ECB Panics; Begins Buying Assault on Portuguese, Irish and Greek Debt

–Countdown to Second Collapse Begins

By Dominique de Kevelioc, de Bailleul
Beacon Contributing Writer

At 6:26 a.m. (EST) Wednesday, Reuters flashed an update on the Euro zone debt crisis, reporting that five European central banks have begun buying troubled sovereign bonds along all maturities. In a desperate measure to support a collapsing Euro, the ECB pulled out the ultimate "quantitative easing" weapon that ECB President Jean-Claude Trichet said he wouldn’t use: monetizing debt.

Euro at par with the Dollar cannot be that far off.

Doing a 180-degree turnaround from previously scoffed notions of buying troubled Euro zone debt, Trichet now admits ECB monetary policy is "hampered" and some markets remain "dysfunctional,"he said at a press conference in Basel. Monday’s rally in the Euro briefly reached the 1.31 level against the Dollar, but the 16-nation Euro quickly fizzled, trading down to1.2663 as of 7:02 a.m. EST Wednesday.

Trichet’s punch of the panic button isn’t going over well with the Bundesbank, however, where Germany’s tightfisted Axel Weber believes Trichet’s purchase of government bonds now "poses significant stability risks." Weber chided Trichet for the change in ECB policy "even in this extraordinary situation."

Money printing now crosses the Atlantic, doubling the fiat-currency frenzied orgy of currency debasement in an effort to stave off the inevitable, defaults on sovereign debt among, at least, the PIIGS.

“On Monday and yesterday they (central banks) were a bit unordered, perhaps also to see the market reaction. Today they are a lot more active,” one bond dealer told Reuters.

As part of the $950 billion TARP-like bailout package agreed to over the weekend, European central banks now will intervene in various debt markets to shore up prices and lower rates. Reuters said a second dealer it interviewed said the central banks of Italy, France, Germa! ny, Spai n and Finland have come in strongly with buy orders along the yield curve in "amounts of 25 million or 50 million euros at a time." Presently, Portuguese, Irish and Greek government debt are the focus of the five central banks.

There is no means of avoiding the final collapse of a boom expansion brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
�CLudwig Von Mises

The second stage of the credit crisis, which began with the first stage, the collapse of Bear Stearns in 2008, now officially begins.

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