Europe’s Central Bank Making it Rain

The ECB dumps a half trillion dollars on world markets

You better grab your umbrellas, because the European Central Bank (ECB) is making it rain to the tune of 350 billion euros, or just under five hundred billion dollars. Yes, thats a lot of cash. The ECB’s move was meant to restore liquidity to short-term banking markets which have been rocked by problems with the sub-prime mortgage market.

In short, the wall street whiz kids who engineered the back end of the stupid mortgages that were given to people who shouldn’t have qualified over the past few years has caused such turmoil in the financial markets, that the world’s largest investment banks have pulled back short-term lending in recent months becase 1) they don’t want to lend money out to struggling mortgage-related special purpose entities looking for short-term cash to stay afloat, and 2) they don’t know how much cash they will need on hand to shore up their own balance sheets as they sort out their mortgage-related losses.

So – is this a surprise? It was a little bigger than expect, but more importantly, it shows the world central banking system’s proclivity (government-backed central banks that regulate capital flow for the world’s largest lenders, who in turn lend to people like us) to flood the market with additional capital (i.e. print money) at a moment’s notice when bankers make mistakes, or market forces play themselves out.

When the world’s central banks continue to open the spigots of cash, worldwide money supply continues to go up, reducing the value of dollars — i.e. causing inflation. Watch out for your wallets!

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