6 Central Banks intervention not the solution
Following yesterday’s coordinated bank intervention, many journalists tended to regard this as a solution to the Euro crisis. There is evidence from prior interventions that this is not the case. The data suggests that this policy response is not a solution and that the performance of equities and other risk assets continues to weaken following the intervention.
We believe that ultimately the market will begin to see the bank interventions as merely a painkiller, covering the symptom but not the underlying structural problems festering in the economies of many countries. The natural consequence of excess debt is deleveraging, which implies deflation. With this much excess debt, this is pretty hard to counteract, even for central banks.
We suggest that our readers check the posting on historysquared.com, courtesy of thedailycapitalist.com, which tracks the progress of risk assets following large scale government interventions.
December 1, 2011 Poor Performances Following Central Bank Liquidity Injections: http://historysquared.com/2011/12/01/poor-performances-following-central-bank-liquidity-injections/
Postscript: December 1, 2011 French President Warns of Dire Consequences if Euro Crisis Goes Unsolved – NYTimes.com: http://www.nytimes.com/2011/12/02/world/europe/french-president-warns-of-dire-consequences-if-euro-crisis-goes-unsolved.html?_r=1&partner=rss&emc=rss&src=ig
PS2: December 1, 2011 Frying Pan Into The Fire: Central Banks Dollar Liquidity Can’t Save Euro Zone Insolvency | EconMatters: http://www.econmatters.com/2011/12/frying-pan-into-fire-central-banks.html
PS3: December 2, 2011 UBS On “How Bad Might It Get” And Why “Sooner Or Later Intense Instability Will Resume” | ZeroHedge: http://www.zerohedge.com/news/ubs-how-bad-might-it-get-and-why-sooner-or-later-intense-instability-will-resume
Plus, well over 60 previous GeoffTalk.com postings since May 2011 have expanded on the subjects of Eurozone, Greece, Portugal, Ireland, Italy, Spain (PIIGS), Belgium, Germany, France, United Kingdom (UK), European Union (EU), European Central Bank (ECB), International Monetary Fund (IMF), US Federal Reserve Bank (FED), Organization of Oil Exporting Countries (OPEC), BRICS (Brazil, Russia, India, China, South Africa), World Financial Contagion, Derivatives, Credit Default Swaps (CDS), Collateralized Debt Obligations (CDO), Mortgage Backed Securities (MBS), US Debt Ceiling, Quantitative Easing I, II (QE I, II), Fed Twist, Platinum, Gold, Silver, Oil, Peak Oil, Rare Earth Minerals, Commodities.