Palace Revolt at the ECB, Legitimacy of Policy out the Window

Draghi’s desperate shenanigans thicken.

ECB President Mario Draghi, who is on his way out, will, as we’re learning more and more, do anything to push his agenda and make it stick at the ECB long after he leaves, but whatever his agenda may be, it’s clearly unrelated to the European economy which has been buckling under the consequences of his agenda: the destructive weight of negative interest rates and QE. And in the process, he is destroying the legitimacy of the ECB’s policy.

The latest incident was on Thursday. During the press conference following the ECB’s policy meeting, he lied to reporters, claiming that the “consensus was so broad there was no need to take a vote,” when in fact he had a revolt on his hand during the meeting by the presidents of the national central banks that represented half of the economy of the Eurozone, and by members of the Executive Board.

Among the key policy changes the ECB announced on Thursday was the restart of QE to the tune of €20 billion a month and a tiny 10-basis point cut in its deposit rate, from the old negative -0.4% to the new negative -0.5%.

The announcement also included a provision to help banks – which have been getting re-crushed by these idiotic negative interest rates – to survive those negative interest rates: the ECB would exempt part of the banks’ deposits at the ECB from negative rates in a two-tier system.

It was the QE portion of the decision that had triggered the unprecedented revolt during the meeting. “Officials with knowledge of the matter” told Bloomberg that during the contentious meeting, the members of the Governing Council and of the Executive Board who vigorously opposed the restart of QE included but was not limited to:

  • Jens Weidmann, President of the Bundesbank
  • Francois Villeroy de Galhau, Governor of the Bank of France
  • Klaas Knot, President of the Dutch central bank
  • Ewald Nowotny, Governor of the Austrian central bank
  • Ardo Hansson, Governor of the Bank of Estonia
  • Sabine Lautenschlaeger, Member of the Executive Board
  • Benoit Coeure, Member of the Executive Board

The countries of the five heads of the national central banks, from Weidmann to Hansson, account for about half of the economy of the Eurozone.

They opposed the restart of QE, but there was no vote – which is common in ECB proceedings when there is a consensus. But there was no consensus. And Draghi simply imposed his agenda.

“Such disagreement over a major monetary policy measure has never been seen during Draghi’s eight-year tenure,” according to Bloomberg’s sources.

Among the key reasons cited against relaunching QE now, according to the sources, was that there is no emergency, and it’s better to save QE for an emergency, such as some big turmoil in the Eurozone following a no-deal Brexit.

Nevertheless, during the press conference after the contentious meeting, Draghi lied to reporters about it, when he told them ridiculously:

“There was more diversity of views on APP [asset purchase program]. But then, in the end, a consensus was so broad there was no need to take a vote. So the decision in the end showed a very broad consensus. As I said, there was no need to take a vote. There was such a clear majority.”

But this wasn’t the first time that Draghi was exposed as having lied blatantly about what had transpired during the policy meeting.

In a speech in June about an unrelated historical topic he said that “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and that “all these options were raised and discussed at our last meeting.”

But those were blatant lies too. Sources who were part of the ECB’s June meeting told Reuters that no such options were discussed. Draghi had simply sallied forth on his own, pushing his agenda, and trying to force the ECB’s hand [read… No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters]

The fact that both of these blatant and manipulative lies – concerning the Thursday meeting and concerning the June meeting – were leaked at all indicates that internally within the ECB, Draghi is going down in flames and that the revolters are offering tidbits of his shenanigans up for public consumption, even as he’s trying to force the ECB on a track it cannot get off after he leaves.

The ECB already has two mega-problems on its hand: Acknowledging that negative interest rates are a destructive experiment that is now blowing up into their faces and that they need to somehow back away from; and acknowledging that QE as standard monetary policy is an economic failure that creates all kinds of wild distortions – though it glued to Eurozone together by having prevented more sovereign defaults after Greece’s default, particularly a default by Italy.

But now the ECB has a third problem on its hand: The legitimacy of its policy decisions has been revealed to be a joke; and that this circus has become a one-man show driven by Draghi’s own agenda.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  157 comments for “Palace Revolt at the ECB, Legitimacy of Policy out the Window

  1. George says:

    Interesting situation looks like good cops vs bad cops in the movies.
    Would anyone revolt against a boss who is already on his way out?

    • Wolf Richter says:

      Draghi wants to lock in the ECB after he leaves.

      • Trinacria says:

        Does Draghi have delusions of grandeur?

        • GP says:

          No doubt, he fully expects bronze statues of him erected in town squares all over Europe.

          “consensus was so broad there was no need to take a vote” – all the voices in his head were in full agreement.

        • Cashboy says:

          Draghi having delusions of grandeur?
          He is Italian and worked for Goldman Sucks so obviously.

          Italians on the whole cannot help lying; however, they call it exagerating.
          Don’t forget Pinochio came from Italy and most Italians do have big noses.
          My mother was from Northern Italy and she cannot help lying as the rest of her family including her brother who tried to shaft me in business. causing me to be skint for three years as I restructured my business to eliminate any ties with him and then had the cheek to ask my mother why I didn’t want to do business with him anymore.

        • sierra7 says:

          “Does Draghi have delusions of grandeur?”
          The glasses were all raised and with one voice:
          “‘Cent Anni” (Pron. “Chent Ahhneee”)!
          Meaning: “100 more years!”
          (From the Godfather movie)
          (Hey, he’s Italian!) (So am I)

        • van_down_by_river says:

          Perhaps just a case of hero complex. There seems to be a lot of that going around in the central bank crowd. That much courage simply can’t be contained.

          Time for him to find someone to ghost write a book professing his courage, have investment banks buy warehouses full of the books (quid pro quo) and get himself a nice, multi-million dollar job at an HFT firm doing something or another (in this case “another” means doing nothing). That’s golfing par on the central bank course.

          Who could have possibly predicted that an Italian would be hell bent on destroying a currency, after all they did such an amazing job responsibly stewarding the Lira in past decades (all of the many iteration of the Lira).

