ECB chair Mario Draghi delivered big-time this morning by announcing lower interest rates and a new round of debt monetization. Historically, this kind of thing has sent the financial markets into Pavlovian ecstasy, with stocks soaring and the local currency falling.
Sound money people have for years been warning that such New Age monetary policies are poison and that the markets would eventually wise up and react accordingly. Today, finally, that’s what they did. European stocks popped on the news — then dropped.
The euro did the opposite, dropping then popping:
And the US dollar, which in a rational Keynesian world should soar as its main competitor is inflated away, fell hard:
US stocks, as this is written at 1 pm EST on Thursday, are down and gold is up big, which implies that markets now view negative interest rates and central banks buying corporate bonds and equities as signs of profound failure rather than innovative genius.
It is now clear that the only reason a government would resort to such things is that its previous policies haven’t worked. In which case there’s no reason to think the next batch will do any better. Which in turn implies that financial assets are a dangerous place to be while chastened monetary authorities sort out their misconceptions and rework their models.
13 thoughts on "Is This The End? Draghi Fires His Bazooka And Markets Turn Away In Disgust"
Creative analysis , I learned a lot from the specifics – Does anyone know where my business would be able to grab a template CA CH-120 document to fill in ?
I don’t think “the market” is as wise or educated as JR is suggesting. If they were all of the stimulus efforts would have been non-starters “way back” in 2009. This is just more of the same. Short-term pragmatism continues to reign. The turning point will not be when people choose to change but when they have no choice. “Unfortunately” there are still more extreme measures central banks have to work with, and there are a lot more central banks that haven’t even started to join in.
There is no doubt it seems insane but all of this is working perfectly into their plan. We will see when all of the dominos start to fall it will all start to fall in place.
Either the Fed is smarter than we think and they let the Japanese and Europeans conduct these idiotic experiments first, or they are dumber than we think and will try the same things even though they failed.
Must not have been enough. He should try again next week and see what happens.
They’ve been blowing their loads now for some years. Their all spent. Firing blanks. Fought the wrong war at the wrong time. All that’s left is ‘duck and cover’…
Faith is failing. Long live faith.
These pea-brained central bwank psychopathic-parasitic wasters — are irresponsible IN-THE-EXTREME… should be shot with balls of their own shit.
The penguins…
It just makes me laugh that all these “Experts” that run the central banks keeping doing the same thing and expect a different result. Isn’t that the definition of insanity?
With all their so called “Ivy League” genius’ this is all they could come up with.