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Tag Archive: Outright Monetary Transactions


Reading between the lines from the  Bank of Italy  , Back to 2012 in the month of July Mario Draghi, on the verge of yet another Eurozone 813530collapse, promised the world that he would do literally “whatever it takes” to defend the Euro, banks in the insolvent continent took his promise seriously, and ramped up their participation in the most epic Ponzi scheme conceived in Europe to a whole new level. The scheme, of course, was one where banks would buy sovereign bonds issued by their host country (most notably Spain and Italy), and subsequently repo them back to the ECB for near full cash (net of a minuscule haircut) collateral.

The IMF also published a crucial paragraph doing the spillover analysis indicates that a shock from Italy could have a marked impact on the Europe and beyond through trade and financials channels. Continue reading

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Going back to the famous Maastricht Treaty.It connected a subset of EU states through a common monetary policy (EMU) and made no imagestreaty provision for fiscal coordination.Well It was prepared the Stability and Growth pact (http://bit.ly/199QLRy), which took its legal authority from the Treaty on the Functioning of the European Union (TFEU).

So when Last July Mario Draghi, president of the European Central Bank, spoke of the ECB’s intent to do “whatever it takes” to hold the euro area together. In the months after his comment, the ECB unveiled its Outright Monetary Transactions programme, in which it pledged to make unlimited purchases of troubled government bonds under certain conditions. No policy has been as important in bringing down government borrowing costs around the periphery. Continue reading

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