The "COVID Debt" Entirely Repurchased By The ECB, The EU Does Financial Cavalry

The balance, about 317 billion euros, was bought by EU banks and mutual funds. Not for "economic" reasons (to satisfy a demand for investments from their clients), but to bring them as collateral (guarantee) with the ECB in order to obtain liquidity in exchange. Banks spend money... to get money. Why do they do it? They need to dress up their balance sheets with assets considered "safe" (government debt) because the rest (loans to the economy) are likely to deteriorate as the economic crisis intensifies.

As can be seen, public debt is found in the accounts of the ECB, either directly (by acquisition) or indirectly (as a guarantee of liquidity lent to banks). The snake bites its tail, the public deficit is financed almost entirely by the central bank: the money supply explodes, the spectre of inflation approaches, etc.

If the market (private investors) were to be counted on, such an explosion in demand for financing would push up interest rates, causing this mountain of debt to collapse, dragging governments and banks down. Fortunately, this full financing by the ECB keeps rates at zero. Finally, it is fortunate for the governments, which finance themselves painlessly in this way, but unfortunate for the savers, whose traditional bank investments no longer yield anything, before they are eaten away by inflation.

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