Mario Draghi Distracts Investors With Just Promises To Save the Euro
By: John Browne
Market Oracle
Aug 06, 2012
In the last week of July, ECB President Mario Draghi attracted investor interest worldwide by saying that he would do “whatever it takes” to solve the Eurozone crisis and, in the process, save the euro. Markets rallied as investors concluded that Mr. Draghi could only be referring to the financial heroine of quantitative easing (QE) and the transfer of toxic Eurozone sovereign debt assets from troubled private banks to EU taxpayers. This mini rally built on momentum that had previously been fueled by belief that Fed Chairman Bernanke would imminently announce a further round of QE in the United States.
Given the record of Central bankers for encouraging hopes that invariably have proved fruitless, it was surprising how international financial markets appeared to be taken for yet another ride. But addiction is powerful and financial heroine is little different to the real thing in its ability to fire optimism.
True to form, neither banker delivered the goods. On August 1st, Bernanke disappointed markets by failing to announce any QE despite offering a gloomy economic outlook. Stock markets wavered, but hung their hopes on Draghi. But the next day the ECB made vague promises of future actions but offered no definitive actions. Financial markets were deeply disappointed. The euro fell as Italian bond yields surged. In the United States, the Dow fell by almost two hundred points at one stage.
In order to lessen the anti-climax, Draghi feigned amazement that his July 26th statement had received so much attention. It was a display of arrogance typical of the Anglo-American led central banks. However, despite denying the markets the red meat that they most wanted, Draghi encouraged further anticipation in three important areas.
The Rest…HERE
