Big guns are often overrated. You see it in nearly every aspect of life from academia to fashion to entertainment to politics to sports to Wall Street.
Another big gun, Mario Draghi, spoke yesterday as the ECB played its version of Texas Hold 'Em and went all-in. All-in to what? Well, that's the part nobody really--especially Magic Mario--knows. Quite often in life we look for one thing and get another. A business associates says it reminds him of his ex-wife.
We could be PC and say a lot of the feminine gender probably could claim the same concerning thier ex-significant other, but we're fresh out of--much like the globe's central bankers--PC props. What we're interested in is rubber and roads.
To recap, the ECB cut it's main interest rate to zero and it's deposit rate ti minus-0.4% and upped its asset purchasing scheme (Yes, that's the correct term!) to $88 billion or 80 billion euros a month. We can only hope the television cheap shot artist Keith Olberman wasn't paying that much to lounge in one of the Trumster's tony towers.
Also on their plate is "ultra cheap" long term financing for those anemic shells known as EU banks where under certain conditions the banks will get paid for borrowing money from the ECB. The new twist, however, is buying corporate bonds--note the sell off in Treauries and the run-up in corporate bonds after the announcement--while equities pretty much shrugged briefly and went back to snoozing.
Some say this is about credit-- credit, you might recall, equals demand and demand with too much credit chasing too few things, equals inflation. Others say this changes focus from interest rate differences and foreign exchange rates as the path to the Yellow Brick Road of Inflation.
Meretricious is an interesting word. Webster's defines it as tawdry, cheap decorations and that's what Europe's banks are--the deep, ugly pockmarks below all the ECB's cheap makeup. The problem with cheap makeup is its difficult to wash off. U.S. corporations will likely issue more corporate debt in euros since the price of debt service is right to fund equity buybacks to pump more air in what is already the second longest U S. bull market in history.
Sounds like just what the world needs now.
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