The Federal Reserve vs the European Central Bank

[BelgianMadCow]

So I am reading up on the upcoming G20, esteemed to be crucial in outlining "the new financial world order".

The common european position being established as we speak is that Europe will NOT inject liquidity in the market ("quantitative easing") as the US just did (to the tune of 1.3 billion dollar, but that's just the latest withdrawal/print run). They are debating since three months on a european program for broadband and alternative energy - a program for 5 billion euro...

Der Spiegel in an article on the current EU summit:

"To flood the markets in cash - where does that lead? The US government is seen as a bad adviser on financial matters, their crisismanagment is suspect to the europeans. The decision of the Fed to inject 1.3 billion dollar in the market gives many participants in Brussels the suspicion many americans still haven't shed their old "growth-thinking". The gigantic amount is greeted with a mixture of shaking heads and shock.

Upon reading further, this brilliant article in Der Spiegel on the US capital injection ends like this:

"In general, the European Central Bank shies away from measures that augment inflation risk. Conform to it's statutes, the ECB is obliged to assure the stability of the value of money (monetary stability) and NOT obliged to assure economical growth - a deciding difference to the american Federal Reserve."

What I see coming is the decoupling of US and european economies, I have been wondering about that since the start.

The quantitative easing may not seem to have much effect now, but once the economy picks up a little bit, all the money will become unglued and cause hyperinflation for the US. It seems we in europe don't intend to follow suit, we will probably have ourselves a severe recession / depression along classic lines.

If only the quantitative easing was done to all of YOU directly :-(

regards
bmc

ps: the one who invented "quantitative easing" should get the Presidential Medal of Obfuscation. And a small golden money-printing press to boot.

[BelgianMadCow]

1. shameful into the Friday Night Fray kick

please people, the bonus issue is only the billion tip of the trillion iceberg...