Friday, June 26, 2009

ECB $622 billion injection: A lesson in reserve accounting



The other day the ECB injected $622 billion into the European banking system.

IN ONE DAY!!!

Yet, there was no outcry in Europe about the ECB "printing money" or that it was, "debasing the euro," claims we so often hear in the U.S. It took the Fed months to expand reserve balances by the amount the ECB did in one day and all we heard were cries of "taxpayer on the hook."

There is something striking about the ECB move and, hopefully, educational, for anyone believing that when a central bank injects liquidity that the taxpayers are the ones on the hook. The ECB has no taxing authority, nor is there any Federal Government of Europe that has an over arching taxing capability. Yet, the ECB came up with $622 billion in an instant.

How did they do it?

Simple, by the stroke of a key on a computer. That's all there was to it. A bookeeping entry.

It came and it went without any hullabaloo and there was no rush to sell the euro as would have been the case if the Fed did anything similar. Without question an action of such magnitude by the Fed would have set of a firestorm of criticism in the media and on Capitol Hill, and speculators around the globe would have sold dollars feverishly.

5 comments:

googleheim said...

THE GERMANS WANTED TO FIRST BLAME US AND THEN DO IT THEMSELVES

THEY ALWAYS DO THAT

WE NEED TO NOW SAY TO THEM :

"WE DON'T NEED YOUR CRASS KRAUT ECONOMICS"

HA HA

Matt Franko said...

Mike,
This (non)reaction you cite is comical.
Where is Schiff on this one?
That said Im trying to figure out what the Euro Institutions who borrowed the E442B are going to do with it?
I look at the US Fed's TALF as a similar collateralized operation and the TALF has only been subscribed to for $25B as of last H.4.1 report, and the last one on June 16 (CMBS collateral) no one even showed up there!
Now here the ECB does a collateralized op and over 1000 firms show up and take E442B in one day? Im getting nervous they are going to take the Euros and start the heavy speculation again.
Resp, Matt

googleheim said...

LIKE I THOUGHT BEFORE :

WE ARE TAKING TURNS MAKING OUR CURRENCIES STRONG / WEAK / STRONG / WEAK WITH UK AND EU

SO WE CAN PAY OFF EACH OTHERS' DEBT AT OPPORTUNE TIMES OF CYCLE ?

WATCH THE EURO

IF IT DOES NOT WEAKEN THEN THE CURRENCIES ARE RIGGED !!!

NOW IS THE TIME FOR USD TO GO STRAIGHT UP IN STRENGTH AGAIN RIGHT ????

UNLESS THERE IS RIGGIN' !!!


SANFORD'S CRY FOR ARGENTINA IS A WARNING SIGN THAT WE ARE GOING TO DEFAULT ON OUR DEBT ????

HAR HA WHOOPS MAYBE ?

googleheim said...

if they are so quick like this
the euro has to tank

Mike Norman said...

Yes, what a hypocrisy! Read my post, "Hanging out with the Forbes Journalists."