The equity markets are rallying over the presumption that the ECB and Mario Draghi will step up on Wednesday and provide more easing.
However, the ECB is already doing $60B a month in easing, with negative interest rates. So of course the answer is issue more debt
Draghi was quoted at the World Economic Forum in Davos as saying the ECB will do “whatever it takes,” to keep the bubble inflated (my words). Despite most of Europe being in a bear market.
Chinese and Japanese financial chiefs have also acted already with currency manipulation to buoy their markets.
It appears that global leaders will continue to load up on debt and play in the currency markets, instead of looking at some hard-line financial reforms to right what’s wrong in their economies.
The Italian banking system is teetering under a mountain of bad debt hitting the books. Officials are looking to set up a bad bank to house the rotten paper ala Citigroup.
So the ECB may ramp up liquidity to what $75B a month. Therefore cheapening the euro against the dollar, sending oil and other commodities to new decades lows.
What could go wrong?