To print or not to print: the choice of whether to open the European Pandora's box, which as we suggested two months ago is an interesting but ultimately moot thought experiment, has suddenly become the only talking point for TV pundits desperate for eyeballs and suckers to buy their books, who are now experts not only on monetary policy but European monetary policy. And while 99% of these empty chatterboxes should be promptly muted, one person whose opinion we value in any regard is that of Jim Grant. Earlier today, with Bloomberg TV's Deirdre Bolton, he discussed not only the expected ECB response to the ever worsening contagion (while the ECB bought Italian bonds in the open market, and potentially primary against its charter, it is prohibited from buying French bonds which is why the OAT-Bund spread closed at record wides), but all the other developments in the insolvent continent. Here are some of the key sounbdbites, and, of course, the full clip.
On the three thread by which the world currently hangs:
i) by the financial probity of Italy
ii) by the determination of Greece to implement austerity measures
iii) and by the responsibility of our money spinning central bankers
"These are very slender threads indeed."
On what the ECB will do:
The ECB has expanded its balance sheet mightily under Trichet. We have a new leader and we have a new imperative. I dare say Europe is going to print money.
On central bank monetization and its implications:
The Italian yields did not fall on their own. It raises questions of overall integrity of market prices. In the US the Fed has nationalized the yield curve. In Europe much the same is going on: the SNB is expanding its balance sheet at astonishing rates of speed. The world over there is seeing immense money printing and there is a huge race to debase on the behalf of the sponsors of paper money.
Central banks are insolvent:
The ECB has a ratio of non-AAA rated assets to equity of 14 to 1. What the ECB has been doing is stepping in where private money fears to tread. In the private sector we call the heading for trouble... The New York Fed is leveraged 100 to one.
And the kicker analogy which is absolutely spot on:
The ECB is now implementing the MF Global trade.
All this and much more in the clip below.