ECB Buying Irish Bonds

Ireland is so bad, that investors are not buying their bonds. On Friday, the ECB (European Central Bank) had to buy Irish bonds to prevent yet another financial meltdown. One day it’s Ireland, the next day it’s Greece, then Portugal, then Spain, then back to Ireland… Ireland is back on the docket this week as it issues another $2 billion in bonds. I’m guessing that the ECB made a few phone calls and that this week’s auction will go smoothly.

http://www.zerohedge.com/article/ecb-stepped-rescue-ireland

You can see how the yields on Irish Bonds have gone through the roof recently. On a related note, things are so bad in Greece, that the ECB will not run a “Stress Test” on Greek banks ahead of their next round of bond sales. Again, no sane investor would buy something when they thought that important facts were being withheld, so the Government will step in with taxpayer money to buy whatever is left over.



From Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO-

http://ftalphaville.ft.com/blog/2010/09/19/346446/guest-post-el-erian-on-an-interesting-week-ahead/

“Market measures of risk for peripheral European countries (Greece, Ireland, Portugal and Spain) are at or near danger levels… despite exceptional support from the ECB, EU and IMF, and despite the implementation of adjustment measures on the part of some.

The failure to reduce risk spreads means that the public sector bailout is not working. Rather than provide assurances of better times ahead and, thus, encourage new investments, ECB/EU/IMF support funding is being used by existing investors to exit their exposures to the most vulnerable peripheral European countries.

This situation cannot be sustained forever. It undermines any chance that the most vulnerable countries (e.g., Greece) have of limiting the collapse in their GDP and maintaining social cohesion; it contaminates the balance sheet of the ECB; it exposes the revolving nature of IMF resources to considerable risk; and it raises the risk of renewed contagion.”

To summarize what I have been saying all along, the Government is using our money to buy the crappy assets from the banks at artificially high prices. The bankers are collecting their bonuses on the sales of these bonds at inflated prices. They then make huge campaign contributions to the politicians and hire the regulators who are supposed to be protecting the citizens, to be million-dollar lobbyists. And EVERYBODY KNOWS IT IS HAPPENING.

Good stuff…