November 2014        

Green light for risk-free speculation

The European Central Bank plans to buy rebundled packages of debt and covered bonds, secured on assets such as property. It will include buying debt with a credit rating of “junk” from Greece and Cyprus, as long as such countries are under a formal international financial programme.
      The danger for working people throughout Europe is clear. The ECB will buy “low-quality loan securitisations” at inflated prices as part of its scheme to buy so-called asset-backed securities. These are created by banks pooling mortgages and corporate, car or credit card loans and selling them to insurers, pension funds, and now the ECB.
      The credit risks taken by private banks would be transferred to the ECB, and therefore to taxpayers, without getting anything in return. The incalculable risk is socialised. Those who speculate will make huge profits and derive great benefit, while the losses will be socialised, and working people throughout Europe will pay the price. It’s a win-win for the banks and finance house.
      This is something the CPI has been pointing out for a long time. These institutions have been established to facilitate, to advance and protect the interests of finance capital, not to protect the people’s interests. The announcement by the ECB is the green light for risk-free speculation.

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