Draghi In A Box

Tyler Durden's picture

The jawboning party has come and gone, leading to a nearly 100 bps move tighter in Spanish spreads (from all time records of 7.6% just three days earlier), and now the hangover is here. Or, as Bloomberg puts it, Draghi is now in a box. "European Central Bank President Mario Draghi has boxed himself into a corner. Spanish and Italian bond markets rallied yesterday as investors cheered Draghi’s signal that the ECB is prepared to intervene to reduce soaring yields. Now he has to deliver, or face deep disappointment on financial markets, analysts said. The risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today." If this seems like a Catch 22 in which the ECB loses regardless of the outcome, that's because it is. Luckily, no matter which path Draghi chooses, the time for talk is over, and now he has to act. Because with every day the ECB does nothing, the more credibility it loses.

From Bloomberg:

Draghi is damned if he does and damned if he doesn’t,” said Carsten Brzeski, senior economist at ING Group in Brussels. “He maneuvered himself into an extremely difficult situation. Expectations are very high.”


“I don’t believe you will see government bond purchases yet,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “But there are other things they can do that will help, such as lowering the haircut on sovereign bonds they accept as collateral or buying private sector securities.”

And repeating what we said yesterday morning following day #2 two of hollow promises (following Nowotny's bluster about the ESM getting a banking license which will not happen)...

It will be difficult to hold these gains without any actual action,” said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about $20 billion. “There’s still pressure on the spreads of the peripheral countries and I fear this is only a temporary narrowing.”

Also, as reported earlier, the Bundesbank has finally stepped into the fray in Angela's absence:

The Bundesbank said restarting ECB bond purchases is not the best way to address the debt crisis.


“The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy,” a spokesman said.

Finally, the ECB's bazooka will once again be a dud:

“We still don’t think policy makers have done enough to make the market sit up and take note,” said Richard Urwin, head of investments at BlackRock Inc.’s Fiduciary Mandate Investment Team in London. That has left bond yields in weaker countries “too high to be sustainable,” he said.


“The ECB appears to be running out of conventional ammunition,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “What is left, however, is the ‘bazooka’,” he said, referring to large-scale interventions in troubled bond markets.

But whether or not the ECB has run out of money, or Europe's politicians have run out of empty promises is, at the end of the day irrelevant: what matters is whether Europe has any actual money good assets. The answer is a resounding no.

And now, Justin Timberlake.

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vmromk's picture

FUCK YOU Draghi !

Don't think I've forgotten about you Bernank.....here's one for you as well....FUCK YOUUUUUUUU !!!!

LULZBank's picture

You need to get laid, mate.

GetZeeGold's picture



It probably won't be by the person that just junked you.


Anyone else feel up to it? We're asking for volunteers.


Dr. Kenneth Noisewater's picture

Isn't free pussy part of ObamaCare?  It should counterbalance the free birth control and abortions that women get.  Pussy is a right that others must provide you at their cost, just like health care!

Monedas's picture

You need to get laid !   I got laid yesterday .... I highly recommend it !

BandGap's picture

Right or left hand, or have you moved on to inflatables?

LULZBank's picture

He got laid like an egg.

vmromk's picture

Draghi will do whatever needs to be done to preserve the Euro.....how about sucking Bernanke's cock ?

battle axe's picture

He already did that, now it is rim job time....

EscapeKey's picture

Deliver? Since when has that been a requirement?

The only delivery that's required is rhetoric.

Snidley Whipsnae's picture

"European Central Bank President Mario Draghi has boxed himself into a corner."

This is total bs in light of the FACT that we have heard from the horse's mouth that "We will lie when necessary"...

Once "lies when necessary" are established, there are no 'corners' left.

LULZBank's picture

Draghi in A Box.

A coffin?

Or even a Schrodinger's Draghi?

azzhatter's picture

Now that would be helpful

hedgehog9999's picture

"Draghi in A Box.

A coffin?"


    More like a plank!

    Coffin later..


magpie's picture

NIRP ratfucker, excuse me, por favore.

Rockfish's picture

Abbey J Cohen just on Bloomberg, " All is clear". Thank goodness.

(sarc off) 

Cui Bono.

LULZBank's picture

Yes, I can has my foot in my mouth, if I want. I am ZE Presidente.!

fonzannoon's picture

I think facebook will be the trojan horse. Someone will see Draghi's status as "GETTING THE FK OUTTA HERE"

Then we will finally see facebook's usefullness.

LULZBank's picture

I just hope he doesnt manage to finish the "OUTTA HERE" bit on his status.

dvsteenk's picture

the premise seems to be that Draghi has to intervene still to keep the rates lower, what makes you think that he hasn't already?

the ECB started buying euros and peripheral bonds and put a floor under it

following the example of the swiss, euro won't drop under 1.20, a peg

the carry trade on the AUD is continuing also

Lux Fiat's picture

"the premise seems to be that Draghi has to intervene still to keep the rates lower, what makes you think that he hasn't already?"

