Courtesy of Mish.
“What’s it all about Alphie” is a sing-along that most have heard.
Take out the word “Alphie” and substitute “Draghi” and the answer is “Assuage Investors” in yet another can-kicking exercise.
ECB president Mario Draghi hopes that if he continues with his kick-the-can tactics long enough, that something good will eventually happen.
Hope is really all the ECB has.
Meanwhile, Draghi Reinforces ECB Stimulus Momentum to Assuage Investors.
Having already cut interest rates to record lows and saying they can go no lower, Draghi is now focused on boosting the ECB’s balance sheet. He told reporters today that he expects to increase assets back toward March 2012 levels. That’s 3 trillion euros, or about 1 trillion euros [$1.2 trillion] more than the current level.
The ECB has issued long-term loans to banks and started buying covered bonds in the hope of flooding the economy with enough liquidity to ease credit constraints. Purchases of asset-backed securities are due to start this month.
“We are quite confident that the impact on our balance sheet size will be adequate, will be significant, will be sizable,” Draghi said. “The main message is that our balance sheet will keep expanding in the coming months and will continue expanding while the balance sheets of other central banks is bound to contract.”
Berenberg Bank economist Christian Schulz said he sees a 60 percent chance the ECB will enter the 1.4 trillion euro market for investment grade non-financial corporate bonds next month.
“Whatever It Takes” Revisited
Draghi’s famous “Whatever it takes … And believe me, it will be enough” statement in July of 2012, resolved the Eurozone sovereign bond crisis (for now) (see Eurozone Target2 Imbalances Rise Again, Led by Italy), but it did not spur lending.
His move to boost the balance sheet of the ECB will not spur lending either. Headwinds explain why.
Headwinds…