      • d says:

        I was going to email you this horror story when it was released earlier but a sixth sense told me you would be watching this event.

        The only things I can see here is Dirty little Mafiosi is trying to devalue against the $ and set the crony corrupt orange legarde up for the blame of all the evil coming to the EU, no matter what she does.

        If she tightens she is wrong, if she sits on her hands or further eases, she will still be wrong.

        I dont not Believe the crony corrupt orange legarde has the skills for this ECB position, or the intestinal fortitude for it, and most defiantly not the testosterone required to reverse all these landmines left by the Dirty little Mafiosi on his way out the door at her first ECB meeting.

        This mess and Brexit must put the EU in uncertainty in serious investor uncertainty, if not outright doldrums, untill at least February 2020 at the earliest.

        • MCH says:

          They need to eliminate one of the problems for sure. It’s time for the vengeful husband (the EU) to put its foot down. No more of this Mr. nice guy, kick that schizo wife (GB) out of the house. Don’t like the deal you got already, then just get out, and stay out. Ain’t no better deal any more, or come crawling back for forgiveness, either way, come Halloween, this charade is over.

        • d says:


          “either way, come Halloween, this charade is over.”

          I SO HOPE SO.

          As then the EU can no longer dictate negotiation terms or the order in which items are dealt with..

          I predict England will go “decent trade deal first, if no decent trade deal, come back to us when you are ready to consider talking about one, as nothing else moves until we get a decent trade deal”

          The EU FEARS Singapore on Thames GREATLY.

          If no decent trade deal is swiftly forthcoming. Singapore on Thames will quickly become a reality, as it will be the only viable option that maintains the current English standard of living.

          NATO will possibly become a casualty in this mess unless the EU comes to its senses very soon. AS Trade and security go hand in hand (In English policy, always have done) no good trade. Why are we(England) providing the blood and treasure for the defense of the EU.?????

          The EU faced with bearing the cost of its own defense, and providing the blood for its own defense, would be interesting to watch.

          Currently the US AND ENGLAND Provide most of the NATO money and in Europe England provides the majority of the deployed European troops.

          A no deal Brexit which is where the EU and the English remainers are pushing the situation to. Entails a period of chaos and financial loss to everybody, how long and large those losses and periods are is up to the EU.

          No deal will hammer the German auto industry, most times German autos get hammered. Germany goes into recession.

          With Germany in recession how does the EU pay its bill’s as there will be no 39 billion Pounds sterling and no weekly millions flowing in from England.

          A group of eurocrats decided, Brexit. Which was occurring as they wanted it to. Would hurt England seriously, or enslave it to the EU as a vassal state FOR EVER. To scare any other EU slave nation’s out of daring to try leaving.

          This creates a situation the same as a war, or trade war, in which there are only big, and bigger, losers. long term the EU will be the biggest looser, as it has the most to loose.

          Verbally slapping you ex (England) around and dictating terms, is not smart, when it has things YOU need and want, and can legally do things that will cause you great long term harm with very little effort.

      • kam says:

        How does Europe imprison money within the EU? What stops money from going to the U.S. for a positive return?

        • panatomic -x says:

          @kam – the european banks and govt pension fund are required to hold eu country bonds. private european capital has been pouring into dollar based assets.

      • Jos Oskam says:

        I rather think that Mr Draghi’s strategy is not- and has never been focused at the best interests of the EU, but rather those of Italy.

        We will see where he ends up after the ECB presidency. If he gets a nice position somewhere high-up in the Italian hierarchy, my suspicions will be validated.

      • RobvC says:

        I’m lost.
        For what reason would he lock the ECB in?

        • Wolf Richter says:


          Italy, for sure. Plus, maybe — I’m just speculating here — self-interest, maybe his own investments and dealings with big investors, Goldman Sachs, hedge funds…

        • van_down_by_river says:

          Mr Wolf nailed the answer here. Ask yourself this, of all the trillions that have been conjured, created and printed by central banks over the last decade, how much of it flowed to you? Where do you think those trillions went? There sure seems to be a lot of people, who do a whole lot of nothing, swimming in cash these days.

          Corruption has been welcomed into high, powerful places and corrupt officials are cashing in on their powerful positions. The world is now rife with corruption, the air stinks of it everywhere. The foxes, guarding the hen house, are have a frenzied feast. Who dares stop them? You are powerless, you have no agency. You would not want to land on their radar screen.

          The former head of our central bank is collecting millions from a high frequency trading firm, and no one blinks, the press says nothing, no one (except me apparently) finds this to be an outrage. They get away with blatant corruption, why should they not continue?

          Ya think Ben B. knows how to code, does he even know C++ or Java or any simple code language? Can he even create an organized spreadsheet? I doubt it. By all appearances he is a useless, corrupt bureaucrat – what value does he bring to a corrupt HFT firm. He brings only his knowledge of corruption and the system he helped to corrupt.

          I’m invested in the market because it’s rigged and it sure aint rigged to go down. It took me way too long to realize this fact.

      • MCH says:

        Meaning he wants to tie down Lagarde’s hands in the future? May be he has ambitions for higher office or something.

        Either way, I wonder if years from now, the massive QE is going to be viewed as the catalyst to the next disaster. Although I suppose in all fairness, one could say that Mario was just copying Ben, but at least Janet was able to wean us a bit off the coke… there hasn’t been that moderating influence on Mario.

      • qwertboi says:

        “Draghi wants to lock in the ECB after he leaves.”

        Draghi isn’t the issue. It’s actually the EU treaties which created the European Central Bank (ECB) then facilitates neoliberalism into it

        Central Banks should never need to affect stimulatory-spend, the theory goes. It should be seen as a badge of shame for neoliberal promoters of the European project and the neoliberalism-on steroids, but, of course, it never is. Like contradictions of capitalism, fiscal impotence is an inevitable consequence of neoliberalism. Fiscal black-holes.

        Draghi is not the issue, he just realises this and so wants to throw buckets-of-money at the black hole.

