Lender of Last Resort For European Banks: Mario Draghi of the ECB
It appears that the European Central Bank under the leadership of Mario Draghi is following in lockstep with the policy prescription devised by the Chairman of the U.S. Federal Reserve, Ben Bernanke. Just as the Fed expanded its balance sheet to over $2 trillion, in the process becoming the lender of last resort to U.S. banks that would otherwise have been insolvent without the cheap credit from Bernanke (and changing accounting rules from “mark to market” to “mark to fantasy”), the ECB is now doing exactly the same in the Eurozone.
Already, through its stealth quantitative easing program, the European Central Bank has expanded its balance sheet by more than $1.3 trillion, thus preventing Europe’s banks from collapsing due to the weight of worthless assets they hold in sovereign loans to insolvent (and defaulting)nations such as Greece, along with Ireland, Portugal, Italy and Spain on their balance sheets.
It is no surprise that many investors, and certainly all the banks, are cheering central bankers such as Bernanke and Draghi. They seem to ignore the fact that if money printing by central banks were truly an effective method of restoring genuine economic growth, than counterfeiting would be legal for us all, and not just the trans-sovereign central banks.