Consumers in the Eurozone, who in many places had to tighten their belts as wages and benefits were whittled down, have been spared the scourge of steep inflation. A real benefit, given their squeezed incomes. But central bankers, corporations, and politicians in France and other countries abhor this scenario, and they clamored for more inflation and for the devaluation of the euro, and they made deafening noises to push the ECB to start printing some serious money and douse the lands with QE.
With some effect: on April 3, ECB President Mario Draghi announced that the Governing Council had unanimously committed “to using also unconventional instruments within the mandate to cope with prolonged low inflation.” QE would start any minute. This led to more deafening noises about beating down the strong euro and stirring up inflation with a big bout of money printing and bond buying, to the point where the Wall Street Journal summarized it this way today:
The drumbeat for quantitative easing in the euro zone grows louder by the day – and it is the European Central Bank that is doing much of the banging. Barely a day passes without a speech by a member of the Governing Council discussing why, when and how the ECB might start to buy bonds.
This kind of jabbering about money-printing makes a lot of Germans very nervous.
So the leaders of the parties that make up Germany’s Grand Coalition – Chancellor Merkel’s CDU, its Bavarian sister party CSU, and the center-left SPD – met for a private two-day shindig at the majestic, mountain-top Steigenberger Grandhotel Petersberg and Federal Government Guest House, in Königswinter, near Bonn, to discuss various politically tricky topics from foreign policy to consumer protection in financial matters. The idea was to do it away from the media, out of the spotlight, to hash out some deals, perhaps. At any rate, one of the guest speakers was Draghi.
And while the meeting was private, a “euro-area official present at the meeting,” who didn’t want to be identified, told reporters, according to Bloomberg, that Draghi tried to assuage these skeptical Germans. He expected low inflation to continue, Draghi had told them, but he didn’t see any threat of deflation. The ECB would be ready to embark on QE if needed, Draghi said, but it wasn’t imminent and would be relatively unlikely for now.
This switcheroo fits well into central-bank forked-tongue politics and market-manipulation: pacifying strong-euro Germans out of one side of the mouth, and out of the other side, promising financial markets “whatever it takes.”
Which is more likely to happen? Turns out, what he told German lawmakers in a private session may be closer to reality than the cheap verbiage with which he jawboned the markets in public.
Read the rest of this post at Testosterone Pit. View original post.
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