        Draghi is the name in the frame. The frame is the neoliberal engineering that creates a fiscal black-holes where government used to (and should) be practiced.

  2. Trinacria says:

    It has been almost 90 years to the day for the 1929 market crash. I believe we are at the end of a 3 generation cycle – generations run from 25 to 30 years each. So “we” are now long in the tooth. There is an old expression that says “from sandals (meaning poverty) back to sandals in 3 generations”. So, here we sit after so much nonsense, debt accumulation by governments at all levels, corporations and households. No matter what games the ECB nor even the FED plays, this self inflicted disaster will hit will a vengeance and will become our version of the 1930’s. The more they try to keep it at bay the worse it will be. Part of the natural cycle is “out with the old and in with the new”. But with all the artificial stimulus, I think the cleansing will be more painful than usual. I believe having no debt will be a saving grace – though still painful – for those of us fortunate (and through hard work) to be in that position. Gird your loins !!!

    • Rat Fink says:

      This is like revisiting 1929.

      And instead of the Great Depression, the central banks say NO – we will NOT have that.

      So instead they do ‘whatever it takes’ to stave off another Great Depression.

      As you point out, this is not a solution rather it only walks the egg further up to a higher cliff.

      But then perhaps this is wise policy. This is NOT 1929.

      This is a much more complex, globalized, JIT world. And a financial crash this time around regardless of it is were to have been allowed to happen in 2008 or it happens in 2020, might result in complete chaos making it impossible to reset things.

      Let’s not forget what nearly happened when Lehman was left to drown.

      If the central banks don’t step in the world would have stopped (I do not believe that is hyperbole).

      So if that is true, then very obviously the central banks have no choice but to continue to step in. Draghi knows that. As do all the central bankers.

      So they keep stepping in because of TINA (there is no alternative)?

      I seem to recall Bernanke mentioning that people would some day thank him when they understood why he did what he did.

      Did he and his mates buy us a decade + of BAU?

      I am inclined to give thanks to the central bankers rather than throw stones at them.

      We see only the tip of the iceberg (which doesn’t look so scary) whereas they see the whole thing – and they are terrified.

      • Doh! says:

        Still inclined to think Bernanke overdid it, especially if we’re headed for a bigger cliff now.

        So what will be the spark that starts the fire this time?

      • Bobber says:

        You thank central bankers for fixing a problem they created that required a taxpayer bailout?

        That’s nonsense.

        • Kent says:

          I’m inclined to think the bankers themselves caused the problem. And they were enabled to cause the problem due to government deregulation of the industry.

          Banks make loans against assets driving up their prices. Then they pawn off those loans to various suckers. Eventually those loans default when the prices get too high. That’s what banks do. If we aren’t going to stop them through legislation, then you need creative central banks.

        • Rat Fink says:

          I don’t think they are fixing anything.

          What I do think is that if they had not acted in 2008 as they did, we would not be having this discussion.

          Once you get on the bullet train to hell, there is no stepping off.

          As for who caused the problem, the problem was caused by the fact that just after the turn of the century the cost of oil started to blast off.

          And the economy does NOT like expensive oil because it causes inflation.

          Recall 147 dollar oil? The economy puked up its liver when that happened.

          The central banks could have sat back and allowed a deflationary collapse as growth crashed due to expensive oil, or they could have done as they did and thrown the stimulus (primarily debt) at the problem allowing people to continue spending and allowing the economy to grow.

          Of course that all culminated in the mother of all financial crises. But what choice did they have?

          Just as they have no choice now. Stimulate or die.

          They will obviously fail. But better to delay that moment as long as possible.

        • Bobber says:

          When you have a cancer, you don’t feed it sugar, you cut it out. Yes, it will be painful, but it’s better for long-term health.

      • ZeroBrain says:

        “I am inclined to give thanks to the central bankers rather than throw stones at them.”

        Well you’ve outted yourself as either a central banker, an economist, a hedge fund manager, or the village … nevermind.

        • d says:

          “Well you’ve outted yourself as either a central banker, an economist, a hedge fund manager, or the village … nevermind.”

          NO what the FED did post 2008 was correct. Until it got involved in QE infinity after the P 44 administration refused to play its part and do from the bottom in infrastructure stimulus.

          “Monetary policty alone can not resolve all the issue we face” FED to P 44 admin.

          P 44 admin could have gone around the GOP by declaring national fiscal emergency. Poured 1T plus into infrastructure, and gotten away with it.

          The GOP would have come round, as their cronies would have had all those lovely treasury backed infrastructure bond’s to invest in.

          Also there would have been lots of infrastructure trickle up profits for their cronies.

          The results of the first post new deal QE experiment in the US are flawed by the refusal of the P 44 administration to play their part.

          The decision to allow Lehmans to fail was personal from some in treasury and other admin entities as they simply did not like Fuld. In 20/20 hindsight the FED regretted it hugely.

          To not have acted after that, as they did in 1929, would have created a situation that would have made 1929 -1942 and 2008 – 2019 ongoing. look like side dishes to a Sunday school picnic.

        • Rat Fink says:

          I rather like to think I’m just the smartest person in the room.

          That said, one doesn’t have to be very smart to see the nature of the problem, so it must be that I am in a room of village…. nevermind

        • daniel weise says:

          Exactly,as if they and their politician friends had nothing to do with creating the 2008 housing crash in the first place. Bill Clinton’s “housing affordability act” that forced banks to give mortgages to disadvantaged (unqualified) borrowers got the ball rolling in the mid 90s. it was happily accommodated by the fed and the banks and later by Bush II who doubled down with his “owner society” wet dream. All the results of the State meddling and intervening in the free market. yet we never learn….

        • ZeroBrain says:

          I shouldn’t have been rude – I’m allergic to banker worship. Anyways, one does not create systemic robustness by moving responsibility from the smaller entity to the larger entity – such decisions eventually cause the larger entity to fail on an even longer timescale. Evolution works by trying a lot of things and wiping out the failures. That should have happened – entities with derivatives, comingled funds, and so much other financial crap would blow up, and the simpler more robust system would survive. Instead we have a backdoor transfer of funds to GS and so much more.

