Killing the Market

Just when I thought the markets would fall through to the downside last week (in other words, sh** the bed)*, Mario Draghi, ECB Chairman, comes out and says he will not let the Euro fail.

Mario Draghi

Great – how many times have we heard that? Now he sounds like he’s the president of Argentina – because I thought Argentinian presidents historically had the monopoly on cheap words on the economy (but to be fair to others, Argentina is in another league – they screwed up the proverbial free lunch but the problem was, it wasn’t proverbial for them).

One thing I know is that when a political leader draws a line in the sand that line gets crossed. True that only dumb politicians even engage in the fine art of line drawing – typically being someone like Robert Mugabe. But Draghi is just silly. He’s buying time so that they can convince Germany to PRINT MONEY. And just as Bernanke has a fear of the Great Depression and “deflation,” Germans have a fear of the Great Depression and INFLATION. Because we had a strong currency, we didn’t get hit with serious pricing pressures but Germany printed tons of money (classic definition of inflation = increase in the money supply) and they were bringing wheelbarrows full of paper money to buy a loaf of bread.

50 Million Mark Note

Nonetheless, people want to see action and it appears that nothing less than full money printing powers to the European Central Bank will do the trick. Surprisingly, unlike Weimar Germany, the market would likely reward the ECB for printing gobs of money to save Spain, Portugal and Greece. But because of Germany’s memory of Weimar inflation, they are not going along.

This dance will continue but my guess is that by Friday, without any further action, the market will be leaking again. And it will be another week where political interference, in cahoots with big finance, distorting the markets, further erodes the average person’s interest and at this point, the market is pretty much dead to retail investor.

Editor note: After writing this I saw this article in the Wall Street Journal which agrees with my point that this market was ready to crumble. Like I said, by Friday this thing will probably leak again if we don’t get any more sweet talk from central bankers.