Archive - Aug 2, 2012

The rate announcement is not the surprise: virtually nobody expected a cut which would have taken the deposit facility to a negative rate and the monetary Twilight Zone. Where the surprise will come is what Draghi announces at the press conference in 45 minutes time which we will livestream when it starts.

Investors now look to the European Central Bank’s rate decision at 1145 GMT.  If “Super” Mario Draghi doesn’t come out with a loaded arsenal (bold intervention), then the markets will be disappointed.  Mario Draghi will be confronting his colleague and nemesis in the ECB Jens Weidmann. Weidmann is the Head of THE Bundesbank, a former Merkel economics advisor, and an ECB governing council member who has just 1 vote out of the 23 today at the ECB MEETING in Frankfurt. However Weidmann sees his role differently.  "I certainly would not say that we are just one of 17 central banks [in the Eurozone]," he said in an interview published on Wednesday. "We are the largest and most important central bank and we have a greater say than many other central banks in the Eurosystem. This means we have a different role." The disagreement here lies with the fact that the Germans are against the ECB becoming like a US Federal Reserve in Europe. Weidmann feels it would be wrong to give the ESM a banking license allowing it to tap large quantities of funds from the ECB. Can “Super” Mario make the jump happen? Time will tell.

• What's wrong with this headline: Obama authorizes secret support for Syrian rebels (Reuters)
• Hilsenrath promptly dusts off ashes of sheer propaganda failure, tries again: Fed Gives Stronger Signals of Action (WSJ)
• Fed Hints at Fresh Action on Economy (FT)
• Fed Poised to Step Up Stimulus Unless Economy Strengthens (Bloomberg)
• IMF Chief Lagarde Praises Greece, Spain for Efforts (Bloomberg) - efforts to beg as loud as possible?
• US sanctions against bank 'target' China (China Daily)
• Trimming China's Financial Hedges (WSJ)
• ganda central bank cuts key lending rate to 17 pct (Reuters)
• Greece Agrees €11.5bn Spending Cuts (FT) - Agrees? Or does what a good debt slave is told to do
• Germany Retains Stable AAA Outlook at S&P After Moody’s Cut (Bloomberg)
• Spain’s Bond Auction Beats Target as Borrowing Costs Rise (Bloomberg)

With everyone confused over why Draghi has put himself in a position from which he can't deliver and satisfy the market one hour ahead of the ECB announcement, and everyone placing their last bets on the EUR and the SPGBs before the ECB press release hits without really having any clue what the Italian has in store that will make both the EuroStoxx and the Bundesbank happy, here are some additional last minute "insights"  from Deutsche Bank that promise not to clarify the situation all that much. Because while "We'll be honest and say we've been totally confused about what to expect from the ECB ever since Draghi's speech last Thursday" DB does say: "In short it doesn’t look like we will get any explicit action today." Clear as mud.

When it comes to building wealth, muddying the difference between perception and reality is the key manipulation tool that banksters use to goad people into wrong choices.