The Difference Between Bubbles And Panic: Mario Draghi Explains

Tyler Durden's picture




 

One can't make this up: in what was timed to be a near perfect alignment of the FOMC Minutes release and Mario Draghi' lecture in London which started, pardon the phrase, minutes after the Fed own Minutes were released (which however will not please Mario judging by the surge in the EURUSD) Mario Draghi just uttered this absolute stunner.

Keeping one’s own house in order also has a further benefit: it helps mitigate the effects of contagion. As we have seen during the crisis, those governments that had more robust fiscal positions were much less affected by contagion – at the extreme they even benefited from safe-haven status.

 

This protection, however, is not absolute, because it relies on the ability of markets to discriminate between sound and unsound debtors. Yet bubbles and panic happen. A bubble is a situation where markets ignore fundamentals, even if debtors are unsound. For too long, markets failed to raise funding costs for countries with unsustainable policies. And a panic is a situation where markets also ignore fundamentals, but this time to the detriment of sound debtors.

This... coming from the same central bank that just ushered in NIRP not to fix its busted monetary plumbing and stimulate lending but to put the peripheral bond carry trade into overdrive and create the biggest sovereign debt bubble of all time!!!??

One doesn't know whether to laugh or cry.

 

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Wed, 07/09/2014 - 14:44 | 4940495 DoChenRollingBearing
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Well, I am happy that Super Mario straightened us out on that.  

Grazie!

Wed, 07/09/2014 - 14:46 | 4940502 NotApplicable
NotApplicable's picture

Well, sometimes ya just gotta NIRP that contagion in the bud, lest it escape the house.

Wed, 07/09/2014 - 14:50 | 4940519 NotApplicable
NotApplicable's picture

Meanwhile, at Billionaire's Summer Camp...

http://www.dailymail.co.uk/news/article-2685905/Media-tech-s-biggest-nam...

Drone intrusion alerts are now in play.

 

Wed, 07/09/2014 - 15:03 | 4940560 NOTaREALmerican
NOTaREALmerican's picture

I sure hope these superior humans will create some more jobs for the inferior people.    We could sure use some.

Wed, 07/09/2014 - 15:32 | 4940693 Haus-Targaryen
Haus-Targaryen's picture

Dear Mr. Draghi, 

Sovereign interest rates are a measure of market confidence in the sovereign's ability to repay, what fundamentals exist that support the market's increased confidence in a country like France, over the United States?  

Wed, 07/09/2014 - 23:24 | 4942113 UselessEater
UselessEater's picture

Billionaires Summer Camp... awww bless, the free market at work without a hint of crony-capitalism.

Wed, 07/09/2014 - 14:53 | 4940527 Groundhog Day
Groundhog Day's picture

I've been crying for 4 years now and have no more tears to shed so i will laugh my ass off

Wed, 07/09/2014 - 14:46 | 4940503 nope-1004
nope-1004's picture

A bubble is a situation where markets ignore fundamentals, even if debtors are unsound

 

Then the world is in a bubble, stuper Mario.


Thu, 07/10/2014 - 05:40 | 4942484 Oracle 911
Oracle 911's picture

The markets were killed about 5 years ago.

Wed, 07/09/2014 - 15:57 | 4940765 BearTrap
BearTrap's picture

Well, this is not printed in bold, but maybe it should have been:

"For too long, markets failed to raise funding costs for countries with unsustainable policies".

Pretty much in sync with what BIS said a while ago.

Wed, 07/09/2014 - 14:55 | 4940506 Itchy and Scratchy
Itchy and Scratchy's picture

I'm not a fancy Goldman Sachs sharp guy but I kinda think bubbles & panics go together!

Wed, 07/09/2014 - 14:47 | 4940507 madbraz
madbraz's picture

I think my head will explode after hearing this marvel of a human being whose official fix to the European problem is to have local banks buy government bonds from their countries and swap these for "cash" printed by him, in essence lowering their borrowing costs to insane levels.

 

His salary should be paid in greek bonds, unadultered by such schemes.

Wed, 07/09/2014 - 14:47 | 4940508 Grande Tetons
Grande Tetons's picture

One doesn't know whether to laugh or cry.

Laugh and Cry are the names of the two icecubes in my glass of scotch. 

