It's Dragster time, Mario Draghi, the European Central Bank President unfurled another of his great attacks on what MSM, in their lockstep, ignorant cheer-leading, calls "stubbornly low inflation." The only stubbornness here is the failure of these self-appointed economic gurus unwillingness to admit their policies have been and are an abysmal failure.
But take a deep breath and slow your heart rate down, Magic Mario stands "'Ready' to Do More," the WSJ reports today. The European Central Bank won’t hesitate to boost its stimulus in March if it believes recent financial-market turmoil or lower oil prices could weigh further on stubbornly low inflation, ECB President Mario Draghi said.
“The ECB is ready to do its part” to bolster the eurozone’s economy, Mr. Draghi told European lawmakers in Brussels, underlining the bank’s readiness to reconsider its €1.5 trillion stimulus at its next policy meeting on March 10.
There are a lot of funny lines in here. "The ECB is ready to do its part," is just one of them. We thought that's what they been doing.
The hearing, at the European Parliament, was keenly watched by investors for signs of how the ECB might respond to the recent bout of financial-market volatility. European bank stocks have come under particular pressure, raising fears that rising equity costs could constrain lending and undermine the ECB’s efforts to boost the economy.
“The ECB is facing a credibility challenge,” both in terms of its ability to drive inflation back toward its target, and in protecting the stability of the eurozone’s financial system given the sharp drop in bank stocks, said Lena Komileva, an economist with G+ Economics in London.
The ECB isn't alone in facing this so-called "credibility challenge." More and more people around the globe are catching on to these bureaucratic eunuchs.
In the same section of the Journal the cheerleaders there rolled out a new column with this preface:
Today begins a new column called Streetwise...on markets and economics. Its goal is to explain how markets really work--or don't work--what that means for investors. Excuse us for the thought, but we were under the impression that that's what this more than a century old scribe has been doing all these years.
The crux of the article is that negative interest rates haven't created the expect reaction in currency markets. Negative rates are supposed to weaken not strengthen currencies. A host of central banks from Denmark to Sweden implemented negative rates. But enter stage left, Japan, and somehting happened on the way to bolster your export markets.
Then yen after just one down day rallied against the U.S. dollar and is now 4% higher than before the cut. Ditto for Sweden last week and its krona after the Riksbank cut rates to -0.5%. The article continue to confirm your worst nightmare, saying that central banks "retain the ultimate weapon to fight deflation: the printing press."
Negative interest rates are the symbolic band aid on a gaping wound that requires much subcutaneous undermining to repair properly and cause real healing. The author then goes on to push the establishment party line, quipping: "...this looks more like a lack of belief in the power of negative rates than a loss of trust in the entire central bank arsenal."
He precedes this insightful gem with the usual potshots at the gold bugs, a necessary stratagem for telling us all that despite the facts, fiat money is alive, well and printable. His conclusion is the usual one we hear from Keynesian in-doctrinaires, the cuts were too small.
But here is his kicker: If things get worse, the Fed will really roll up its sleeves and unleash the really big guns to save us all, QE4.
Just keep the faith in central bankers, folks, and we'll get you through this. We feel better now. Hope you do.
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