IMF, ECB Desperation: Hyperinflate, Bail-In, Whatever it takes!

April 16, 2013 • 10:08AM

The IMF, Obama Administration, and U.K., French and Spanish governments are coordinating plans to gang up on European Central Bank chief Mario Draghi and the "northern Europeans" at the annual IMF-World Bank April 19-21 meeting, until they agree that the ECB must also open the hyperinflationary spigots, sources close to Spain's Prime Minister Mariano Rajoy told Spain's Voz Pópuli today. Reportedly, the intention is to turn the meeting into a "pressure cooker" on Draghi with the message: "forget inflation for a moment ... and step on the money printing press's accelerator as the other monetary authorities are doing."

ECB President Mario Draghi, for his part, focused on rapid action in setting up a "Single Resolution Mechanism" to handle bank collapses as the big solution. In a speech delivered to students in Amsterdam on today, Draghi said the ECB has done what is required to "avert an abrupt deleveraging ... panic and fire sales," but he insists a European banking union must be created, proposing that the ECB's now-operational bank "Single Supervisory Mechanism" (SSM) be "quickly complemented with a Single Resolution Mechanism ... to guarantee timely and impartial decision-making, particularly in the cases where cross-border resolution is required." He added that "a Single Resolution Mechanism is essential to ensure that the SSM's supervisory decisions for resolution can be followed up with action, without reinforcing the vicious link between banks and sovereigns."

Draghi did not mention that German Finance Minister Wolfgang Schaeuble had effectively gummed up the works on any quick action on that banking union front April 12, with his declaration at the European Finance Ministers' meeting that a banking union would require changing the EU Lisbon Treaty.

Voz Pópuli's sources at the ECB report that the ECB is, however, studying new mechanisms for bailing out the financial institutions, by accepting collateral from bankrupt small and medium enterprises (SMEs).