Executive Intelligence Review
Subscribe to EIR


ECB Starts Violating Its Charter To Try To Make Hyperinflation Work

March 11, 2015 (EIRNS)—The European Central Bank (ECB)’s new quantitative easing program is only adding to the disaster of the Eurozone’s banking system.

The ECB is supposed to buy €1 trillion of European government bonds by mid-2016, trying to copy the Federal Reserve’s "success" in raising the stock and bond markets far above the heads of American households and businesses whose livings standards are sinking.

But because of the huge proportion of "toxic" securities and bonds in the European banking system, the ECB’s efforts at mass buying of "asset-backed securities" and "covered bonds" from the banks, failed from December to February. Now, the government bond-buying binge may also fail, with much worse consequences.

The ECB tried to follow its own charter, by telling European central banks to avoid buying government bonds with negative interest rates, for just two days. It switched course Wednesday morning and "purchased debt with negative yields, including that of Germany and the Netherlands," according to Bloomberg in an article headlined "ECB Chasing Own Tail as Interest Rates Turn Negative." This amounts to providing "fiscal support" to governments, by the ECB paying them interest money. "Fiscal support" is barred by the ECB charter.

And as the headline implies, more and more government bond interest rates are going negative across Europe as the ECB prints money and buys them directly from governments. So it either tears up the charter and buys bigger and bigger volumes of negative-interest-rate bonds—"buying losses"—or it lets the government bond-buying program fail to meet its €1 trillion target, which itself will shake the bond markets and the European banks.

The euro currency fell rapidly in value again today, with the ECB claiming that this was “deliberate” on its part, to try to create inflation. It is indeed creating hyperinflation, but only of huge asset bubbles in the stock and bond markets, which it is driving to a crash.