• 2 days The Gold Rally Has Finally Run Out Of Steam
  • 2 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 5 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 5 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 7 days Why 12 Million American Millionaires Isn’t Good News
  • 8 days Big Oil Is Paying The Price For Investing In Renewables
  • 9 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 10 days Did Amazon Just Democratize Prescription Drugs?
  • 11 days The Private Space Race Just Got Very Real
  • 13 days Short Sellers Are Willing Big In This Turbulent Market
  • 14 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 15 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 16 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 17 days Black Friday Could Be Retailers’ Only Hope
  • 18 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
  • 19 days The Real Reason Why Uber And Lyft Stocks Have Soared Nearly 50%
  • 21 days Bitcoin Heads Towards $16,000 And No One’s Cashing In
  • 22 days Elon Musk’s $250 Tesla Tequila Is Already Sold Out
  • 23 days Will The San Francisco Wealth Tax Spark An Exodus Of The Rich?
  • 24 days The Fin-Tech IPO Of The Century Just Got Crushed
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

'No Limit' to Economic Madness

Last week the markets were upset because ECB president Mario Draghi did not do enough to combat deflation.


Draghi Recap

  1. ECB would continue its €60bn-a-month bond buying program for another 6 months until March 2017 "or beyond."
  2. ECB reduced key interest rate to a historic low of minus 0.3 percent.
  3. ECB pledged to buy more assets with the proceeds of its existing bond purchases.
  4. ECB announced it would buy municipal bonds in addition to standard government debt.

That Japanesque set of actions seems like one hell of a package but the market expected far more.

I commented on the package in Euro Surges, Bonds Sink as ECB's Rate Cut to -0.3% and Pledge of More QE Until March 2017 "or Beyond" Not Dovish Enough.


Offending Markets

Heaven forbid a central banker offends the market with an undesired announcement. Not upsetting the markets is the only "tool" central bankers have left.

So Mario Draghi followed up with a new pledge 'No limit' to ECB Action to Hit Targets.

The ECB pledged on Thursday to continue its €60bn-a-month bond buying quantitative easing plan until March 2017 and cut a key interest rate to a fresh record low of minus 0.3 per cent. But the measures disappointed investors that have come to rely on Mr Draghi to smash expectations, with a broad market sell-off after the ECB failed to deliver deeper cuts and an increase in the pace of QE.

In an attempt to reassure markets that the ECB has more firepower should inflation remain low, Mr Draghi said in New York on Friday that the central bank had "the power to act, the determination to act and the commitment to act".

He added: "There cannot be any limit to how far we are willing to deploy our instruments, within our mandate, and to achieve our mandate." He said there was "no doubt that if we had to intensify the use of our instruments to ensure we achieve our price stability mandate, then we would."

The central bank's mandate is for inflation of just below 2 per cent, a goal that it has missed substantially for the past two years when prices have risen by less than 1 per cent annually.

ZeroHedge has an interesting take on The Inside Story Why The ECB Decided "The Markets Needed To Be Disappointed" And How It All Fell Apart.

Here is an amusing video of a Draghi lie corrected on the spot.

The key moment is right at the end when Draghi corrects an obvious lie that the audience laughs at. Rest assured there is no limit to Draghi's madness.

 

Back to homepage

Leave a comment

Leave a comment