It's been just a few days since my "Modest Proposal" post and the ECB is (finally) poised to intervene in the government bond market, looking to buy PIG(S?) debt in the secondary market. Excellent decision, if I may say so myself (insert false modesty). And to be really effective it should be a massive, knock-out blow. Hopefully ECB has some canny market operators in its staff who know how to act for maximum effect.
But as my proposal detailed, it's not enough for the ECB to just buy and hold existing government bonds on its books. The second step in this process, the exchange of old bonds for new ones at cost resulting in a reduction of debt by 30-50%, ought to follow immediately. The benefits to the national economies from a lower debt load and smaller interest payments would be very significant, making the market's reaction to the ECB operation even more pronounced.
Better yet, if the ECB exchanged the national bonds with Euro-bonds that are - almost certainly - coming, we would be talking about a Perfect Storm hitting the shorts.