Trading by headlines continue with this now, “There is no concrete planning that I know about, but there is a possibility of purchasing sovereign bonds on the secondary market.” Since the ESM doesn’t exist yet, she is likely referring to the EFSF which already has the capability of intervening “in the debt primary and secondary markets. Intervention in the secondary market will be only on the basis of an ECB analysis recognizing the existence of exceptional financial market circumstances and risks to financial stability.” http://www.efsf.europa.eu/about/index.htm. Thus, this is not for Merkel to decide as the EU already has their entity to buy bonds with only the question of when and whether to use it. But as seen with the ECB bond buying, this is just dealing with the symptoms and not the disease.
Category: MacroNotes
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
“…dealing with the symptoms and not the disease…” is an anology and like all analogies eventually fails. The reason here is that if debt prices were higher, there wouldn’t be an immediate problem. The CDS jamming Hedge funds distort market perceptions. The bond vigilantes move rates in a brief period of time that cannot possibly have predicitive value ( See Schillers work on volatility) so all you have is locusts fliting from Greece to Spain to Italy etc…
When the private sector has screwed up, the gov’t sector takes on debt to maintain GDP while the private sector pays down debts. That is how it works. That how it always works.
The disease is cutting taxes and increasing spending during good times, the “Starve the Beast” strategy of the GOP ( Bush’s temporary tax cuts which couldn’t possibly be justified without them ending, suddenly need to be made permanent, while simultaneously mandating a pharma-free-for-all Medicare plan.) The GOP’s strategy to keep the rich’s marginal rates low is the reason for the ‘high’ debt ratios here. Would Spain and Ireland have had a property bubble without Greenspan’s Starve-the-Beast supporting monetary lunacy? Doubt it.