STOCKS LOVE EUROPEAN PROMISE

policy transmission in all countries in the euro zone area.”

In more simple language, Draghi promised that the ECB would create an “unlimited” amount of euros to buy the debt of the Southern European counties that currently may not be able to refinance their debts in the bond market, because of fears of their ability to repay that debt. While it is a powerful promise, Draghi still faces opposition from the German Bundesbank — and a potential legal challenge to the ECB’s ability to buy country bonds.

Still, global markets liked what they heard: a promise that Euroland would hold together. The implications for global trade and global financial institutions were all positive, as European stock markets soared along with the U.S. market.

Just one sticky issue: If the ECB is going to create more euros, what will that paper money be worth in a few years’ time? The answer was given by the price of gold, which jumped nearly $12, to $1,703 — capping a $100 gain in just the past two weeks, and a six-month high.

When a central bank creates additional money, it may avoid bank failures and move markets. But it also can destroy the future value of the currency. And that’s The Savage Truth.