So Draghi actually did something but…..so far – not really.
The European Central Bank’s plan is to buy “repackaged debt” to help boost lending and the euro zone’s lagging economy. What’s important to understand is that the program is designed to encourage banks to increase lending by allowing them to “repackage loans into bonds” and sell them to the ECB and other investors – freeing up their balance sheets to make further loans.
It’s my view that until the euro zone banks “know” how much the ECB intends to buy ( which at this point they do not ) there will be little movement in this area, and that for the most part banks will likely just hang on to these assets ( considering the costs of selling them ) and continue to “choke” lending – essentially killing the programs intended effect.
We’ll get more information early October but for the most part I still see Draghi’s actions as “lots of talk and no action” and assume ( perhaps after another day or two ) markets will also come to this conclusion.
The Euro vs USD scenario appears pretty self explanatory as the “Central Bank ponzi ping-pong” continues, with The Fed essentially “ending QE in October” and The ECB cranking it up. I find this somewhat ironic if one didn’t already have the broad understanding that it’s all just a part of the same coordinated effort.
The United States looking to come out as “the shining winner” as both The BOJ and now ECB look to carry the weight of the world on their “balance sheets”.
Is this the “new normal” as Central Banks continue to run the show? or will the natural forces affecting human decisions making / behavior again be reflected in markets, as they have been in the past?
Will humanity prevail?
So we’ll see here soon.