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A Cure Worse Than The Disease

Monday, May 10, 2010, 9:13 AM
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Recently I've argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and...) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

 

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