ECB Buying Frenzy
Anything can be bought these days, even an economic boom.
In times of the pandemic however, this is twice as expensive because the real economy (where real people produce tangible goods for real customers), returns with difficulty from its depressive phase:
❧ Most economists expect the domestic economy to return to pre-crisis levels in 2022.
❧ For 2020 as a whole, the German government in particular is anticipating a GDP decline of 5.8%. It would be the worst economic slump in German post-war history.
While the doctors eagerly search for a vaccine against the coronavirus, the economists of the European Central Bank (ECB) believe they have found the right supplement for the European economy: the central bank money created out of nowhere.
At the beginning of June in the fight against the pandemic, the ECB almost doubled its PEPP (Pandemic Emergency Purchase Programme), decided on March 18, 2020 at €600 billion, to now €1.35 trillion. The experts are therefore allowed to buy stocks and bonds from the market until mid-2021, which would otherwise be difficult to sell there.
ECB Buying Frenzy
Volume of assets held from bonds and stocks, in billion euros
The money, which was not available before the act of buying, is injected into circulation in varying doses.
❧ In the week up to last Wednesday, the ECB and the 19 affiliated central banks acquired securities worth €22.1 billion.
❧ In the previous week the volume was €15 billion.
❧ In mid-July, the weekly volume was €27.2 billion, which in turn can still be described as moderate when measured against the May injection, when the ECB and its European partners injected €40 billion into the circulation of money.
❧ If the current purchase authorization for the ECB is not sufficient, as reported by the “Börsen-Zeitung”, the program will be increased by several hundred billion euros at the turn of the year.
Conclusion: The miraculous increase in money works like the Gauls’ magic potion. You feel stronger than you are. Pray for the grace of God when the effects wear off.
Gabor Steingart 
