What's a Central Bank To Do? | Elliott Wave International

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What's a Central Bank To Do?
What if the ECB has an ace up its sleeve, and the next round of stimulus FINALLY does the trick?

By Vadim Pokhlebkin
Wed, 01 Aug 2012 12:15:00 ET

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"Stimulus" -- it's been the buzz word in the financial world in recent weeks.

Google the word and you'll get countless news headlines that claim world markets rallied "on the hopes of stimulus from the European Central Banks and the Fed," or that say prices fell when that hope "faded."

With so much focus on central banks, it's important to consider what difference (if any) the already HUGE amount of economic stimulus has made. Let's look at Europe.

It may be easy to forget, but as our European analyst Brian Whitmer points out in the new, August issue of his monthly European Financial Forecast,

"...over the past five years: The Bank of England, the European Central Bank, the European Commission and the International Monetary Fund have together cut interest rates to near zero; they’ve created three massive bailout facilities; they’ve engineered five emergency rescue packages; they’ve embarked on six rounds of quantitative easing; they’ve held more than a dozen crisis summits; they’ve supplied insolvent governments with short-term funding through the ECB’s discount window; and they’ve provided long-term loans through programs like LTRO.

"Yet, despite these strenuous efforts throughout this time, stock and bond markets across most of the eurozone have continued to fall, and the Continent’s overhanging debt has become more precarious than ever."

As a result, adds our August European Financial Forecast,

"...2-year bond yields are below zero in six European countries: Germany, Switzerland, Denmark, Netherlands, Finland and, most recently, Austria. In other words, bond investors are so worried about getting the bulk of their money back that they’re willing to accept a known loss over 24 months."

Now, here's the all-important question:

What if the ECB has an ace up its sleeve, and the next round of economic stimulus FINALLY stops the crisis?

You'll find our answer in the Special Section on pp. 2-4 of the August European Financial Forecast. Look below for details on how to get instant, risk-free online access.

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Tags: AEX, Bank of England, Ben Bernanke, CAC40, DAX, diversification, Elliott wave, europe, european central bank, European debt crisis, european markets, European Union (EU), eurozone, FTSE, golden ratio, Interest Rates, International Monetary Fund (IMF), monetary policy, quantitative easing, Swiss Market Index (SMI)

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