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Eurocrisis: A Big Bazooka For Markets, Maybe

Eurocrisis: A Big Bazooka For Markets, Maybe

The worst is yet to come, says a report Issued on Friday by the International Monetary Fund. A “big shock” in the region could lower output in the euro zone by 5 percent, by almost as much in the UK, by 2 percent in the US and by 1 percent in Japan. The causes of such a shock noted by the IMF are all too familiar: “a jump in sovereign and private bond yields across the eurozone, a drop in consumer demand, and shifting asset prices.”

Or maybe not.

On Thursday, European Central Bank (ECB) president Mario Draghi made a much-anticipated announcement about measures to “save the euro.” The ECB has offered “to buy Italy’s and Spain’s bonds on the market as long as the euro governments’ bailout fund makes purchases directly from the two countries’ treasuries and ties them to tough conditions.”

That is, this plan will take the ECB “further away from its roots as a politically autonomous central bank, modelled on Germany’s Bundesbank, with prime responsibility for containing inflation and only a lesser focus on the broader economy and the stability of the banking system.”

While initial reactions were muted, one analyst commented on Friday in Bloomberg that “if transferred into actual activity,” theae measures “would be close to the big bazooka approach that the markets are looking for,”

This will not start until September 12, when Germany’s Supreme Court rules on the constitutionality of using funds from the planned 500 billion- euro permanent rescue fund, the European Stability Mechanism, for bailouts.

The measures do not give immediate short-term relief such as Spain is seeking. But they do make steps towards the goal of greater fiscal unity in the euro zone mentioned at a summit earlier this summer.

The Guardian points out that the actual figure for the employment rate in the US is 8.254 percent, which rounds up to the more alarming 8.3 percent that took the bloom off the addition of 163,000 jobs in July.

Job creation is still weak but the US economy seems to be slogging on and avoiding fialling into a recession. Markets seemed cheered with the Dow posting its longest rally on Friday since October. Will Draghi’s bazooka be the hoped-for “shot in the arm” to weary markets or a bubble that bursts?

 

Previous Care2 Coverage

Eurocrisis: The Fed Says, “Wait and See”

Eurocrisis: The Colloseum Is Tilting

Eurocrisis: No Jobs? Make Artvand Go To the Theatre!

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27 comments

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10:56AM PDT on Oct 1, 2012

Thanks.

7:33AM PDT on Aug 6, 2012

The result of this will be interesting to observe.

3:29AM PDT on Aug 6, 2012

Meanwhile the FED debt money marches on to new highs.

Now over $16T of public debt and staggering high private debt. All we need is a small increase in interest rates for the US monetary system to crash and burn.

I want a US Treasury Dollar that is equity in ALL government assets, not just a precious metal. Stop this systematic collapse by changing from only a FED debt currency to at least a partial equity currency...a US Treasury Dollar.

Or don't and watch the entire debt money system collapse. Nobody can borrow their way out of debt unless you plan to screw somebody in bankrupcy. Choice is breaking the money system monopoly OR collapse.

1:35AM PDT on Aug 6, 2012

thank you.

7:30PM PDT on Aug 5, 2012

Curious how it will evolve further.

5:50PM PDT on Aug 5, 2012

The entire stack market system needs to be dismantled. It s a big pokemon card trading game played by the rich at the expense of the poor.

12:01PM PDT on Aug 5, 2012

Noam Chomsky on Europes's "Austerity" policy

http://www.youtube.com/watch?v=7s6ye-XrfeU

11:05AM PDT on Aug 5, 2012

The big hype for the past 30 years has been about the 'global economy'. All countries took a big dive in this direction without thinking what it would do to their own countries economies. It seems to be that what we all have gotten ourselves into is some very bad business and trade agreements. I am so sick of goods made in China and everywhere else at the expense of jobs here at home. The trading of notes held on American homes being sold on the world market. I am tired of American property on American soil being own by some Arab that hates our guts. We have lost sight of what it meant to have that label MADE IN AMERICA. We, a country whose citizens use to do business on a handshake and a person’s word, now know we can’t trust many, if not most, business people. And that has come down to trusting them to do right by their employees, right for the environment, right for Americans and America in general.

I’m not saying countries should not trade with each other but I do not like the idea of bonds, homes, commercial properties, etc., being sold to foreigners. We need to bring fairness, integrity and trust back into business. We need our trade agreements to be fair and not have a country like China dominate our markets. We need to bring jobs back to our own countries have a stabilizing period and during that time reinvest in our own countries and people.

6:38AM PDT on Aug 5, 2012

Dang, and I thought the article was going to be about Bazooka bubble gum. I miss not being able to chew that stuff anymore!

10:56PM PDT on Aug 4, 2012

The result of this will be interesting to observe.

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