Ask your friends and family this.

First, do you know what a gambit play is?

In the game of chess, you can offer a pawn early in the game (that is taken by the opponent) in exchange for gaining a positional advantage.

All gambit plays are inherently risky—you are giving a material (piece) advantage to the opponent in the game, and if you can't champion that inherent spatial advantage vis-à-vis your opponent in enough time, your risk was a failure, and you will lose the game.

The ECB is doing the same--a gambit play.

They are risking an early pawn (future price stability, ie long-term inflation) to provide European politicians with space, or rather, time to "win" the game.

Second, do you know how balance sheets work?

A balance sheet is composed of assets and liabilities, and assets must equal liabilities (forget owners' equity).

For the ECB, currency (Euros) is a liability. It increased the size of its liabilities (printed Euros) to buy assets (stuff the private-banks are willing to sell to them).

If the ECB bought an asset for 100 Euro today yet can't sell it for 100 or more Euro in three years--much like the failed gambit chess-master--the ECB has lost and allowed for inflation in the long-term.


You might be wondering who is the player here? Up to this point, it was the ECB--they made the gambit move seemingly last Friday.

The player going forward, however, are the European Politicians.

In the ECB gambit play, the ECB has provided Euro Politicians with three-years time to get the Euro zone in order ("winning" the game).

Hopefully the European Politicians are skilled players who can champion on the gambit. Because the last I heard, the opponent (the currency market) has a devastating counter to the gambit that takes three moves (years) to perform.


What happens if the Euro Politicians lose the currency chess game? Look out beloooow…..