Loading ...Sans Rig the mkts would have torn Draghi apart….
this reply gets to the point
But in an addition to your balance in a dutch bank account — the Dutch central bank was forced to lend an equivalent amount back to the Spanish central bank to prevent concentrations of money from developing in certain parts of the eurozone.
That 150.000€ you sold your hacienda is not only 150.000€ in your Dutch bank account but also now exists as an Accounts Receivable on the Dutch Central Bank’s balance sheet and an Accounts Payable on the Spanish central bank’s balance sheet.
What happens if Spain leaves the Eurozone and tells everyone with open target2 balances to go sodomize themselves? Well the Dutch central bank has to completely write off any accounts receivables from Spain to the Netherlands and the Dutch central bank goes insolvent immediately. Who recaps that and with what funds?
Target2 being labeled as “sustainable” is pure bullshit and is only remotely accurate so long as no debtor nation leaves. As soon as a debtor nation leaves, well its game over for the whole thing.
The EMZ is more like a collective financial suicide pact than it is a currency zone.
But lets all get around and sing the EU “National” anthem, and the premise it bases all policy on: Its a Small World After All