Friday, 27 July 2012
Mr Draghi, are you wearing any clothes?
The thing is:
1) The ECB can't do much more without further agreement from Germany
2) Germany is on holiday
3) The problems in Spain and Greece can only really be fixed by a massive devaluation via Quantitative Easing - Germany will not agree to this.
So..what exactly is Mr Draghi going to do - what is his bazooka in the modern finance parlance? It is not QE or use of the ESM monies to buy bonds because he is not allowed to do this.
perhaps it is more Bond buying, this in the medium term is nuts. The ECB is going to own all this peripheral debt when the balloon goes up and be seriously bust as a consequence. Who can bail out the ECB when it has already called on all the funds of the Eurozone?
I think this statement yesterday, as much as it rallied the markets, sounds like the last throw of the dice to buy some time over the summer. I wrote earlier this week that August will be critical, its still looking that way.