Have had similar thougts regarding Fed action these last few months.  Think both Fed and ECB have been working hard these last few months (probably much longer) to keep some appearance on normalacy in the mkts.  From that perspective, could view Mario's statement as designed to make it appear that the mkt action so far has been normal, and that they are not spent.  Why do I get the feeling this is providing a possibly last-ditch opportunity for banks to get out of PIGS bonds with a smaller loss? 

miker's picture

I think the ECB is going to monetize; and soon.  I think they will employ the old "it's easier to get forgiveness than permission" rule.  I think if they don't monetize, Europe will implode and the rest of the world with it. 


EscapeKey's picture

Yep, and once it goes wrong, they will be "sorry". "Very, very sorry", and "terribly disappointed with themselves", and "promise to suggest new regulation to deal more effectively with the issue in the future", but won't actually make any moves to get the crooks to return their loot.

flaunt's picture

"But whether or not the ECB has run out of money, or Europe's politicians have run out of empty promises is, at the end of the day irrelevant: what matters is whether Europe has any actual money good assets. The answer is a resounding no."

I hear Europe has something like 17 tons of pure gold in the vault, so says Jim Rickards.

Dermasolarapaterraphatrima's picture

I just got The Bernank's memo; "If Mario prints, we print faster."

Hype Alert's picture

It will be difficult to hold these gains without any actual action,”


I hate to break it to him, but there are no gains.  The market goes up the same reason gold does.  Replacement cost will be higher as the currency is devalued.  It's not a gain.

Market Efficiency Romantic's picture

Welcome to hyperrealism, Mario! The increasing number of exponential charts popping up only supports this. Monetization has lost its power, as an instrument it is literally worn out.

Take a different perspective, though. They are not stupid, they are aware of this, so it is a question of how you monetize, which channels are used with what distribution and how and to what extent the effects transpire though society.

Interestingly, we are entirely missing the exponential wage curve, the only one that will not materialize. Is it because the people as a whole are the slowest to realize the new patterns, causing the delay of that curve or is it a well-designed plan:

Latterally selective distribution in the course of the monetization endgame will avoid hyperinflation and save the world, wow. No, the price curve for basic goods will be the second to last possible exponential curve, but it will end the game.

I understand the exponential curve popup frequency metric to be an elitist indicator, when to start buying goods, when to dig in and when to hold out fpr 15 years until the dust has settled and only little is left of the people that starved / went to war as they realized they got fucked and are the ones holding the huge bag of the mother of all ponzis and no one is there to be made responsible. It's like a detonation countdown

falak pema's picture

ha ha ha, jack in the box has to show he is Jack and the bean stalk! 

Last time he barked the market jumped like a frightened frog. Can he pull it off every week?

Not likely, he will have to show us his MAGICAL BEANS! 

Especially as Merkel has this to say today ! 

La Bundesbank reste opposée au programme de rachat de dette publique

"I am opposed to ECB secondary market buying of public sovereign debts ..."

Caramba, as they say in Rajoy country! 

Tug of war continues, and ECB and Merkel are not on the same page, in the very short term at least! 

Or, are they just trying to make Spain and Italy run up the white flag and say : We surrender all our national rights to Mutti Merkel! Just come and shaft us as much as you want! That would be very subtle and eleventh hour shock therapy for Eurozone! 

Auf Weidersein nation-states! 

Key short term decision that Draghi has to make : Will he give banking licence to FESF and upcoming ESM. If he does, that institution (s) can borrow from ECB to lend to sovereigns and to private banks and thus open up indirectly the de facto balance sheet of ECB that Merkel DOES NOT WANT TO SEE happen.


Ghordius's picture

+1 and it's a classic tug of war between CB and gov. another reason why classical liberalism (and sweet reason borne from historical experience) always asked for an independent CB, though of course this always implied an independence from the banks, too.

falak pema's picture

lets face it Ghordius, in a classical CB situation you have a monetary situation where ALL entities using the money are on the SAME fiscal page! Only the patchwork EU machinery could imagine such a dangerous deviation from classical economics, to appease the Bundesbank and to allow local governments the hubris of working their local fiscal spiggots, all the while they paid lip service to common monetary goals. 

Like I said elsewhere, Lincoln managed to unite the USA in bloody civil war. These Euro bureaucrats and the Mitterrand-Kohl team have tried to slalom in peaceful times to avoid past Armageddon, thus to entice the nation states into federal union; silently, surreptitiously; and it will be at a HUGE financial and social cost. 

Oh well, we live n learn! 

Satan's picture

" why not you no believe? "

dvsteenk's picture

today EURUSD is nearly flat, still we go up over 1% on equities... today its totally driven by AUDUSD, which is up over 1.2%

avidtango's picture

Reminds me of our plight - the answer to every problem is creating more debt (with nebulous blathering about getting better") After piling on yet more debt does anyone ever asks, "OK, now what?" Nobody with an atom of sense thinks the PIGS will suddenly become productive...So what then?

gatorengineer's picture

Angie and Hollande at 1pm today........  German constitutional court 10 days out for phase 1.....

overmedicatedundersexed's picture

all the courts of the world will rule for what the elites want no matter how convoluted and contrived the justification.

courts are the rubber stamp to make it all look legit.

