In this week's conversation we will focus our attention once more on Europe and the impossibility of "Squaring the Circle" even through European Banking Union.
By tying itself to Europe via swap lines, the FED has increased its credit risk and exposure to Europe:
"If the ECB does not embark in Quantitative Easing, the Fed will bear the burden, because the worse the private sector of the EU performs, the more dependent it will become of US dollar funding and the more coupled the United States will be to the EU." - Martin Sibileau
Unless of course Mario Draghi goes for the nuclear option, Quantitative Easing, that is.
And as indicated by Martin Sibileau from his note from the 17th of October "The EU must not recapitalize banks":
As the ECB approaches the zero bound boundary in its "easing" process, the only tools left will of course will have to be "unconventional" as pointed out in our conversation "Fears for Tears" in August: