Remember when ECB President Mario Draghi stated that officials were unanimous in being willing to stimulate further if the current round of stimulus failed to get the EU out of its economic depression?
For those who missed that comment, which pushed various EU nations’ sovereign bond yields lower, it was made three weeks ago:
Spanish government bonds advanced for the first time in four days as European Central Bank President Mario Draghi said officials were unanimous on being willing to introduce further stimulus measures if needed.
Italian securities also climbed as Draghi said the ECB’s current stimulus policies will have a significant impact on its balance sheet, causing it to expand toward the level it was in March 2012. The central bank, which has already started purchases of covered bonds, is set to start buying asset-backed securities this year. Benchmark German 10-year bunds were little changed.
Well, lo and behold, Draghi lied about that.
European Central Bank executive board member Sabine Lautenschlaeger on Saturday signaled she would oppose having the ECB purchase government bonds of eurozone countries unless there was a clear threat of persistent consumer price declines.
Her remarks, from a prepared speech at a conference in Berlin, contradicted the more urgent message conveyed recently by ECB President Mario Draghi and his top deputy Vitor Constancio to bring inflation higher. And her comments suggest that if the central bank does press ahead with government bond purchases, it risks doing so despite opposition from the euro bloc’s most powerful member, Germany.
http://online.wsj.com/articles/ecbs-lautenschlaeger-opposes-government-bond-purchases-1417257394 [10]
This isn’t the first time Draghi has lied. Indeed, the entire “Europe is saved” theme being thrown around by the financial media was all predicated on a lie: Draghi’s famous claim that he would do “whatever it takes” to save Europe.
No one bothered to check if the ECB cannot buy sovereign bonds (it can’t… the EU charter doesn’t permit it) or if the ECB would even be able to prop up the insolvent $40 trillion EU banking system (which is leveraged at 26 to 1 by the way)… everyone fell for the big lie.
Instead, investors plunged in, pushing several countries bond yields to multi-century lows and EU stocks through the roof.
Interestingly, the Euro is now trading at levels not seen since 2012 (a time when most investors thought the Euro was finished… which lead to Draghi’s initial “do whatever it takes” lie). Apparently today that is a good thing. What a difference two years and couple of lies makes!
Today the Euro is on the cusp of breaking critical support. Draghi will likely see this as a success (he wants inflation). More likely, it will bring in another round of the EU Crisis (the same line was hit when Greece imploded in 2010 and when Spain imploded in 2012).
The next round of the EU Crisis beckons…
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http://www.phoenixcapitalmarketing.com/roundtwo.html [11]
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Phoenix Capital Research