      • Tom Pfotzer says:

        Let’s recall the scenario in 2008:

        dot-com bubble had burst (1st iteration), So Fed opened the money spigots, and Congress repealed Glass Steagall.

        And that caused the real estate bubble. (2nd iteration). RE finance became a laughingstock of ratings lies, much of that packaged debt was pawned off on 3rd parties. All the big banks, all of WS was involved.

        Checkpoint 2008.
        Policy option 1: jail the fraudulent bankers and relateds. Let their companies go bankrupt. Stockholders, bondholders get squashed. Gov’t buys them up pennies on dollar (remember Conrail buyout as precedent). Gov’t operates them in receivership till it’s profitable to sell.

        Policy option 2. Gov’t (Fed) buys bad debts at face value, bails out fraudulent banks. No one, no one at all, goes to jail. Massive amount of losses to middle class, massive profits to the fraudulents. Open the spigots even further (QE), load up the Fed balance sheet with all the iffy “assets” until the bubble can be re-inflated enough to re-sell them without loss to the Fed.

        Oh, you say, but the world would have ended if we hadn’t bailed out the banks. No payrolls, etc..

        Did the world end when Conrail consolidated all those eastern railroads? Railroad operations are complex. Did the gov’t fail to run it? No. Worked fine.


        So, here we are today, facing a much worse problem. The bankers and their trade association (the various central banks) have extended the stupid yet another cycle, and now to almost all of the major western economies.

        Let them fail. Put them into receivership. Get the legislation ready now, so we’re walking around with a bazooka in our pocket* for the next occurrence. Next time the bankers put a gun to our head, out comes the bazooka.

        * credit Hank Paulson, GS exec-became-Treasury-sec “just in time”.

        • Kent says:

          Option 1 would have:
          1. Crushed the campaign financing for almost all of Congress.
          2. Proven that the government could run banks as well as the private sector.
          3. Crushed the net worth of the wealthiest individuals in the United States.

          Nice thought, but we aren’t that country anymore.

        • Tom Pfotzer says:

          Referencing Kent’s reply below:


          You’re right. Those would have been the effects of the policy I advocate. Furthermore, I understand your cynicism re: the character of Americans “these days”.

          I think it’s time we Americans start taking action to restore our faith in ourselves.

          I’m “that country”, still. Reading the comments below, it seems like many of WS readers are also “that country”. Seems like you’re “that country”, too, or you wouldn’t have posted as you did.

          The thing that greedy, avaricious, selfish people count upon is weakness in their opposition, e.g. the ethical people.

          So, let’s show strength. Seems timely.

        • van_down_by_river says:

          You have earned an A+ for your post, sir.

          You go to the head of the class.

        • panatomic-x says:

          @Tom Pfotzer – one additional thing to add to your timeline: 2020 zirp/nirp policies wipe out pension system. also, it’s not our weakness that they count on, it’s our fear.

      • robt says:

        Despite their supercilious attitude towards the rest of the world, and especially America, the Europeans have had the most, and the most legendary, inflationary events in history. Every nation.
        Except Britain, of course. And Switzerland.
        Looks like the ECB is coordinating the mother of all inflations for all the members who print Euros.

      • mike says:

        Yes. We should say: “Thank you Mr. Bernake for giving the banks billions of dollars without any strings. Thank you for not helping the average Americans instead. Thank you for only helping the billionaires and millionaires that caused the 2008 collapse.”

        Then, we should give him a prize for not letting the public know about all of the help that the “Federal” Reserve covertly gave to insolvent banks, e.g., ultra-low-interest rate loans to insolvent banks, through which the real interest owed was effectively gifted to the insolvent banks, without strings attached. Then, we should release Charlie Manson and John Gotti and buy each a mansion and a Ferrari as a prize for also helping us so much.

        Of course, they are now terrified. In the next collapse, if Americans come to their senses and realize the full extent to which the banksters have harmed them and their children and grandchildren, the banksters may be harmed.

    • Xabier says:

      Very true: although we are facing more than a cyclical process, as the great globalised economic structure based on intensive resource extraction and consumption, combined with massive over-population (on a scale never before seen) is faltering and about to collapse, together with an ecosystem viable for humans and their civilisations.

      It might well be so painful that no recovery that is bearable might even be possible, in most regions.

      Probably a few serious bumps along the way down, though, and having no debt at all is certainly the wisest provision one can make – but who can live like that in this system?

      • Rat Fink says:

        There are those that welcome collapse. They will think otherwise when they experience it.

        And I guarantee, they will be thinking of Bernanke very fondly, as they gulp down their last can of beans

        • Gershom says:

          There are those that welcome collapse. They will think otherwise when they experience it.

          No one welcomes collapse. Clear-eyed people realize the present system is doomed to collapse under the weight of its own fraud and avarice. They welcome the change to flush out the toxic waste, punish the guilty, and rebuild a better, more honest system that serves more than just a corrupt and venal .1% in the financial sector.

        • Tony says:

          Am I correct in remembering that there was an economic downturn in 1921 that was over in a few months and is long forgotten, and that the reason 1929 lasted so long was the size of the bubble that preceded it plus the government intervention to try and correct it?

        • Bobber says:

          Bernanke will go down as the guy who thought you can solve a debt problem by encouraging more debt.

        • robt says:

          Everybody forgets 1921; it was a big bust, not just a blip, after the big double digit inflation following WWI. That’s why they cranked up the money machine again after 1921-22 – Florida real estate, stock market boom, the roaring ’20s.
          Senator Elihu Root was right to oppose the creation of the Fed during the debates: If you vote for this, ‘You will have created an engine of inflation’. And of course, depression.
          The Fed predictably did both within 16 years of its creation.
          Not too many people remember Elihu Root, either. Besides doing just about everything, he won a Nobel Prize, when it actually meant something.

