DOW + 259 = 17,813
SPX + 31 = 2063
NAS + 82 = 4750
10 YR YLD + .04 = 1.90%
OIL – 1.24 = 46.54
GOLD + 9.20 = 1303.10
SILV + .20 = 18.41
The European Central Bank has launched a quantitative easing program, which together with existing programs, will pump €60 billion per month into the Eurozone economies through the purchase of public and private securities, mainly government bonds. The QE program will run through September 2016 with a total price tag of €1 trillion (or $1.3 trillion dollars).
So, it’s a big money printing, QE party for the Eurozone, except for Greece. The central bank effectively shut Greece out of the bond buying until July, and only then if Greece passes a review of its current bailout program. That program is heavy on debt reduction and austerity. The country’s existing program of financial support expires at the end of February. The government will run out of money by June without further aid.
Greece holds elections on Sunday. The Syriza party is expected to win the election. Syriza would like to default on existing debt and scrap the current bailout program; essentially challenging the status quo of fiscal austerity policy. What happens if Syriza wins the election on Sunday? Well, they will probably claim that fiscal austerity has contributed to the despair and poverty of Greece and created a humanitarian crisis in the country, deserving of special assistance.
Greece is an extreme case, as its output has fallen 30 percent since 2008, but not a unique case, as peripheral Europe has suffered disproportionately in the post-global financial crisis era. Syriza has already called for a “European debt conference†to renegotiate the current loan debt. No telling what could happen with such a conference; they might find a sympathetic ear or not; they might repudiate their debt, or not. Greece is unlikely to exit the Eurozone, but the Eurozone might try to kick them out, or not. The real risk for the EU is not a Syriza win, nor a Greek exit, but that EU policy fails to evolve and adjust to the shifting political will of its citizens, particularly now that populist and anti-establishment parties are finding their political voice on national and EU levels of representation. It’s not just Greece that has suffered under austerity.
Is Euro QE bearish for the US? It is widely expected that Euro QE will push down the value of the euro currency, which means European exports would be cheaper for US buyers, and in turn could negatively impact US exports which are already feeling the sting of a strong dollar. Further, cheaper euro exports might have a deflationary or disinflationary impact on the US.
