Reader Asks "Why Does Euro Rally When Trichet Buys Bonds and Dollar Sink on Essentially the Same Thing?"

In response to Trichet's Secret "Dragon Transfer" Letter to Italy PM; Watch France CDS Rates as France is "New Italy"; Trichet Illegally Usurps Judge-and-Jury Power reader Paul asks ...

Hello Mish

Really great work on Europe.

I'm so confused as to why in the USA when the Fed directly buys bonds and pumps $$ into the economy, it pushes our currency down, yet in Europe, when the ECB adds 800 billion to its bond buying program, it firms up the euro.

Can you help me understand this?

Paul

Two Reasons

1. If the ECB does not straighten this mess out, there will not be a Euro, or if there is one, it will be a Euro minus some countries. That is of paramount importance.
2. The Fed is simply printing money. In the Eurozone, there is an implied assumption that taxpayers, primary German taxpayers but secondarily French taxpayers will bankroll whatever idiotic thing Trichet does.

Whether the assumption regarding German taxpayers is true or not remains to be seen. The immediate problem is concerns the Euro is about to fly apart here and now.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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