Oscar García Muñoz, follow it on other blogs here .

Europe already makes money

In the end, everything is a matter of time. On Thursday May 7, European Central Bank (ECB) not only lowered interest rates to 1%, a move considered historic, but announced a series of extraordinary measures. The most important (and disturbing, in my opinion) is to buy debt. The ECB said it would buy 60,000 million euros in covered bonds (backed securities in a housing credit issuing banks to refinance and have liquidity), which means one thing: Jean-Claude Trichet, president of the issuing bank in Europe, and has given the order to give speed printing of bills, or put another way, as there is fear of deflation.

The measure is far from the massive purchase of debt raises the U.S. Federal Reserve (as we discussed in a previous article), but it certainly is symptomatic. The ECB is characterized by its deep conservatism money: God forbid the governing council to take precipitate action. I would say: God forbid the ECB to take action in time.

Possibly, when economic historians have time to see events in perspective, will make Trichet and their managers some serious accusations. It is true that the 2007 data showed a strong credit growth and inflation tended to rise due to the pressure of oil and food. At that time, the ECB took the worst possible decision: to raise interest rates to 4.25%. Suddenly, he broke the credit market, to drown families with mortgages.

In August 2007 the stock market began to collapse, banks eager to attending auctions and issuing bank provided special auctions began. The "credit crunch" had begun. Then there was the whirlwind known: balance sheets troubled assets, I do not trust to lend, lest I do not give it back, the interbank market collapses and presto! credit crunch and the data are beginning to discuss the financial crisis hit the real economy.

Now, putting biblical comes weeping and gnashing of teeth. The rate of reduction of the price of money in the EU has been anything but agile, unlike the Federal Reserve and the Bank of England (the latter started from a level of 5.25%). Now, the extraordinary measures will not be immediate, but from June. As if we were not for a rush, go.

However, if the ECB, which implements monetary policy catenaccio, and opt for these measures, how it should be the financial system and the real economy! Do not go too far, because the European Commission foresees a collapse of European GDP of 4%, no less. However, even with this situation, it is clear that there will be further reductions: already said Axel Weber, president of the German Bundesbank and known "hawk" in monetary policy. Recently, went on to say that 1% was the floor price of money. We'll see, Herr Weber.