big con!

i didn't think they could do this unlike the US or UK which is why the eurozone is at a disadvantage?

[_Al_]

The ECB can print whatever it likes. The problem is that its actions affect the euro as a whole. It can't just dump sackloads of cash into the countries that need it without affecting them all. What's good for Greece is very bad for Germany and vice versa.

[ninja-lewis]

My understanding is that the ECB isn't allowed to print money to buy sovereign debt (because of those German concerns about hyperinflation) but there's nothing preventing them from printing money and loaning it to banks (who can then use it to buy sovereign debt as well as improve their capital ratios).

The latter can serve as a proxy for the former especially when a significant part of the sovereign debt crisis is related to capitalising banks.

[0a]

ninja-lewis said:

My understanding is that the ECB isn't allowed to print money to buy sovereign debt (because of those German concerns about hyperinflation) but there's nothing preventing them from printing money and loaning it to banks (who can then use it to buy sovereign debt as well as improve their capital ratios).

The latter can serve as a proxy for the former especially when a significant part of the sovereign debt crisis is related to capitalising banks.

This is correct.

They can't print and buy soverign debt.

Printing and lending at low rates to banks on the condition they buy sovereign debt of country X,Y and Z is COMPLETELTY DIFFERENT HOW DARE YOU START THIS THREAD?

[jonah35]

thank you.

so, how then will a european bank go bust? surely it won't.
also, can't they do this forever and hence the PIIGS won't go bust 'this autumn' as per the other thread?
I know inflation may be an issue but given all the QE so far in the UK inflation is decreasing so is this a big an issue as made out?

so, is it a time to buy european banking shares?

[Murph7355]

jonah35 said:

...but this can't be right because in essence germany is then paying for the other countries and eventually german voters would vote against this...

What makes you think they'll ever be given the opportunity to vote on it...?

[jonah35]

Murph7355 said:

What makes you think they'll ever be given the opportunity to vote on it...?

well merkel won't be voted back in??

[_Al_]

jonah35 said:

thank you.

so, how then will a european bank go bust? surely it won't.
also, can't they do this forever and hence the PIIGS won't go bust 'this autumn' as per the other thread?
I know inflation may be an issue but given all the QE so far in the UK inflation is decreasing so is this a big an issue as made out?

so, is it a time to buy european banking shares?

When the bank runs out of assets to offer as security on its ECB loans, the ECB can no longer lend to it (under current arrangements anyway). At that point they're sunk.

[Murph7355]

jonah35 said:

well merkel won't be voted back in??

We've had three prime ministers from two parties who weren't (aren't) up for a proper vote on the subject. And the EU is woven far less into our political fabric than it is Germany's (or France's for that matter).

I strongly suspect the German public must have been getting pissed off at the bail outs of countries for a while. But I suspect it would take a serious amount of uprising from them to get any of their political classes to use exiting the EU as a vote winner, and I'm not convinced exiting would happen even then.

Watching this lot unfold will be very interesting.