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Get Your Share of an Extra Trillion Euros

When Gutenberg introduced the printing press to Europe, he never could have imagined this.

Like so many revolutionary inventions, it's proven a doubled-edged sword.

The U.S. Fed has begun winding down its latest QE program (for now), and the baton's already been passed to Japan with its own massive easing campaign.

But lack of inflation and concerns about outright deflation are again gripping Europe.

So the latest "noise" from the IMF and European Central Bank (ECB) is signaling that Europe is about to crank up its own printing press.

While the implications may be serious, the profit opportunities are even bigger…

Trying to Print Away Deflation

On April 2, IMF chief Christine Lagarde said the ECB should help along the continent's recovery by using "unconventional" policies.

With overall prices falling between 2% and 6.5% in the Netherlands, Slovenia, Portugal, Spain, Italy, and Greece, the Eurozone has endured five consecutive months of -1.5% deflation.

Debt-to-GDP ratios have continued to rise in Southern European economies, despite austerity measures. Spain and Greece still have unemployment running above 26%, with France at 10.3%, Portugal at 15.3%, Italy at 12.9%, and Ireland at 11.9%.

Clearly, the pressure on the ECB to "do something" is rising.

When the ECB then met on April 3, interest rates were kept at 0.25%. But Draghi shocked exactly no one when he said they were committed to nipping persistent low inflation in the bud.

He confirmed that quantitative easing was part of a "rich and ample discussion," with Eurozone inflation at 0.5%, well below the 2% target.

This was the first sign that some central bankers from within the 18 Eurozone members (Germany, mainly) were finally warming up to the idea of printing money.

Finally, Germany may have cleared its own internal resistance, allowing for QE to proceed unabated once and for all.

In July 2012, Draghi conjured a plan to "save the euro" with a bond-buying program called Outright Monetary Transactions, or OMT.

The program was challenged in Germany. Back in early February, the German Constitutional court in Karlsruhe announced its decision, ruling OMT to be unconstitutional, and saying only major modifications would make it suitable.

But then they passed the proverbial buck, referring the final decision on the matter's legality to the European Court of Justice in Luxembourg.

That, of course, is going to pave the way to take away any annoying obstacles and make it all happen on a grand scale.

Firing Up the Presses

Just last week, reports surfaced that the ECB has done financial modeling to gauge the effects of a 1 trillion euro annual bond-buying program to counter deflationary pressures.

In line with the Fed's own program, the ECB tested buying 80 billion euros monthly over a year, estimating it would boost inflation by 0.2% to 0.8%.

Realizing the strong euro's been weighing on hopes for inflation (it makes imports cheaper), Draghi's been talking down the currency every chance he gets.

There are two major "unconventional" policy options Draghi could well use. The first is of course printing to buy bonds.

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About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

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  1. Werner | April 14, 2014

    Europeans would certainly like a weaker Euro, but they are running against a big wall, the US's desire to have a weaker Dollar. Consequently they will have to be Lucky to see EUR USD back down to 1.36. Only two consecutive closings below 1.3550 will accentuate the pressure.
    I am surpised how little the Ukrainian unrest influences EUR/USD rate.
    Considering that in the 1980's, when Reagan bombed Tripoli, USD DEM rose more than 3% overnight, just to lose it on the following day again. Those were the happy days of "reasonable " forex volatility

  2. HYMN | April 15, 2014

    The main thing I took away from this was the idea that ECB money printing is folly,an error in judgement,and generally not a good thing. However, the Feds printing of money,and QE has been touted as genius,Ben to the rescue,TA-DA.

  3. RUSS SMITH | April 19, 2014

    Hi!, Patrons Of Money Morning Et Al:

    Although deflation announces risk to the Big Banks around the socialized world, inflation leaves the little guys at risk throughout their economy of scale; as announced many decades ago by Daniel Webster; when Mr. Webster announced: "Of all the contrivances designed for cheating the laboring classes of mankind, none has proven more successful that those policies t that delude them with issues of irredeemable, fiat, I Owe You Nothing, paper money. Our politicians can's sense that they are using the Big Banks to delude their constituents with trillions of debt money plus interest to debase OUR national, fiat paper currencies?

    RUSS SMITH, CA. (One Of Our Broke, Fiat Money States)

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