Wed, 07/09/2014 - 14:54 | 4940520 Itchy and Scratchy
Itchy and Scratchy's picture

Now ... the difference between laugh & cry is that when u laugh it is often when one ignores the fundamental soundness of mind & when u cry it is often at the realization of the loss of soundness of mind fundamentals. - Goldman Sachs central bank type sharp guy

Wed, 07/09/2014 - 14:48 | 4940511 fonzannoon
fonzannoon's picture

Draghi translation: Hahaha i will say anything i want, how do you like my balls in your face?

Wed, 07/09/2014 - 14:53 | 4940528 Grande Tetons
Grande Tetons's picture

OMG.  That is fucking hilarious.  I can almost see Draghi's ball sack resting gingerly on Yellen's nose. 

Wed, 07/09/2014 - 15:03 | 4940561 TabakLover
TabakLover's picture

Nose?  or chin?

Wed, 07/09/2014 - 15:16 | 4940625 Grande Tetons
Grande Tetons's picture

Nose. Don't ask. 

Wed, 07/09/2014 - 14:48 | 4940512 ebworthen
ebworthen's picture

Funny.  I suppose a "sound debtor" to Mario is an Investment Bank with an umbilical cord to a central bank and the public treasury.  That baby never leaves the womb.

Wed, 07/09/2014 - 14:49 | 4940516 Quinvarius
Quinvarius's picture

Almost every piece of economic news I see reminds of one scene or another from Apocalypse Now.

https://www.youtube.com/watch?v=WdNsltQXTVU

Wed, 07/09/2014 - 14:51 | 4940518 Baby Eating Dingo22
Baby Eating Dingo22's picture

IOW, stay calm and the bubble won't pop

Like sleeping with rattlesnakes

Wed, 07/09/2014 - 14:59 | 4940543 Winston Churchill
Winston Churchill's picture

You know my first wife ?

Wed, 07/09/2014 - 14:51 | 4940522 Downtoolong
Downtoolong's picture

Drawing a line in the sand between bubbles and panic?????

Who could ask for a better battle plan than that?

Wed, 07/09/2014 - 14:53 | 4940524 i_call_you_my_base
i_call_you_my_base's picture

They create bubbles and then criticize the reaction to them. It's like when your older brother hits you in the face with your own fist and says, "stop punching yourself."

Wed, 07/09/2014 - 14:56 | 4940535 Itchy and Scratchy
Itchy and Scratchy's picture

The BS gets deeper & smellier!

Wed, 07/09/2014 - 15:07 | 4940538 Late onset ADHD
Late onset ADHD's picture

...and before they buy their boxes of Mr. Bubble bubble bath powder...

it would just be "common courtesy" for the "ebt card army" to at least line up outside the wallys for an hour or two on "reload" day...

just for show... after all it is showbiz, bitchez...

and on a side note... what forward thinking fucknut in big-gov sold all the giant "soup pots and ladels" from the last time around?...

holding my breath in 3,2,1...

...peace...

Wed, 07/09/2014 - 14:59 | 4940544 financialrealist
financialrealist's picture

another example of the ineptitude of central planners...

Wed, 07/09/2014 - 15:00 | 4940546 NOTaREALmerican
NOTaREALmerican's picture

<<  Laugh?

<< Cry?

 

Re:  One doesn't know whether to laugh or cry.

Wed, 07/09/2014 - 15:02 | 4940549 Late onset ADHD
Late onset ADHD's picture

i choose "c"...

 

please add thorazine as a choice...

...peace...

Wed, 07/09/2014 - 15:02 | 4940556 Wait What
Wait What's picture

"the bullshit piled up so fast... you needed wings just to stay above it"

- a favorite quote from a favorite movie

Wed, 07/09/2014 - 15:04 | 4940569 Bernoulli
Bernoulli's picture

Brazil x Germany FIXED?

I know I know, totally off topic, but did anyone see the match? It was ridiculous.

The brazilian team DIDN'T MOVE anymore after the 0:1. They didn't try, the goalie grabbed in the air several times. Watch all the goals and watch the brazilian players before and during the goals. they did not move a bit.

They DID IT ON PURPOSE!

Just imagine all of the following bets won:

- Germany wins the game with more than 3 goals difference

- More than 6 goals in the match

- Klose breaks Ronaldo record

- More than 4 goals in the first half

- etc etc.

tens or hundreds of millions to be made...

or is it "too unrealistic"? like "the betting mafia can't do this when the whole world is watching"??

