Thursday, August 02, 2012
The Day of The Dragon
That's the big news today. ECB is on the hook. What will they do? What will they promise? How much will they throw in the kitty?
ESM will be denied banking license, according to Draghi. The strong measures will include bond buying, it seems, but there's an awful lot of hedging going on.
Last update on news conference - in a stunningly weak response to questioning, Draghi asserted that the meaning of his earlier speech and today's guidance is that the Euro is not going to go away and that it is useless to short it, because it is a strong currency. Now he's bouncing around yelling, "Hit me, ya big bully! I dares ya!" This is excruciating - I can't watch any more.
Link to published Draghi statement:
The Governing Council extensively discussed the policy options to address the severe malfunctioning in the price formation process in the bond markets of euro area countries. Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy. Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. The euro is irreversible.In order to create the fundamental conditions for such risk premia to disappear, policy-makers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination. As implementation takes time and financial markets often only adjust once success becomes clearly visible, governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines.The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions. The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. In this context, the concerns of private investors about seniority will be addressed. Furthermore, the Governing Council may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission. Over the coming weeks, we will design the appropriate modalities for such policy measures.
He can't DO anything.
It's been 5 years. If you haven't found any new suckers yet, then you are the bag holder and the pressure is on YOU, not the fairy godbanker.
The can gets bigger every time you kick it.
The situation may get explosive from here.
Rammstein - Benzin.
The Chinese are now selling exploration rights for the disputed South China territories.
There's a lot going on, and ain't none of it good.
So now we find out what deflation looks like in the 21st century.
Agree that Draghi's insistence on Monti/Rajoy asking for a bail out was key. The whole secondary mkt. bond purchase idea was to help these two out so that they didn't need to ask for a bail out. If they ask for one, they are done politically, and we don't know what will replace them.
Europe is cycling through center-left and center-right gov't's right now. Soon it will realize none have the answer, and will turn to the fringes. Too bad. We could use a few Teddy Roosevelts, but instead we'll get populists of another stripe(s).
I'm not looking forward to what happens next, and I am badly shaken by this morning's events.
The Sicilians and Beppe got handed the ball this morning, and that was not what I expected.
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