Will additional ''quantitative easing'' by the ECB encourage movement into gold worldwide?
*CNBC, by Catherine Boyle, February 9, 2012:
''The European Central Bank's second injection of long-term
liquidity into markets could reach as much as 1 trillion euros ($1.33
trillion), analysts predict.
Initial estimates for the February 29 operation of three-year,
long-term refinancing operations (LTROs) suggested that there would be
only about a 100 billion euros take-up by Europe's banks, but those
estimates have shot up in recent weeks after the success of December's
operation became clear.
December's action by the ECB has spurred a stock market rally after
increasing the supply of cheap money, and ECB Director-General
Francesco Papadia even suggested that the bank could say 'mission
accomplished' after the operation.
Yet the effects on the real economy are still to be seen. Banks
have shored up their balance sheets, but lending figures to consumers
and businesses remain low.
'The hope is that it will trickle down,' said Christel Aranda-Hassel,
director of European economics for Credit Suisse, who believes there
will be a take-up of around 500 billion euros at the second auction.
'Bank lending is not just a supply issue -- the demand side is not
looking too happy either, and you can't do much about demand as a
central bank. If you're fiscally constraining a series of
countries to comply with targets, then you're stuck.'
While the headline figure of 489 billion euros made December's
three-year operation the biggest single refinancing operation ever
undertaken by the ECB, this was slightly misleading, some analysts
argue. Banks also slashed their use of the existing Main
Refinancing operation and of the shorter, 3-month LTROs, making the net
increase in outstanding ECB open market operations only around 210
billion euros.
'What we get in terms of 'new money' will be much bigger than in
December,' Aranda-Hassel said. She estimates that around 350
billion euros of February's sum will actually be a net increase in the
amount of ECB open-market operations.''
''The question of what banks will do with this money if they are not
lending it to businesses and consumers lingers, with some concerns that
the money could create bubbles in other asset classes if banks use it
to play the market.
'This liquidity, as long as it only helps to prop up balance sheets of
banks and doesn't go into any other asset classes, shouldn't create
another bubble. The central bank could absorb this liquidity from
the banks at any moment if needed,' Walter said. 'In Germany,
people are already beginning to move into asset classes like real
estate or gold again, and we may see small bubbles in those asset
classes already.'
Walter believes that there will be further, similar LTROs in the
future, although not any new instruments.
'I'm very happy that within the ECB, everybody is really deeply
concerned to find the best and fastest way to get out of this damn
trap,' he said. ''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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