ECB to buy up junk bonds

[-:Undertaker:-]

http://www.telegraph.co.uk/finance/f...-for-euro.html

Mario Draghi defies Germany with launch of 'fully effective backstop' for euro

Mario Draghi has defied German opposition and launched an “unlimited” bond buying programme by the European Central Bank (ECB) that he said would provide a “fully effective backstop” to the stricken eurozone economies.

Mario Draghi confirmed that the new programme would be unlimited in the amount of bonds it could buy and would have conditions attached.

The president of the ECB said the decision to unleash the new action, which will be called Outright Monetary Transactions (OMT), had not been unanimous. He refused to confirm that the “one dissenter” on the ECB’s Governing Council was Jens Weidmann, head of the Bundesbank, but repeatedly told reporters that both he and the bank were “independent”. “I am who I am,” he said.

Shortly after the ECB announcement, Philipp Roesler, Germany’s economic minister, said: “It is all the more important to attach conditions to the current temporary bond purchases and to lay out as quickly as possible the exact nature of these conditions for individual countries.” Mr Draghi confirmed that the new programme would be unlimited in the amount of bonds it could buy; the ECB would renounce its seniority and be on a par with other creditors; and the bond buying would be sterilized.

He said OMTs were necessary to combat the debt crisis which he said looked set to continue to drag on the eurozone economy. “OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro,” he said. “We will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area.” He insisted that the ECB was not acting outside its mandate, as Germany has argued, because the ECB would be buying bonds in the market, not funding national treasuries directly. “We are sure we are acting within our mandate,” he said. “Action in the primary market would be a violation, not secondary market.”

This comment summed it up best I found, in laymans terms..

Just over four years ago many banks, initially mostly in America but quickly distributed to the entire world banking system, sub prime loans were bundled up into AAA grade investments by AAA banks.

What could possibly go wrong, the more sub prime available the more to bundle and the bigger the bonuses for the bankers.

No one concerned themselves with the basic facts; those being the people who borrowed the money had no intention of ever paying it back.

The rest as they say is history.

Now consider Draghi's great new idea. He being a AAA bank is looking to load up with sub prime loans (Spanish, Greek, Portuguese, Cypriot, etc, bonds).

These will be held as AAA security on the books of the ECB.

This is economics straight out of the Robert Mugabe book of economic good practice.

The letters ECB will come to have a whole new meaning when this latest can kicking ploy unfolds.

The European Catastrophic Bank

In short, this is financial insanity the ECB is embarking on - the Central Bank itself will, in time, become insolvent. The efforts they are going through to maintain this mad project are incredibly dangerous.

But then, since when did the EU elite ever care about anybody else other than their final desired aim of a superstate?

Thoughts?