In a little publicized press release towards the end of November, the German High Court announced it was not going to make a ruling on the ECB’s OMT program this year.  The pundits have all arrived at the opinion that any ruling that emerges will not jeopardize the ECB program under consideration (the OMT, or Outright Monetary Transaction, is an announced program where the ECB promises to buy an ‘unlimited’ amount of government debt of any EU country whose bonds come under speculative attack — this announced policy was seen as key to stabilizing the government debt markets in Europe).

The fact that the Court’s ruling was put off until next year is symptomatic that the consensus view is wrong.  If the Court were to make a benign ruling, then there would be no need to delay the announcement.  Given the undermined length of delay in this ruling (it was initially expected that the Court would announce a ruling in November), one can only think that the Court is more inclined to rule against the OMT program — as it should given the Maastricht treaty and Germany’s Constitution — and it is delaying its ruling out of political pressure to reconsider.  A negative ruling by the German HIgh Court, against the OMT, would most likely throw the EU government bond markets into disarray, and cause a sell off in the bonds of the weaker nations of Italy and Spain.

At this point, we can only wait and see if the German High Court will yield to political pressure or whether it will make a ruling against the ECB.  Like the markets, we will move on and forget about this crucial issue until the High Court finally makes a ruling on this case — it is legally obligated to make a ruling at some point.

Should the German High Court rule against the OMB program, it may be the pin prick that blows up the carefully inflated bubble being created by Bernanke (and soon to be Yellen) and the Federal Reserve.

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