        • Frederick says:

          Think of Bernanke fondly What are you smoking I want some

        • panatomic-x says:


          Senator Elihu Root was right to oppose the creation of the Fed during the debates: If you vote for this, ‘You will have created an engine of inflation’. And of course, depression.
          The Fed predictably did both within 16 years of its creation.

          it amazes me how little economists pay attention to history. one thing i’ve bee trying to understand about the early years of the fed vs. now, is why do they now buy primarily gov’t debt. this fuels inflation by expanding the federal gov’t. i believe that before wwi, the fed only bought corporate paper. the idea was to create liquidity in the private sector during a downturn or an “elastic money” supply. this was to keep business humming and prevent massive layoffs. after the panic passed, it was supposed to pull in the liquidity by downsizing, the balance sheet. apparently all that changed when the gov’t needed a buyer for war bonds and it’s never been undone.

    • RD Blakeslee says:

      Well said.

      • RD Blakeslee says:

        This is meant for Trinacria’s post, on a “marionette line” well above this.

  3. MD says:

    So we have POTUS demanding 100 basis points cut, referring to the Fed chair as an ‘enemy’, and ORDERING (via Twitter) US companies to bring their factories (ain’t democracy grand?) back to the USA – and in Europe, we the behaviour described in the article.

    Strange days of hubris and arrogance have arrived on the back of these decadent days of excess.

    • Bobber says:

      The powers that be don’t want the invisible hand to do its work, because it won’t put easy money in their pockets. Profits would only go to those who earn them.

      • Kent says:

        Well the invisible hand may decide to put all the profits in the hands of Chinese industrialists instead of American workers. And that’s not good for politicians.

      • Trinacria says:

        Yes indeed…the so called invisible hand may just give them a very serious and painful prostate exam….

    • Gershom says:

      Strange days of hubris and arrogance have arrived on the back of these decadent days of excess.

      Surreal, isn’t it? Candidate Trump lambasted Yellen and the Fed for creating a “big fat ugly bubble.” President Trump has embraced the Fed’s Ponzi markets as his own. The sell-out of his base has been monumental.

    • Insta says:

      MD, I love your last line, very poetic and a great quote. It should be a headline.

    • The multinationals moved on years ago, Silicon Valley is our own City of London. The quixotic presidency of Donald Trump is part farce, all fiction.

  4. Pinto says:

    From “whatever it takes”
    To “for how long it takes” those printers working.

  5. Tony says:

    I always struggle with these conspiracy theories, especially when they are based on single (evil) individuals. It’s like in a James Bond movie. These conspiracy theories always assume and require that there is some evil intelligence, hidden somewhere just out of sight, but the people dwelling in this conspiracy theory obviously are the smart ones who lifted the veil and discovered it all. I call BS. The ECB is an institution like the FED and nothing will change after Draghi left. The one thing he made very clear during the press conference is that fiscal stimulus is what is needed next, and that pretty much represents the consensus among all CBs.

    What I’d like to hear from Wolf is how he thinks the world will shift the paradigm and get out of this current malaise, in a way so that common people can turn the corner. More austerity or this notion of ‘paying back the debt’ is certainly not it.

    What I want to know is how I get my social security, how I pay for health care, how I pay for my kids education, how I can afford a house, and how my pay will increase. A lot of money will have to be printed and given to the people to meet the $125 trillion of government liabilities. I want to see a government like under Roosevelt with a New Deal. Inflation is the most efficient mechanism to transfer wealth back to the people.

    • Wolf Richter says:


      “Inflation is the most efficient mechanism to transfer wealth back to the people.”

      At first I thought you’d made a typo, and then re-read it. And it seems you really meant to say this. You’ve got this totally reverse. Instead:

      Inflation is the most efficient mechanism to transfer wealth from labor to capital because labor is denominated in the monetary unit that is losing its purchasing power, and thus the value of the fruits of labor declines.

      • Tony says:

        You only mention labor. What about assets accumulated by the 1%?

        Inflation will cause interest rates to raise, which deflates the asset bubble and starts to deleverage our world. Now suddenly our wages have purchasing power again. Millennials might now be able to afford a house. And wages will gradually raise.

        If this inflation is brought about by fiscal spending (which it will), and if this fiscal spending is invested wisely into our Common Good, like a new New Deal, then the world has a chance to turn around.

        I want government to honor social security, Medicare, pensions, and all the other $125 trillion in liabilities. That requires a lot of printing of money, but this time given to the people and not the banks.

        Our mountain of debt can only be inflated away, as austerity or defaults are way too painful. So yes, inflation is the most efficient mechanism to transfer the wealth back to the people.

        • van_down_by_river says:

          I see… you want the government to print $125 trillion so you can collect welfare (social security, medicare and unfunded pensions are welfare – don’t believe me? look up the definition).

        • Tony says:


          You bet. I paid for social security. I also paid for my pension with low wages in return for a pension. You got to be kidding me. Don’t you dare to call this welfare. The alternative is to starve or who/what else do you think will sustain all the retirees with no savings? Or do you think I can eat the promise of ‘trickle down economics’?

        • panatomic-x says:


          call it whatever you want but the gov’t took 16% of my earnings (8% from me and 8% of my employer) and guaranteed me a retirement plan. it’s not my fault if it was based on a pyramid scheme and poorly invested in zero interest bonds so they could bail out their friends. a deal is a deal and i want my money.

      • Old-school says:

        I used to read all of Buffets stuff. He seems to understand the big picture. A few things I remember:

        1. Money is no longer “In God we trust”, but “In Fed we trust”.
        2. I don’t invest in long term fixed income because the value of the dollar is diminishing.
        3. What is important is that you have pricing power in what you produce, it does matter if you are paid in dollars or something else.
        4. I have instructed my trust for my wife to put 90% in sp500 index fund and 10% short term treasuries.
        5. Government debt will never be paid back, it will just keep getting rolled over.

        Didn’t take his advice on the 90/10 but I probably should have.

