>   
>   (email exchange)
>   
>   On Tue, Oct 12, 2010 at 1:17 PM, Kevin wrote:
>   
>   Warren
>   
>   I am interested in your views on this development
>   
>   It would strike me as either blather or a dramatic reversal of fortune for
>   the continent
>   
>   Any thoughts?
>   

Weber has been against it from day one, which tells me he doesn’t get it at all. For now he’ll keep getting over ruled, but that can change down the road when ECB management turns over.

Yes, if this were to happen in this kind of economy it could all head catastrophically south very quickly again, and, as before, not end until the ECB resumes writing the check.

The problem is he doesn’t understand that inflation and currency weakness would follow from excess spending by the national govts, which is both not the case and under control of the ECB while they are funding. Instead he thinks the bond purchases per se somehow matter, though with no discernible transmission channel.

Weber Says ECB Should Phase Out Bond Purchases ‘Now

By Gabi Thesing and Christian Vits

October 12 (Bloomberg) — European Central Bank Governing
Council member Axel Weber said the ECB should stop its bond-
purchase program and signaled that it’s time for officials to
show how they will withdraw other emergency measures.

“As the risks associated with the Securities Markets
Program outweigh its benefits, these securities purchases should
now be phased out permanently,” Weber said, according to the
text of a speech delivered in New York today.

“As regards the two dimensions of exit consisting of
phasing-out non-standard liquidity measures and normalizing our
clearly expansionary monetary policy, there are risks both in
exiting too early and in exiting too late,” Weber said. “I
believe the latter are greater than the former.”

Weber’s comments are the strongest so far from any official
on how the ECB will withdraw its emergency stimulus measures.
They come as governments and banks in some euro nations such as
Ireland and Portugal struggle to convince investors about their
financial health and as other major central banks signal their
willingness to add more stimulus to their economies.

The remarks also come less than a week after ECB President
Jean-Claude Trichet’s last policy statement, when he declined to
comment on the timing of the ECB’s exit strategy.

The bond purchases were opposed by Weber when they were
started in May as part of a strategy to keep the euro region
together after the Greek crisis threatened to undermine the
currency. The ECB stepped up its bond purchases at the end of
September, buying 1.38 billion euros ($1.9 billion) in the week
to Oct. 1, as tensions reemerged in Portugal and Ireland.