Loading ... [Definitely not-everyone knows gold is moved by interest rate differentials and other arcane nonsense]—currency collapse!—preposterous to think it could make gold rise—wink! wink!]
THE ECBs LONG JOURNEY INTO CURRENCY COLLAPSE JUST GOT A LOT SHORTER
The ECB’s announcement on Thursday July 21 of a “new instrument” for tackling “fragmentation risk” is ominous for the future of the euro. The idea is to pre-empt the emergence of serious break-up risk for the euro-zone as the policy interest rate continues to move higher in coming quarters towards “neutral.”
The new instrument, born under the name “transmission protection instrument” (TPI), will be the catalyst to the accelerated full transformation of the ECB into a bloated European “bad bank” fund. The European public at some stage should become alarmed about the danger of default by inflation spilling over into their holdings of the money issued by this bad bank fund.
If Germany exits EMU, then the ECB’s monetary liabilities just become worth a lot less in real terms (via currency collapse and inflation). Ultimately these monetary liabilities might cease to be monetary – that occurs if monetary union comes to an end. Then the monetary liabilities of the ECB would have to find a market price (in terms of real purchasing power) as the paper of a giant bad bank devoid now of monetary function.
No-one expects the present coalition government in Berlin to be taking any such decision. But market valuations including of money do reflect shifting probability of future catastrophe even far ahead. The dangers highlighted here of ultimate monetary collapse have just got a lot worse due to the ECB’s launch of its new instrument.