European "Corporate" Bank

I will keep this post short - I welcome today’s decision by Mario Draghi, the chief of the European Central Bank (ECB), to pump some of the new quantitative easing (QE) money into high quality corporate bonds. In general, I wouldn’t have favored this because this has a potential to set a wrong precedent and exacerbate complaints of crony-capitalism, but given the fact that there aren’t much new debt to buy from euro area governments, and the fact that no amount of bond-buying makes some of these governments to utilize that money to stimulate demand by efficient fiscal policies, and given another fact that many of these governments are waiting for private demand to catch up without any public investments or increase in public debt (in other words, they just don’t believe in Keynesian economic model), it makes sense for the ECB to pump money directly into the private sector by buying some of their non-bank corporate debt.

Now, how and who decides which company’s bonds to buy, how much to buy, when to buy etc..are still not very clear. And questions like if there will be a preference for one sector over another still exist (atleast in my mind, as I am yet to see all the details).  But as a general theme, and given the precarious situation they are in, I welcome the ECB’s decision to start pumping QE money directly into the region’s corporate bond market.