Thursday, June 9, 2016


Mario Draghi said today what many of have been saying for some time (including Mario):  this stimulation thing isn't going anywhere unless reform comes to the fiscal side and there is a complete and speeded up reform of...(most importantly) labor laws.  He is right of course but it appears that this is more of a reaction to Mario beginning to feel the heat and a somewhat gratuitous piece of advice than any real commitment on his part to make what is needed happen.

Coming a day after the ECB began buying corporate debt in an extention of  failed policy one can't help but have the impression that the advice is hollow.  Worst yet, it is certain that it will be ignored.  Over There as Over Here, politicians love for the public to believe that it is not their problem to solve but that the intervention of the central bank will at some point cure all ills.  If Mario were truly serious, no speech would be needed: a simple "FINITO" would suffice.  I have done all in my power and all I intend to do; it is now your turn and you must face the voters with the results of your actions...or non-actions.  Janet should do the same thing but of course this central bank is now totally politicized as I have said many times before and it is insane to think that anything useful will be done in this, an election year.

To be truthful, I do not know if Sr. Draghi can, should he so desire, assume a totally independent path.    I would think he could but clearly the backlash against the office would be immense.  It is therefore perverse in a way to believe that perhaps the only way at this time to preserve the unity that the EU seeks is to first destroy what has become a bureaucrats Nirvana and rebuild on a more sane and inclusive approach, recognizing that the national difference of, to be honest, very different peoples must be taken into account in an economic union rather than a political one with economics attached as has been attempted.  If there is still a concern about Germany and France going to war every 40 years or so, one might as well forget the entire thing and move on separately.  There are threats but a reconstituted NATO is the way to deal with those.  And in this there is a giant place for the United States and it's contributions in an economic, political and defensive sense.

But it appears that these thoughts will not see implementation for a while if ever.  And therefore the most ignore risk seems to be that of BREXIT as a reaction to the entirely unacceptable status quo.  If it comes about, what will the the consequences?  I'm going to try to spell out what I think might happen over the next few days.  In the mean time, the Bund traded below 0.03 today.  In addition to Sr. Draghi, people should start listening to the markets as well.  They don't think it's happening either.

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