France - License to Print

Written By: The WealthCycles Staff

The European Central Bank (ECB) sets no limits in Paris to save its banking system. Bonds of any quality, it says, can in fact be minted into euro beyond the Alps.

The euro speaks French.

While Cyprus suffers the compulsory levy on current accounts, ECB President Mario Draghi grants a special permit to Paris in order to inject liquidity into its system. Reason?

The rescue of the banking system in France is evidently too important to take the risk of seeing it sink. In particular, a large bank intimately tied to the present world monetary system would be expected to falter.

The French bank’s name has not been revealed, but it is likely one part of the trio: BNP Paribas, Société Générale, Crédit Agricole.

Berlin warns

First to report the news was a German newspaper, Deutsche Wirtschafts Nachrichten, later backed by the most authoritative publication, Die Welt, according to which the value of the garbage used as collateral for fresh euros amounted to about 440 billion euro. Of these, 370 billion are well represented by bonds, the vast majority issued by the same, insolvent French banks.

A complex system

Following the 2008 financial crisis, the ECB began to provide liquidity to banks in exchange for collateral. It started out requiring triple-A securities, according to its statutes, but soon ended by accepting securities with BBB- ratings. After two years of suspension, the purchase program was restarted in late 2012, with no time limit. Among the titles accepted, now there are also those

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