      • Old-school says:

        It’s interesting to go back and read how the North and South financed the civil war. South only 5% through taxes and north only 21% through taxes.

        It’s basically all the tools of governments to get resources of society and individuals coping to try to survive. It’s very sad how the civil war divides ordinary people now. It seems like it was the wealthy of New England vs. The Plantation owners of the the south. Most of the little people were just just going to pay the price.

        Read where after the war where people were so famished they ate dirt

    • Kent says:


      What appears to be a conspiracy is often something different: lots of influential people advocating for something they commonly believe to be in their own self interest.

      My take on the “malaise”: the industrial revolution is over. The major fruits of the Internet revolution have been picked. There is nothing new on the horizon that is going to both cause dramatic increases in new jobs and increased productivity. So we have a real economic stagnation, until someone comes up with something new and remarkable.

      This creates a situation where one person’s gain becomes someone else’s loss. So if you aren’t seeking to take from others, others are taking from you. This creates the massive wealth inequality we are experiencing.

      Finally, unlike our esteemed host, I believe the central banks only have a marginal effect on interest rates. In a world awash in money, with no real good investments, interest rates have to be extremely low (though certainly not negative).

      And all of this is self-reinforcing: lower opportunities create lower interest rates which creates greater inequality which creates less ability to create new opportunities …

      • Tony says:

        Wealth got transferred to the 1%, not because we are out of ideas, but because we are at the end of a cycle that started after the 2nd WW. We started in 1945 with a New Deal. Up until about 1982 both inflation and interest rates rose. Then it peaked, and since then inflation and rates have been declining. We are now back where we started, faced with a huge mountain of debt and no way out of it. ZIRP is needed because every increase in rates causes the economy to crash.

        Listen to Draghi’s press conference. He explicitly says that fiscal policy has to take over. ECB/FED can only buy financial assets, providing needed liquidity to keep the system afloat, while giving this money to asset owners. Only fiscal policy can invest in both people and the Common Good. Central Banks make this possible. Without the ability to print massive amounts of new money over the next decade or so, we will never get out under our mountain of debt. It has to be inflated away as other forms of deleveraging are worse. Paying it back is utter nonsense.

        So it is not the lack of ideas or opportunity. That is the effect, not the cause. The cause is our mountain of debt and the lack of inflation to deleverage and deflate the asset bubbles.

        • Art says:

          Tony, your solution to this mountain of debt is…

          More Debt!

          Inflation is a tape worm on society and while the debt levels are reduced in real terms, the additional fiscal expansion you are suggesting will make this a zero sum game. Only sustained economic growth and increase in national income can make reduce the debt burden.

    • Brant Lee says:

      “These conspiracy theories always assume and require that there is some evil intelligence, hidden somewhere just out of sight…”

      Perhaps lurking in the shadows on top are a few who know how all of this will play out. Most likely not so much financial geniuses, but most talented at predicting human nature and the general path we always take. A world with 99% dirt poor people is just as much fun to rule over as the present percentage.

  6. Clockwork Orange says:

    But why? Just what purpose are they telling themselves their policy serves? And on what basis? What can anyone tell themselves have been the benefits of this policy thus far? And why go lower now, for what reason, what catalyst?
    Seriously, asking for a friend.

  7. Gordon says:

    There used to be all sorts of jokes about the EU such as putting an Italian in charge of finance etc. Now it has come to pass with the consequences exactly as predicted.

    Also, there are whispers of Draghi’s corrupt links to GS in hiding/obfuscating Italy’s debts before he became the ECB President.

    So, nothing unexpected.

    • Just Some Random Guy says:

      Heaven: English police, French cooks, German mechanics, Italian lovers, Swiss run everything

      Hell: German police, English cooks, German lovers, French mechanics, Italians run everything.

    • Bobber says:

      Wasn’t it an Italian cruise ship captain that ran his boat ashore while taking pictures on deck several years ago? I wonder if he was related to Draghi.

    • Frederick says:

      “Italian” Huh OK technically yes

  8. yon says:

    I keep thinking, where is the money coming from to pay for these debts? I just don’t get it.

    • Mario Dragact says:

      It’s funny money. Conjured out of thin air, with the hope it won’t cause hyperinflation.

      • Frederick says:

        It won’t because the velocity of the money will be so low A lot of it will go into physical precious metals if I know the Germans and I think I do

    • Kent says:

      When banks lend money, most of that money is newly created by the lending process. So that new money is paying off the debt that’s created. But, because only part of the lending is new money, if the amount of debt isn’t constantly growing, the debts eventually can’t be paid back. Which is one of the reasons “growth” is so important.

  9. unit472 says:

    The immediate issue for the EU is keeping Salvini and BoJo from holding national elections they would be expected to win. The EU and its operatives in Rome and London seem to have accomplished that but they do have to to keep Conte in power and that means there can be no Italian budget crisis. This requires the EU Commission to look the other way at the fudged numbers Conte will submit and for the ECB to keep Italian bond yields down. In London the goal is the opposite. Tony Blair and his Remaniacs will do ‘whatever it takes’ to keep the UK in the EU because the EU budget falls apart without British funding.

  10. Tim says:

    There was never much likelihood that QE and ZIRP/NIRP would “fix” the economy, and the only real aim was to put things off until later.

    Now, it seems, “later” has arrived.

    • Rat Fink says:

      It does appear that we are entering the Beginning of the End stage.

      I have read that those opposing Draghi’s measures were demanding to hold off until things were truly desperate.

      Perhaps things are truly desperate —- now.

      There is a faint smell of something in the air. It’s either dog sh8t smeared on my shoe or desperation. My shoe is clean so………………..

  11. Old-school says:

    As I have stated before from the reading I have done, there is no empirical evidence that the Fed can materially improve the economy or that an inflation rate of 2% is any better than 1%.

    The danger of the Fed in my opinion is 1) centralizing economic decisions concentrates risk to society 2) it transfers economic power from the individual to the state 3) it allows the Fed to pick winners and losers (savers vs debtors)

    The Fed facilitates leverage. Society can do fine without excess leverage. A company can be totally equity owned. The housing market can operate with 20% down loans only.

