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Draghi Announces ECB Exit From Easing Remains Far Off; Think the Fed Has an Exit Strategy?

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Publié le 27 juin 2013
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SUIVRE : Eurozone
Rubrique : Opinions et Analyses

The Financial Times reports ECB exit from easing remains far off, Draghi says.

Speaking to committees in the French lower house of parliament, Mr Draghi said there were still downside risks to growth in the eurozone economy and the ECB was ready to take fresh action if needed.

"On our policy stance, let me say that it's been accommodative in the past, it is accommodative in the present time and will stay accommodative for the foreseeable future," Draghi said.

"Our exit – as Benoit Coeure [ECB executive board member] said a couple days ago – remains distant. At the same time we have an open mind about all other possible instruments that we may consider proper to adopt . . . we stand ready to act again when needed."
Taper Talk on "Strength" of US Economy

Bernanke says the US economy is solid enough that the Fed can begin tapering its balance sheet purchases later this year.

Given the stock and bond market bubbles the Fed has created, the Fed of course should taper (not that it should ever have expanded its balance sheet in the first place).

4th Quarter GDP barely crossed the zero line with 0.4% growth. That growth was via questionable GDP deflators.

Today, 1st Quarter GDP came it at 1.8% annualized, a dramatic downward revision from an estimate of 2.4% released last month. In turn, 2.4% was a downward revision from the first estimate of 2.5%.

GDP Trends



click on chart for sharper image

The above chart is courtesy of Doug Short at Advisor Perspectives who reports GDP Q1 Third Estimate at 1.8%: A Surprising Downward Revision

Note the linear regression trend of lower GDP over time.

Taper vs. Exit

There is absolutely no chance the Fed has any real "exit" strategy other than to hold its entire bloated balance sheet to maturity.

If the Fed "tapers" its purchases, it will not be because the economy is picking up steam, but rather because the Fed is clueless about the prospects for the economy, or perhaps out of very belated concern over the stock and bond market bubbles that it has created (nothing the Fed would ever admit of course).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 
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I'm a little confused. Anyone who has taken time to read the relevant sections of the BIS Annual Report, as I did (masochist) that I am, saw Draghi taken to the woodshed in all but name. The Report came down four square on it's member central Banks to end easing and get on with structural reforms - yesterday! They repeated twice, a negative reference to Draghi's what ever it takes message and said that's over and done. Printing and buying has to stop because of the law of diminishing returns they said. I was quite surprised at how direct they were., not just with him, but all laggard (their word) financial institutions and sovereigns. They really laid it on the line with regard to Resolution. Bail-in and said CBs had done all they could do at this point. Continuing any easing would lead to huge difficulties, as they urged CBs back into their former roles and also told then to push governments in the correct policy directions and to educate people that there would be pain, the longer the delay, the more pain.

They criticized planned pension and health care spending and cautioned about the burden of the increasing elderly in general. In sort, end QE, increase interest and let governments and people who had abused the privilege of the time bought by easing by letting them pay the price - no quarter given. Over regulated labour and consumer markers are verboten and barriers to improved competition must come down. I gathered that was in regard to us expendable serfs; they didn't call directly for euthanasia, but a lingering death by poverty and starvation, as best I could interpret the jargon. Lower wages and higher interest and inflation were deemed highly appropriate. It seemed that having abused stimulus and bailouts, we should now be left twisting in the wind. My favourite was "...if there was an easy path [out of this mess], we would have found it by now.

I could go on, but the tone remainder rather "globalist" throughout. In fact it was consistent with Bernanke's recent remarks. However, since then, Canada has delayed that section of it's Budget from Royal Assent; the EU is still squabbling over interpretations of wording, as several of it members will be appearing next week begging bowl in hand, and several senior US Banker/FOMC types want Glass-Steagall back (end Dodd Frank) - they may be unnerved by the markets there in the last few days....even as the Fed runs out of roof to buy more Treasuries.

I am left to think they may have thought that they could do these criminal deeds, throw a few crumbs for a time, and then quit. Bulletin - no way forward; no way back. Even a neo-Liberal (not Keynesian) fanatic should know better. Perhaps they do...another bout of Fascism anyone...Forward means total collapse; backward means global totalitarianism from this point --- but the BIS doesn't seem to have a handle on that...or is playing totally dumb...they wouldn't, would they :-)
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I'm a little confused. Anyone who has taken time to read the relevant sections of the BIS Annual Report, as I did (masochist) that I am, saw Draghi taken to the woodshed in all but name. The Report came down four square on it's member central Banks to en  Lire la suite
SirJames - 28/06/2013 à 21:30 GMT
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