 

Wed, 07/09/2014 - 15:11 | 4940594 Wait What
Wait What's picture

"Jacob Bernoulli might have something to say abt the outcome"

there's probably 1 person in the world who bet on the goal spread, and the rest of the betting world lost.

Fat tail much?

Wed, 07/09/2014 - 15:16 | 4940614 Late onset ADHD
Late onset ADHD's picture

hi speed trading/betting by beating the delay of the up-link, down-link times of the satellite feed...

 

think fast, trade faster

...peace...

Wed, 07/09/2014 - 15:21 | 4940645 Wait What
Wait What's picture

how quaint. that's so 1800s horse racing of you.

ever hear of that awesome innovation called the telegraph?

Wed, 07/09/2014 - 15:35 | 4940701 Late onset ADHD
Late onset ADHD's picture

luddite...

Wed, 07/09/2014 - 15:26 | 4940666 Bernoulli
Bernoulli's picture

I'd just love to know if there were any big sums bet on this "totally impossible" outcome.

Wed, 07/09/2014 - 15:12 | 4940607 NOTaREALmerican
NOTaREALmerican's picture

If the Brazilian Mafia found out they'd murder the Brazilian team.   The Brazilain team knows it.    And,  no, the Brazilian mafia - which is a kick-ass big-dick organization like any other mostly male one - would never vote AGAINST their own slow-motion flag.  

Wed, 07/09/2014 - 15:24 | 4940654 Bernoulli
Bernoulli's picture

Makes sense. Maybe I'm beeing too crazy.

But it's weird, no: They'd get murdered if they take money for standing around but not for being unmotivated or "shocked" and just stand around...

 

Wed, 07/09/2014 - 15:12 | 4940601 Late onset ADHD
Late onset ADHD's picture

nope missed it... don't do the sports-sheep "trance walk"...

 

I prefer anestithezation by my own hand w/ big-pharma-grade narcotics...

...peace...

Wed, 07/09/2014 - 15:28 | 4940675 Reaper
Reaper's picture

Honest Abe had Mario in mind with his advice, that it is better to keep quiet and let people only consider you're a fool, than to open your mouth and remove all doubt

Wed, 07/09/2014 - 15:50 | 4940740 Atomizer
Atomizer's picture

ZIRP and NIRP didn't work. The slackers have defaulted on loan obligations. Why not man up to real problem? Do you think we're born at night, but not last night? 

Wed, 07/09/2014 - 16:00 | 4940774 Itchy and Scratchy
Wed, 07/09/2014 - 17:06 | 4940966 Atomizer
Atomizer's picture

Funny. My mum had me one month later. So sick of this terrorism bullshit. Why can't we just go back to happy times? 

Who needs to be killed to bring 1967 happiness? Just venting. 

Wed, 07/09/2014 - 17:20 | 4940996 BeetleBailey
BeetleBailey's picture

Hey Mario....

a special, heart felt, bottom of my heart FUCK YOU....

You cunt

Wed, 07/09/2014 - 17:26 | 4941010 MrTouchdown
MrTouchdown's picture

So, Germany will be fine and Belgium will pick up the rest. Hey! I should be the head of the ECB!

Wed, 07/09/2014 - 17:31 | 4941027 gcjohns1971
gcjohns1971's picture
The Difference Between Bubbles And Panic

Is all about who you trust, and who you don't.

Wed, 07/09/2014 - 18:03 | 4941141 Herdee
Herdee's picture

We can count on the swap lines from The Fed.(oh ya,put it on my tab,the American taxpayer can foot the bill later when we all go bust.)

Wed, 07/09/2014 - 18:37 | 4941214 realWhiteNight123129
realWhiteNight123129's picture

This is just absolutely fucked up. Central Fuck-upery. 

 

Wed, 07/09/2014 - 23:50 | 4942191 AdvancingTime
AdvancingTime's picture

And a flash crash on steroids is reality returning to this farce we call a market. I love the way reality is always being kicked out a year or two and never going to happen tomorrow. It is as if we can't handle what is coming at us and need more time.

For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Below is an article looking at how it could happen sooner rather than later.

http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html

Do NOT follow this link or you will be banned from the site!