ECB president Mario Draghi pulled out a bazooka today with a package that allegedly exceeded expectations.
- QE goes from €60bn to €80bn
- ECB to buy corporate bonds
- ECB Cut the deposit rate to -0.4% from -0.3%
- The main refinancing rate fell by 5 basis points to 0 percent
The Financial Times reported “The euro dropped sharply in response to the package of measures – a clear sign that the central bank had manage to excel even aggressive expectations.”
Oops!
Second Thoughts
It’s not the news that matters, it’s the market’s reaction to it. The market had strong second thoughts.
That’s a huge 2.7% swing in about 3 hours.
So much for the bazooka theory. Is this a “clear sign” Draghi failed?
Mike “Mish” Shedlock
16 second video summary:
Now for the real fun. ECB QE will continue, yet the reason (excuses) for it will continue for as long as somebody believes them, or acts as if they do.
While Dhragi would have loved it if ECB QE actually created inflation so that long term debt was depreciated in value over time, he will end up with simple monetization of Euro Debt and the lowering of sovereign interest rates via brute force money printing. ECB QE is all that is keeping the Euro project solvent now. The only alternative is actually each euro-country living within its means, which is preposterous.
As I wrote before, when you are falling off a cliff, you may as well flap your arms since it can’t hurt and it might help. The Eurozone is now in the arm flapping state.Soon to be followed by a splat.
Mish, this is a clear sign their economy is in worst shape! And, the players in their market recalling they can make money when their market is going up, or going down! Only the pigs don’t make money! 😉
Well this time he didn’t fool the market, only himself and his CB-friends. About time!!
How the f… is it supposed to be ok to incentivize debt-driven consumption when most ppl are too much in debt already (merely saved by the illusion of bubbly valued assets) and when probably about 75% of all new debt goes stealing from the future with unnecessary consumption or non-productive “investments” .
Stupid, stupid, stupid, is what the man is. May he burn for this! (and surely he will, but far too late)
Well this time he didn’t fool the market, only himself and his CB-friends. About time!!
How the f… is it supposed to be ok to incentivize debt-driven consumption when most ppl are too much in debt already (merely saved by the illusion of bubbly valued assets) and when probably about 75% of all new debt goes stealing from the future with unnecessary consumption or non-productive “investments” .
Stupid, stupid, stupid, is what the man is. May he burn for this! (and surely he will, but far too late)
And, what exactly is Mario Draghi’s latest “action” supposed to accomplish?
For the banks, and the market seems to recognise that that means the economy is in worse shape .
http://www.bloomberg.com/gadfly/articles/2016-03-10/mario-draghi-backs-banks-ahead-of-2-3-trillion-maturity-cliff
The real failure is ECB ( and other central banks) believed it could perpetually keep the economy going up. With all the debt in the system and a slowing economy, the likelihood of defaults is very high.