Mario Draghi once again surfaced this morning to promise to do “whatever it takes” to help the Eurozone. Draghi has done this anytime the EU markets drop ever since since the bottom in the summer of 2012.
It’s amazing to watch, particularly when you consider that it is now public information that Draghi actually didn’t have a plan when he first claimed this and is effectively making up policy on the fly.
Here are Draghi’s comments from this morning:
*DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE?
*DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS
Note, that the first statement contains the qualifier “within its mandate.” Of course traders and investors won’t bother to consider that the ECB’s mandate DOESN’T ALLOW IT TO BUY SOVEREIGN BONDS.
It’s not entirely their fault. Draghi is huge liar (as in Jean-Claude Juncker’s statement that “when it gets serious, you have to lie.”) This is why he stated that the ECB’s expanded purchase program “could” include Government bonds.
Sure… it could, but it would be illegal and would instigate an outright revolt from Germany.
Draghi could just as easily have said that the program “could” include buying used cars or discarded aluminum cans… those assets would be more likely acquisition targets than EU Sovereign Bonds.
Indeed, if we wanted to take this approach to investment analysis, we “could” state that the EU “could” be a great place to invest if EU banks came clean about their balance sheets, the farce ended, and accurate pricing returned to the markets.
Similarly, savers “could” feel good about having their deposits in EU banks if interest rates were not negative and the ECB and EU Governments stopped stealing savers’ deposits to prop up insolvent banks.
The reality is Draghi is bluffing, just as he has been since the summer of 2012. He’s not willing to “do whatever it takes,” because in order for the EU to survive, accurate accounting has to come back and outright fraud and corruption have to end.
What Draghi really means is that he’s willing to do “whatever it takes,” to perpetuate the farce that is the EU recovery. Unemployment of 25% or higher in some countries? Doesn’t matter. People starving? Ignore. Corrupt politicians taking bribes to profit from the fraud? Irrelevant.
The show must go on. Eventually the music will stop. When it does, the EU will collapse. Until then, the farce will continue, though it’s getting old.
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Best Regards
Graham Summers
Phoenix Capital Research