Market Efficiency Romantic's picture

"in a box" and "cornered himself", you mean, as the other super Mario cornered himself, when threatening offering Merkel to step back...

I would think, it is a typical blackmail power play. With Merkel on vacation, Draghi knew, markets would react to his statement, and once Merkel returns, she would have to disappoint concerning something by then assumed fact.

I bet that's why Merkel feels pressured to oppose, even while on vacation, in order to stop that statement to turn into assumed facts. Being isolated in her holidays, she urgently needs Hollande support and she telegraphed the necessity aka blackmailed on her part by sending it via newswires.

Draghi were not super Mario, if he was not backed up by France & Mediterranean governments.. Would not be surprised, if Hollande would check and Merkel would have to call in a televised statement from her holidays. From the FM+ ECB standpoint, there is not better point in time to attack Merkel, but it is a damn dangerous strategy. If there will be a preannounced statement from Merkel and France is quietly holding back, I would get the hell out of Italy and Spain.

Her statement would need to be very tough to compensate for the weak position she is in due to the holiday, off-power context.

GMadScientist's picture

Oh the sweet irony of the zooro being wrought asunder by those ridiculously long and undeserved "holidays".


hedgehog9999's picture

People talk about LIBOR as a Big Manipulation etc., but the biggets manipulation of them all is the constant resetting of expectations by these scumbags This guy (Draghi) had his training at GS and therefore he's a master at it.....

I really feel sorry for the individual investors out there working their buns off to make a living and grow ther little nest eggs in IRA's and their investment retirement accounts, etc. because in spite of all these manipulations , etc...... they have lost at least 60% of their nest egg since 2000, when the SPX hit 1500 and the NASDOG hit 5000. Here we are 12 years later with SPX at 1360 and NASDOG at 2000 and change, when we know that the cost of living (not inflation as that assumes you don't eat or drive) has gone up at least 60% in those 12 years and by some accounts even higher....

And the Central Bank manipulators are the cause of it.....

As far as speculators and traders ( I am one of them), they fully deserve what they get as that is their job or main activity, if they believe these assholes all the time..... I have learned over the years you need selective believing and truly pay attention to the charts which never lie........my biggest problem when I lose on a trade is not following what the charts are telling me and doing what I think should happen based on some asshole like Draghi moving ther lips........

But the fact of the matter is we are doing a corrective move up which might have just ended as I type this.

Good luck to you all.!

Major Priapus's picture
  Der deutsche Elefant im Wohnzimmer! It is ever more clear to me that Germany will not for ever participate in this "Schießerei auf schon zu vielen Akten"!   http://www.creditwritedowns.com/2012/07/german-mp-draghi-is-a-thief-of-peoples-savings.html   ...  at some point Berlin will pull the plug on the Euro life-support.
Bam_Man's picture

Personally, I think it is more of a "Scheißerei auf schon zu vielen Akten".

sunny's picture

There is always the possibility that Germany caves (again), EBC prints like mad, markets soar and the world is saved.  Has anyone considered that?  Folks have been talking abut the utter collapse of euroland for some itme now and it still keeps chugging along doesn't it.  

Just saying.


Too Big 2's picture

Sunny, while we don't know if Germany will cave what we can say with certainty is that Germany had a hyperinflation and subsequent dark age not long ago with WWII-Hitler and the aftermath.  Even if Germany does agree to cave and print it does nothing for the SOLVENCY of the EU nations and it even puts their own solvency and at the very least, credit rating on the line. 

The PONZI scheme in Europe, USA, UK, Japan will fail miserably. 


Too Big 2's picture

How can anyone say that the Draghi, the EU, ECB, et al have any credibility "left"?  These guys are making it up on the fly just trying to maintain their control of the sheeple. 

My money is on Germany leaving the EU as they seem to be the only one holding up the printing press....which is what everyone seems to think is the solution.....

Lux Fiat's picture

Watched a very interesting interview with Thomas Mayer back on July 10th re the EMU crisis.  While the entire interview is worthwhile, the short version can be gleened from watching starting at the 7:00 mark.  http://www.bloomberg.com/video/italy-politics-after-monti-not-pretty-mayer-says-RFQrfROmSs6zLbF3wTaQrQ.html  Good luck Mario.

When I saw the story on Bloomberg, the title reminded me of this for some reason: http://www.youtube.com/watch?v=WhwbxEfy7fg


Lux Fiat's picture

Oops - looks like FasTTcar beat me to the punch on the SNL vid.

jvcorazo's picture

The European elite just want to enjoy the rest of the summer, just like you and me, and try to kick the Euro can (which is now loaded with sticks of dynamite) a few more weeks, probably till after August, then the real SH*T will hit the proverbial fan sometime mid September, then look out...we should all find a desk to hide under as this can get real ugly, real fast. The END GAME is unravelling fast and the FAT Lady is clearing her throat!