Black swans and white elephants: ECB’s Mario Draghi announces plans to buy 60 billion euros a month of euro debt until Sep 2016


Following today’s eagerly awaited speech by European Central Bank President Mario Draghi which covered the sensitive issue of a potentially lengthy quantitative easing program, the euro has already started to depreciate by 0.5% to $1.1555 at 1.43pm GMT.

Mr. Draghi announced an extended quantative easing policy, with plans to buy 60 billion euros ($69 billion) a month of public and private debt until September 2016.

The pan-European currency approached an 11-year low as Mr. Draghi’s measures exceeded a proposal the ECB was said to have considered for 50 billion euros a month.

The severely indebted Eurozone has experienced several bailouts in various regions over recent years, and the situation is far from improving, especially with confidence at a low point after last week’s decision by the Swiss National Bank to remove the 1.20 floor on EURCHF, creating what the industry is referring to as a black swan event across the entire financial sector.

This, added to the ruling by the European Court of Justice last week that the bond buying policy is indeed in accordance with European Union Law, could result in a large exposure of approximately 190 billion euros to the European Central Bank should Greece exit the European Union, and render the bonds a white elephant.

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Black swans and white elephants: ECB's Mario Draghi announces plans to buy 60 billion euros a month of euro debt until Sep 2016

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