After many years of falling short of expectations Mario Draghi and the European Central Bank stepped up big today. Going into the announcement today the consensus expectation was for the ECB to announce a plan to buy back bonds worth 50 billion Euros a month for the next year. The ECB decided to go big and instead will buy 60 billion worth of bonds from now until September of 2016. Markets took a while to digest the news but began to rally this afternoon. The hope is that flooding the Eurozone in cash will help fight off deflation and get the disastrously weak European economy back on track.
The move was pretty well received by many market participants. One could argue that this type of approach Draghi is using should have been applied much earlier, which would have gotten Europe on a similar kind of platform the U.S. was on. It is never too late to do the right thing, Stephen Schwarzman, chairman of the Blackstone Group LP, said in a Bloomberg Television interview today. The Wall Street Journal commented that "If the ECB's new bond-buying program works as intended, it should spur more economic activity there, which should mean more business for U.S companies and possibly more demand for U.S. workers."
Not everyone is so confident that the 1.1 trillion euro program is such a great idea. David Malpass who is the current President of CEO of Encima Global LLC and past Deputy Assistant Treasury secretary pointed out in an editorial in the WSJ today y that both the US and Japan have gone down this road yet there has been little to no growth in incomes or strong economic growth. He points out the Japan has repurchased binds equal to nearly half its GDP with very limited economic ...
