Printing money ad infinitum...

The Fed in the US has embarked on yet another round of money printing - QE3. This bouyed the share markets initially but since then the reality in the Eurozone has come back to haunt equities.

In a fiat economy (unbacked ) monetary system, central banks do not need assets,apart from using them for monetary control. They are able to create paper money ad infinitum and as long as people are prepared to settle transactions with the newly printed cash and the state can settle its tax obligations, then this type of fix can work. In the Eurozone this scenario may not work so well.

Copying the US without a Treasury may cause more harm than good. After all, in most cases high public debt in European countries would pose a big challenge to replicating the US fix. The Treasurys recapitalisation has credibilty because the Dollar is seen as a safe haven.

This is not the case with the Euro!

Until the European central bank can come up with an acceptable and credible plan, then the equity markets can not sustain their recent rise.