Euro zone gets vast bond monetization

Avery Goodman: Euro zone gets vast bond monetization through the back door
Submitted by cpowell on Fri, 2011-12-23 04:08. Section: Daily Dispatches
11:11p ET Thursday, December 22, 2011
http://www.gata.org/node/10814

Dear Friend of GATA and Gold:

Securities lawyer Avery Goodman explains at Seeking Alpha tonight how the European Central Bank's new long-term refinancing operations (LTRO) will constitute back-door quantitative easing, as big banks borrow from the ECB at negligible interest rates, buy the bonds of insolvent governments that the ECB is prohibited from buying, collect a handsome spread, and keep coming back to repeat the maneuver while the eurozone figures out how to monetize those bonds permanently.

Of course setting up interest-rate differentials that only big banks and investment houses can exploit long has been how the Federal Reserve has reliquefied and bestowed lucrative patronage on financial institutions in the United States.

The gold carry trade of the 1980s and '90s, apparently invented by Robert Rubin while he was at Goldman Sachs, before he became U.S. treasury secretary, was the same sort of mechanism to support government bonds and enrich financial institutions -- borrow gold from central banks at negligible rates, sell it, use the proceeds to buy government bonds, and collect a big spread risk-free as long as central banks kept dishoarding enough gold to prevent the price from rising and as long as they were ready to write off borrowed gold in cash settlement of leases.

That the gold carry trade devastated gold- and commodity-producing developing countries was no deterrent; indeed, this devastation, the suppression of commodity prices, was another objective.

Thus Western central banking becomes an ever-more totalitarian and parasitic system, which is why GATA long has been opposing and trying to expose it.

Goodman's essay is headlined "How Gold, Silver, and Platinum Will Respond to ECB's Money Printing" and it's posted at Seeking Alpha here:

http://seekingalpha.com/article/315636-how-gold-silver-and-platinum-will-respond-to-ecb-s-money-printing

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.