Thursday, July 26, 2012

Is Draghi Serious or Just Jawboning?

That is the question.

Earlier today in London, Mario Draghi, the head of the European Central Bank, said that he would "do whatever it takes" to save the eurozone. He can do this by buying up sovereign debt of eurozone countries that are having trouble raising money on their own.

Draghi can just have the ECB print up the money. He said that he has authority to do this:
Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate.
This is why markets are up today. But the question must be asked that if Draghi really believes this, why is most of the Spanish yield curve above 7%.

Bottom line:Watch what Draghi does, not what he says he is going to do. There is no indication that he, at present, is intervening in the markets to bring PIIGS interest rates lower.


  1. All comes down to whether the Germans will tell club med and France to take a long walk off a short pier and go back to being the bad eggs of Europe or being good Europeans which means putting (or allowing Mr Draghi) their hands in their pockets.

  2. He probably told his buddies to go long on the appropriate index funds then opened his mouth. They've probably exited by now, pocketing a nice sum (who, me? Cynical? Nawwww...)

    1. Yep, and ALL of his "buddies" are supporters of the New World Order. That's just a given. They continue to get stronger and stronger and the rest of the world weaker and weaker... soon, they will control it ALL and it won't matter what passport you have!

      Same thing happens in the US, the politicians have been selling that "type" of info for decades! I could go on and on, but I won't.

    2. Seems to me that the "New World Order" started way back in the 1930's with Herr Hitler. Ahem, ahem !!!

      Eighty plus years later, Deutschland has finally achieved its "Deutschland uber alles" w/o
      the bloodshed of war. Unbelievable !!!

    3. Oh, please do !!!

  3. Don't get too close to this monkey - he flings poo...

  4. Till now printing money could not solve the problem. Markets are only drawing strength from Mr. Bernanke and Mr. Draghi. Strange??

  5. Major diluting of the Euro is just a Bernanke trade to kick the can down the road and digging the hole deeper for future generations - eventually the younger generation will recognize this and default on all these loans, leaving the soverign bond holders holding the bag. Next, currencies backed by gold because we know polititcians in all countries can not and will not manage money appropriately. Rich