Well… yes? Hmmm… The new wizard wheeze or another doe doe?

It’s just that I’m a bit thick and I don’t quite understand the logic of it all. First of all we were told that the countries of the EU would fund the IMF to the tune of 200 billion Euro so that the IMF could then lend that back to the countries of the EU needing help. Okay. Of course that couldn’t be achieved so it was notched down to a European funding of the IMF of 150 billion Euros which the IMF would then use to refinance countries of the EU…

Then of course the great liquidity fix! Hurray! They’ve done it at last! The ECB would lend unlimited amounts to the European Banks for a three year period at an interest rate of 1% ! And indeed the said banks snapped this offer up for an amount of approximately half a trillion. Well why wouldn’t they? So okay! Everything is fine! No more sovereign debt crisis and we can all enjoy Christmas!

But wait a minute. Why is it all so tortuously complicated? And what will the outcome be? With this wallop of cheap funds what are the precarious banks going to do? Well anything, from throwing the cash back at the roulette table of structured multi layered derivatives and so on. (And losing it all again as tends to happen to addicted gamblers). Or else, wait, they can lend the states’ in debt at interest rates of 4% to 5% and make a pretty little profit on that, while perpetuating the sovereign debt crisis. Or they might just use it to shore up their tottering balance sheets and not lend anything to anyone. A dead end…. huh?

Wouldn’t it have been simpler and more effective for the ECB to lend to sovereign states directly at 1% instead? Or, in any case why the rigmarole of sending funds to the IMF in the hope that they will come back again? Or… Why give the banks cheap money and not states who could then use these funds to nationalise (and hence recapitalise and REGULATE the banks?) Or…. But no, no, no! None of that is feasible!

Anyway, it’s the banks that need saving, dumbo, not states which can just collapse as far as anyone who really matters cares! And the sooner that happens, the better. What a killing to be made when it does! (The sound of financiers’ hands being rubbed vigorously together). And then you keep forgetting! The ECB must under no circumstances EVER lend to states! You should know that! But… why?

It’s against ze rules, silly! Rules engraved on stone tablets!

So are we back to square one again? Apparently there is optimism that the Euro will be saved after all. At least for a select few. But then there is always optimism in the EU after every new announcement of measures designed to solve the crisis which they never do. Why should this be different?

Too little too late again? Or a last heroic stand? Or a first timid step to real measures? Or…. Does anybody know? Probably not. Does anybody care? I leave the answer to that one to you.