    • Bobber says:

      Yes. A sensible Fed would never allow debts in the economy (including government debts) to grow faster than nominal GDP.

      It’s no different than a working person with a credit card. That person cannot repay his debts if the debts consistently grow faster than his wages.

  12. Tim says:

    What happened in the years before 2008 was an attempt to fix “secular stagnation” using what I call “credit adventurism”, pursued mainly through deregulation.

    This meant that 2008 was always going to be a banking event, because banks are the central component of the credit system.

    What has happened since – “monetary adventurism” – has been quite different. The next crisis won’t, primarily, be a credit (banking) event, but a monetary (fiat currency) event.

    As ever, like generals and admirals, policymakers are reasonably prepared to re-fight the last war, but not prepared at all to face the next one.

    • a reader says:

      “The next crisis … but a monetary (fiat currency) event.”

      So what? They’ll issue a new currency; has been done many time before. As long as they manage to avoid a large scale social unrest the show will go on, same as ever.

  13. Joe says:

    I have come to realize that this banking system is designed to crush savers by the constant deflating of the currency purchasing power.

    I have been buying some fantastic carvings and many in the semi-precious stones…love the artistry of some of these.

    • RD Blakeslee says:

      Perhaps some diversification getting closer to liquidity might be wise.

      “Junk” silver comes to mind.

      • Xabier says:

        In a crisis, junk silver is certainly highly convertible to cash – and then immediately food, fuel, etc – and much preferable to gold, which gangs will certainly torture and kill for. See Argentina.

  14. Old-school says:

    Central banks have got the world too complacent. As Albert Edwards says both the P and the E get marked down during a recession. No problem at all seeing SP500 GAAP earnings knocked down to $100 and the P going as low as 7. That could give you 700. It may not happen exactly that way, but it could. The P could go to 10 or even 12, but pensions are not ready for a 700 – 1200 S&P.

  15. Dan Romig says:

    I have four ‘Rules of Business’, and rule number 3 is, “Be honest.”

    Mario Draghi certainly does not adhere to rule # 3.

    Reading Wolf’s analysis of the illegitimacy of the ECB, brings to mind a recent quote by ‘Ignacio’ in NakedCapalism’s on ‘The Two Sides of Government Guarantees for Banks’ that has seven words that sums up the European mess. “… eurozone members lacking sovereignty on their currency …”

    Jens Weidmann who heads the Bundesbank has to deal with a liar like Draghi because Germany sacrificed the Deutsche Mark to join the euro in 1999. Notice how Switzerland has not sacrificed their sovereignty?

    Of course, here in the U.S. we’ve had Congress hand over sovereignty of the dollar from the Treasury to the Fed, but that’s another story.

    1) Answer the phone. (Nowadays this includes texts & emails)
    2) Be on time.
    4) Be polite.

  16. Old-school says:

    One more before I let it go. Central banks facilitate government spending. Just read new F35 costs 35,000 per hour to operate. That’s just shy of $600 per minute. Typically I think you send up a wingman so that’s $1200 per minute to do even a non combat exercise. Its easy money while 80% of population are trying to save a few bucks by shopping at a discounter or on-line.

    • Anon says:

      F35 cost so much because building it was spread out over as many Congressional districts as possible. Everything will probably work out because war is evolving in a way that will most likely emphasize rods-of-god/hyper-sonic-missiles for attacking rogue states and drones/riot-police for insurgencies. World will most likely either devolve back to subsistence farming or create super-states capable of who-knows-what or both at the same time. We have first-world-countries and third-world-countries. Is there such a thing as a second-world-country? Argentina? China? South Africa?

      • RD Blakeslee says:

        Some of us are living a compromise “hedged bet” sort of life – remote from major population centers, debt-free, producing a reasonable amount of our subsistence in situ and using PMs as money insurance.

        It’s not like the life of a monk – not these days, with modern communications (like here and now) and automobiles.

      • Tim says:

        Logically, if we have ’emerging economies’ as a category, we ought to have ‘submerging economies’ too.

        Plenty of candidates in Europe – Italy (shrinking economy, awful banking mess); France (minimal growth despite a debt binge, widespread unrest); Britain (deteriorating economy, politically dysfunctional); Ireland (though you need to look behind the “leprechaun economics” of reported GDP)….

        • Xabier says:

          The waves lap at their shaky foundations: soon one may only hear the muffled ringing of distant bells as of a submerged cathedral…….

        • Pete in Toronto says:

          Coining: “leprechonomics”

          H/T: Tim

      • The F35 debate is useful, by analogy. Having seen this before, the reasons for the shortfalls in performance stem from a lack of a useful deployments. Fed policy falls into the same quandary, by Powell’s own admission policy is superfluous (business people are not basing their decisions on interest rates). They spend a lot time worrying about contingencies, and basing their policy, reserve requirements and balance sheet size on the matter. I have more faith in the F35 as a physical defense, than the Fed/Treasury/Congressional cabal of fiscal and monetary policy makers, to defend this economy in a crisis. The executive wants EuroNirp, while posing as a populist, and leading is into a (trade/hot) war with untested means and methods. Once the economy collapses they roll out the F35s…

      • Wolf Richter says:


        “We have first-world-countries and third-world-countries. Is there such a thing as a second-world-country? Argentina? China? South Africa?”

        Actually no, we don’t have first-world countries and third-world anymore. What we now have are:

        1. Developed Markets — US, EU, Japan, etc.”
        2. Emerging Markets — China, Argentina, Greece, India, etc.
        3. Frontier Markets — Bangladesh, Zimbabwe…
        4. Standalone markets” that don’t fit into these categories

  17. Lisa_Hooker says:

    Apparently we have not pulled forward every last scintilla of consumption. But our brave CB’ers keep trying. When they succeed what will be left for us to do but sell.

    “No amount of money can buy happiness, enough money can rent it – temporarily.”

