Strap yourselves in folks.
It's going to be a wild ride today and probably all week as the ECB begins it's $1.2Tn QE program that is scheduled to pump roughly $70Bn a month (it keeps going lower as the Euro keeps dropping!) into the wallets of rich people across the EU. Just to illustrate how insane they can be, they began buying German Bunds this morning – giving the most to the country that needs it the least.
Greece, meanwhile, the country that needs it the most is not getting any and Greece has already burned through the last of their $260Bn bailout, driving their 3-year yeild to 15.21%, roughly 50 times higher than Germany's borrowing rate. Now, bear with me here but, in order to get the same return on their bond buying from Germany as they would from Greece, the ECB would have to lend Germany $13 TRILLION that Germany doesn't need rather than lending Greece the $260Bn it does need AND THAT'S EXACTLY WHAT THIER PLAN IS!
By putting more money into "safer" countries the ECB is making things worse for the riskier countries, which aren't benefitting from this misguided QE missile. But don't worry about things getting out of countrol, Draghi says the ECB will not pay more than 0.2% for the privilige of lending out money!
That's right, the ECB will PAY YOU 0.2% to borrow their money for up to 30 years. It doesn't sound like much but, if you borry $1Bn, you get $60M in interest over 30 years for holding onto the ECB's money. Again – they won't do this for Greece or anyone else who needs it but, if you don't need money – it's nice to know more money is available if you are willing to be paid to hold it, right?
This is all, of course, completely insane and our reaction to an insane policy environment has been to remain "Cashy and Cautious" while these radical policies play themselves out. The markets got a little scare on Friday but it was a very minor sell-off and already this weekend, China claims exports rose 48.3% in a month and, whether or not…
