Mario Draghi has played a weak hand with skill, as always. He is a superb actor.
Yet the package of measures unveiled by the ECB yesterday is pitifully small and mostly window dressing, an effort to buy time with a mix of vague gestures and outright gimmicks, a substitute for decisive action.
"This is a classic ECB play of the kind we have seen so many times over the last three years," said Andrew Roberts, credit chief at RBS. "There is huge smoke and mirrors at the time of the announcement, but when you go through the figures 24 hours later you realise it is nothing like what you thought."
The delirious reaction of market traders is interesting, but essentially just noise. What the ECB did will not move the macroeconomic dial by one iota.
As Christian Schulz from Berenberg Bank puts it, the latest rate cuts are a screen to "paper over divisions". The ECB could not secure German political consent for genuine reflation, so it put on a pantomime instead.
The new measures add little to what was already on the table in June. Some are marginally helpful, some trivial, with a shocking lack of detail about the one point that really matters.
The ECB has had years to plan asset purchases (QE Lite), yet Mr Draghi dodged all questions about the scale. You might conclude that there is still no real agreement on the course of action. Little wonder since Germany’s member of the ECB board – Sabine Lautenschlaeger – said only two months ago that QE is unthinkable except in an "emergency", and no such emergency exists.
... The overall policy settings remain contractionary. Monetary policy is still too tight. Fiscal policy is too tight. Bank regulations are too tight. Little is in fact being done to stop a deflationary psychology taking hold across half of Europe. Nobel laureate Joe Stiglitz warns of a depression running through most of this decade.
Mr Draghi said he hopes to "significantly stir" the ECB’s balance sheet back towards the levels of 2012 (€3.1 trillion). That means a €1 trillion boost, and there begins the first big confusion. Much of this will be in the form of cheap loans to banks (TLTROs) in exchange for collateral.
As the IMF said earlier this summer, this not remotely akin to QE. The ECB is not taking the risk on its own balance sheet. The monetary mechanism is entirely different, and far less powerful.
The original €1 trillion of LTROs in early 2012 were a lifesaver because EMU was then in a financial crisis. It stabilised the system (for a few months). But euroland is now facing a different problem. It is in a chronic deflationary malaise, a bad equilibrium. Households are paying down debt. Demand for credit is muted.
Mr Draghi himself suggested in July that the forthcoming TLTRO auctions could reach €1 trillion in various forms. (From which you then have to subtract repayments from the old LTROs). Nick Matthews from Nomura calculates that the actual purchases of asset-backed securities, mortgage bonds, and covered is likely be near €450bn, though others suggest it may be even lower.
This would be spread over three years, a mere €12.5bn a month. This is derisory, and will not even start until the end of the year. All the evidence is that QE works through a critical mass effect. It must be carried out swiftly and with maximum force to break out of the vicious circle.
En cuanto al truco de la bajada de los tipos de interés: Aviso de los efectos no deseados del tipo de interés negativo de los reservas bancarias en el BCE en la delicada situación de los bancos: pueden ir a buscar colocarse en otras nonetas, más cuando ese espera que el euro se devalue.
The cut in the discount rate to minus 0.2pc is clearly intended to drive down the euro, so far successfully. It is however a hazardous strategy, which is why the US Federal Reserve and the Bank of England never went this far. Much of Europe’s €900bn money market industry is sliding under water. We can expect an exodus over the next two months as maturities expire.
Al final, un dura advertencia a Draghi, que según su opinión no dirige un banco central, sino un Zoo,
If the brilliant Mr Draghi were running a real central bank, he would simply carry out old-fashion open-market operations – with an eight hundred year history – and keep buying assets on whatever scale is needed to meet the ECB’s 2pc inflation target. Instead he running a zoo. He is forced by abominable circumstances to blow smoke in our eyes. He is good at it though.
He dejado para el final la declaración dura y neta de Ambrose Evans-Pritchard sobre el euro: hay que destruirlo porque esta poniendo en peligro la democracia.
It is not doing this because Germany has a de facto veto, and everybody knows that there will be a challenge filed at the German constitution court the moment any such action is taken. This is not a criticism of Germany. I entirely agree with German patriots who say that QE is fiscal union by the backdoor and an assault on the budgetary prerogatives of the Bundestag, an evisceration of German democracy. It is a criticism of the irredeemably hopeless construction of monetary union. My argument has always been that EMU should be dismantled because it is a creeping danger to democracy.
En suma, Draghi, en el mejor de los casos, está lleno de buenas intenciones porque ha visto los riesgos que se nos vienen encima, pero no le van a dejar jamás hacer lo que necesitamos. ve el peor de los casos, es un mal actor.
¿Hay que destruir el euro? Yo siempre he estado contra él, desde antes de que empezara a formarse. Pero a estas alturas, siempre me ha parecido una proeza destruirlo sin graves consecuencias. Soy tan pesimista o más que Ambrose sobre su demoledora acción contra la economía y la democracia. La democracia en España ya ha saltado por los aires (no se cumplen las leyes emitidas por el Parlamento), pero nadie se ha dado cuenta de la decisiva influencia del euro. Todos hablamos de la corrupción, del separatismo, de la mediocridad política, pero por delante de eso está la crisis económica, como sucedió en la Europa de los años treinta. Entonces hubo una crisis por culpa del patrón oro, que originó una contracción monetaria mundial. Hoy, la crisis la ha provocado un sistema monetario más rígido aun que el oro.
No soy determinista. No creo que la economía determine la política. Pero sí estoy convencido de que el malestar económico sin esperanza mina la sociedad y sus valores, con consecuencias terribles. Cuando fracase Rajoy (que fracasará con su hipócrita economía de marujita la hacendosa -y no lo deseo para nada), no nos quedará alternativa política, y las fuerzas debeladoras nos acercarán aún más a la ruptura geográfica y política de España -y no sólo de España. El euro habrá sido el primer causante. Sin embargo, no deseo que se rompa descontroladamente, pues sería una bomba termonuclear. Demasiada gente está enganchada a él, sobre todo psicológicamente. El golpe sobre la moral sería terrible. Ahora bien, no me imagino a los políticos europeos reuniéndose y diciendo: esto no funciona, vamos a deshacerlo gentilmente, perdonandonos las deudas mutuamente, y aquí paz y después gloria. No.
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