Sure he can, and pigs can fly. What have such rescues so far produced? The euro has declined from 500 euros in 2008 to an ounce of gold to its present 1322 euros to an ounce of gold. The only way that the ECB has found to “preserve” the euro in the last 4 years is to inflate it and destroy its value. The governments, in vain Keynesian attempts to hold price levels up above equilibrium levels, have produced bigger and bigger deficits and seen their bonds fall in price anyway. Major banks remain insolvent. Europe is prime evidence of the bankruptcy of Keynesian ideas.
If the ECB attempts to back up the bonds and banks of countries in the eurozone with even more fiat euro creation, and if the ECB attempts the impossible feat of maintaining asset price levels above their fundamental values by such continued inflation, there can be only one result: the euro will decline in value against gold, against goods, and against other currencies that inflate by less. Asset price levels will not rise in real terms. The additional inflation will create uncertainty and cause capital accumulation and saving to falter. Securities may well fall in real terms.
All that is happening if the ECB does what Draghi promised, which is to do whatever is needed to preserve the euro, is to turn his printing press over to the governments in the eurozone. He will aid and abet the past, present, and future fiscal profligacy of European governments. How can he save the euro by destroying whatever independence the ECB might have? It is an impossibility. He can’t preserve the euro by destroying its value. The only possible way to save the euro is NOT to print more.4:29 am on July 27, 2012 Email Michael S. Rozeff