Tonight (today Euro time) all eyes will be on the European Central Bank and its chief, Mario Draghi, to see if this is the month they finally give in and launch their own QE style money printing program to spur their sick patient back into life. His reluctance, being the last major central bank to do it, may be his observation of it’s real failure in Japan, the US and China. Printing money doesn’t come free, especially when you are not the world’s reserve currency. It adds more debt to a situation borne of debt burdens. If he does it we will know just how desperate they have become after failed attempts of targeted zero interest rate loans, neaqr zero interest rates, negative deposit rates and jawboning down their currency. This week saw their official inflation drop to just 0.3% as it continues its slide to deflation, territory they are desperate to avoid.
Andy Hoffman summarises it well as follows:
“As for Thursday's meeting, it is unclear whether the ECB will actually pull the trigger on the $1 trillion QE program it has been "preparing" the past three months. However, it is highly likely at least some incremental easing will emerge, with the aforementioned QE program nearly guaranteed by year-end. To that end, Draghi can spout all he wants of "deflationary fallacies" - but in reality, Europeans are spending more to survive than ever, despite record high unemployment, record low economic output, and exploding entitlements provided by insolvent governments with unprecedented, rapidly escalating debts. Not to mention, ones that appear hell-bent on declaring war on Russia.”
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