Friday, April 26, 2013


Someone leaked a Bundesbank report today which claims that the exercise by Sr. Draghi and the ECB of which we spoke of yesterday, namely the "Draghi Put" on sovereign debt was contrary to EU rules inasmuch as the ECB has no mandate to save failed states.  If that view is adopted in Germany across the board, I'm afraid it is game, set and match.  Hearing this I was reminded that the German "commitment" to this activity is, at the present time, limited to 190 billion Euros.  More importantly, the German Supreme Court only gave conditional approval to the scheme and is scheduled to re-visit the issue in June for a final ruling.  Clearly, the leak was designed to influence official thinking and public opinion in the month and a half following.

This is no small matter.  Reaction has not yet been fully expressed.  I'm going to wait until next week before going further as this and the efforts in Italy to form a new government should dominate the weekend.  In the mean time if you wish to have a laugh, read the op ed page of the Times today.  Rugoff/Reinhart vs. Little Paulie.  Hysterical.  It brings to mind the comment of Henry Kissinger who, on speaking of battles within academia as being so fierce, remarked that the reason was that the subject matter was so unimportant.

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