Get Your Share of an Extra Trillion Euros Money Printing

By: Money_Morning

Peter Krauth writes: When Gutenberg introduced the printing press to Europe, he never could have imagined this.
Like so many revolutionary inventions, it's proven a doubled-edged sword.

The U.S. Fed has begun winding down its latest QE program (for now), and the baton's already been passed to Japan with its own massive easing campaign.

But lack of inflation and concerns about outright deflation are again gripping Europe.

So the latest "noise" from the IMF and European Central Bank (ECB) is signaling that Europe is about to crank up its own printing press.

While the implications may be serious, the profit opportunities are even bigger...

Trying to Print Away Deflation

On April 2, IMF chief Christine Lagarde said the ECB should help along the continent's recovery by using "unconventional" policies.

With overall prices falling between 2% and 6.5% in the Netherlands, Slovenia, Portugal, Spain, Italy, and Greece, the Eurozone has endured five consecutive months of -1.5% deflation.

Debt-to-GDP ratios have continued to rise in Southern European economies, despite austerity measures. Spain and Greece still have unemployment running above 26%, with France at 10.3%, Portugal at 15.3%, Italy at 12.9%, and Ireland at 11.9%.

Clearly, the pressure on the ECB to "do something" is rising.

When the ECB then met on April 3, interest rates were kept at 0.25%. But Draghi shocked exactly no one when he said they were committed to nipping persistent low inflation in the bud.

He confirmed that quantitative easing was part of a "rich and ample discussion," with Eurozone inflation at 0.5%, well below the 2% target.

This was the first sign that some central bankers from within the 18 Eurozone members (Germany, mainly) were finally warming up to the idea of printing money.

Finally, Germany may have cleared its own internal resistance, allowing for QE to proceed unabated once and for all.

In July 2012, Draghi conjured a plan to "save the euro" with a bond-buying program called Outright Monetary Transactions, or OMT.

The program was challenged in Germany. Back in early February, the German Constitutional court in Karlsruhe announced its decision, ruling OMT to be unconstitutional, and saying only major modifications would make it suitable.

But then they passed the proverbial buck, referring the final decision on the matter's legality to the European Court of Justice in Luxembourg.

That, of course, is going to pave the way to take away any annoying obstacles and make it all happen on a grand scale.

Firing Up the Presses

Just last week, reports surfaced that the ECB has done financial modeling to gauge the effects of a 1 trillion euro annual bond-buying program to counter deflationary pressures.

In line with the Fed's own program, the ECB tested buying 80 billion euros monthly over a year, estimating it would boost inflation by 0.2% to 0.8%.

Realizing the strong euro's been weighing on hopes for inflation (it makes imports cheaper), Draghi's been talking down the currency every chance he gets.

There are two major "unconventional" policy options Draghi could well use. The first is of course printing to buy bonds.

The second is keeping interest rates low, even once the economy starts to improve... just in case. He may even lower deposit rates below zero - essentially charging banks for leaving cash with the ECB.

That's been the case since 2012 in Denmark, helping the Danes become the most debt-ridden people in the world, as they borrow ever more.

Imagine the possibilities when the same policy begins rolling out across Europe...

Odds are the ECB is more ready than ever to unveil a bond-buying program the moment it gets the go ahead.

Ride Their Folly to Your Profit

So how do you prepare and profit as Europe follows in the footsteps of America and Japan?

On the conservative side, consider hard assets like precious metals, commodities, commodities producers, and even real estate to protect against the inflation that the ECB is hell-bent on achieving. These will protect and grow their value as inflation sets in. That's my main focus for subscribers of Real Asset Returns.

If you want to take a more aggressive approach, consider a European stock ETF, like the iShares MSCI EMU Index ETF (NYSE: EZU). It's up about 34% since bottoming last July, but when the ECB creates conditions similar to the Fed in the United States, it's likely to head much higher.

And finally, you could short the euro, the value of which the ECB would happily see decline against other major currencies. If the EUR/USD exchange rate drops below 1.35 (the 200-day moving average) and keeps heading lower, you could use the ProShares UltraShort Euro ETF (NYSE: EUO), which aims to generate twice the inverse daily returns of the U.S. dollar price of the euro.

Remember, if anything strikes fear in the heart of a central banker, it's dreaded deflation.

And the ECB never met a QE program it didn't like.

Easing is coming to Europe, and it's only a question of when. So take advantage of their fiscal largesse by positioning yourself now...

Source : http://moneymorning.com/2014/04/14/get-your-share-of-an-extra-trillion-euros/

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