– European Central Bank Sleds The Slippery Slope (Forbes):
Despite the optimism in markets, the European Central Bank’s latest moves put it on a slippery slope, raising doubt about its credibility.
“I see that the European Central Bank will start buying Eurozone government bonds,” writes Stephen Pope, chief global equity strategist at Cantor Fitzgerald in London. “This is total, undiluted quantitative easing.”
It also represents backpedaling by the European Central Bank. “I recall Trichet saying he would never go down the route followed by the Fed and the Bank of England,” says Pope. “Of course events can always force a change of mind but does JCT have any credibility left?”
What worries Pope is a question that is nagging many veteran market pundits: Where is the money going to come from? In the quantitative easing followed by the Federal Reserve and the Bank of England the money was created by simply expanding the balance sheets and literally printing money.
Pope says that the European Central Bank quantitative easing bond purchases will be “sterilized” so there will be no expansion of the monetary base and the ECB balance sheet.
Pope, quite understandably, says, “I still want to know where the money will come from.”