    • Wolf Richter says:


      I’ve always loved the “scintilla of doubt” standard. But now, there is an even greater standard, thanks to you, the “last scintilla of consumption” standard.

      I may steal this expression from you in the future :-]

      • Lisa_Hooker says:

        I should have said “try to sell.” With maximal debt there would be minimal capable buyers. Personally, I’ve bought too much “stuff” already. Good, practical stuff, but too much. ;-)

        • panatomic-x says:

          @Lisa_Hooker reminds me of the legend of my friend’s grandfather. he was thrown out of harvard for gambling. during the great depression, he used his poker winnings to buy a 1000 acre farm in litchfieldc ct. for back taxes. part of the land was used as the site of ivan lendl’s mansion and offered for sale in 2016 $19.7 mil.

  18. Anon says:

    Everyone is doing what they think is best. Few want to disappoint their friends. I’ve read that General Marshall (WW2 fame) was told something to the effect, “how can you do this to me”, when he relived incompetent senior commanders after December 7, 1941. Hard to balance the heart and the head.

    Time for a lot of senior commanders in all occupations to be retired.

  19. Gershom says:

    Germany’s Bild newspaper blasted Draghi for bilking German savers out of billions in interest income. Nice to see a media outlet taking the side of the people against the banks.

    • MC01 says:

      The Bild always forgets to remind readers that German firms that never turned a rusty pfennig in profits or are deep in debt can access credit at the lowest rates in history right now.
      It also forgets to mention that the German economy has reaped a rich bounty from these low interest rates, otherwise it would have to contend with mundane growth rates or even, gasp!, the occasional recession.

      The Bild also forgets to mention that German politicians, central bank officials and other decision makers are always ready and willing to talk talk talk, but so far they have done absolutely nothing to put an end to this fiasco. If I were malicious (and I am) I’d say they are just trying to bamboozle the public while doing the exact opposite behind closed doors.

      This is akin to the classic piece on the local newspaper about residents of Little Town X fighting a desperate rearward action against a landfill or whatever: nobody really wants to help out these poor devils, and in fact they are probably seen as a nuisance, but everybody has to pay lip service to their plight.

  20. Mark says:

    “I am inclined to give thanks to the central bankers rather than throw stones at them.”

    Very few idiots will admit being one in writing …… your honesty is to be commended.

  21. Stephen says:

    Tic Toc…… I am starting to smell desperation in the air. I am not sure this is just bad timing or the Deep State has decided to slowly bring the house of cards down (because its going down anyway) and because a collapse is at this point is perhaps the only way to dump a US President that they do not approve of these days. Expect the rest of 2019 and 2020 to be an epic period much like 1929 and the 30’s. I would advise all to try to disengage from the fear porn. I do read news and try to grasp the issues, but I also try to disengage and just know that the cycles of history repeat over and over. If you are my age (over 60), you probably have had a pretty good run relative to our Fathers and Grandfathers thus far.

  22. Jake Scotts says:

    I don’t know about you guys but where do they find these guys with their names. Dragi, it looks like he is dragging everyone done to an abyss of financial ruin and disaster.

    If there is no consequences for failure and everyone in massive debt gets bailed out on the backs of the responsible and prudent, savers versus debt junkies then it will never work as it has shown for over 11 years now.

  23. Just Some Random Guy says:

    Low interest rates provide opportunity to make money for those willing to invest and take a risk. But they hurt the risk averse who want to put money in a CD for 30 years.

    Judging by the comments, lots of risk averse people hang out here.

    • Wolf Richter says:

      Just Some Random Guy,

      Well, not quite – you’re ignoring the all-important question that underlies – or should underlie — all capital investment decisions: the risk-reward relationship or the pricing of risk.

      What you’re seeing is not an issue of avoiding risk. It’s an issue of avoiding mispriced risk.

      The average yield on a Euro junk bond is 2.7%. These bonds have a considerable risk of default. You could lose up to your entire investment. In addition, there is the risk that rates rise, which can be painful for bonds. These are VERY risky instruments today at these prices. And the yield is a ridiculously low 2.7%.

      This is a classic case of mispricing risk. Only desperate and blind yield-chasers would buy them, or institutional investors playing with other people’s money, including hedge funds that apply huge leverage to make some gain on possible further declines in yield – with the hedge funds taking the risk of blowing up and screwing their investors.

      If you don’t understand the pricing of risk, you’re just chasing momentum, which a chimpanzee could do (follow the others), which works great until it takes you over the cliff, along with the others.

    • Argus says:

      All this money printing debases currencies. Low and negative interest rates discourage savings, which would typically be the way to build true wealth through eventual production.
      The Bible puts it this way “Dishonest money dwindles away, but he who gathers money little by little makes it grow ” (Prov 13:11)

    • MCH says:

      When interest rate is too low, the problem is that there are now more and more “investments” making a potential wipe out more likely. There is a reason for risk averse, most of it is age dependent if you’re in your 60s or 70s, you want safe rates of return. At 20s and 30s, sure, go and gamble on risky investments.

      The problem of the low interest rate environment as Wolf has pointed out is that people now start to chase yield. That means real high grade bonds have lower yields, but so do crappier junk bonds, and now people will take outsized risks to chase those yields. Think about it, if Argentina bond yields is suddenly at 10%, would you go for it? The risks are so outrageously outsized, that it isn’t proportional to the rewards any more.

      This pushes people into things like equity or other assets, which may be more dangerous.

  24. KGC says:

    Draghi is Italian above all else. His agenda since he was put in this position has been to keep Italy from having to make the cultural change it’s going to have to undergo if it’s to remain a (marginally) functional country in the EU. How the ECB ever thought an Italian banker could could provide honest, conservative, guidance disassociated from politics I’ll never know.

    • doug says:

      How the ECB ever thought an Italian banker could could provide honest, conservative, guidance disassociated from politics I’ll never know.

      I imagine the ECB knew exactly what they were getting.

  25. This segues nicely with the inflation post (Fed rate cut not implied). The Fed doesn’t need to lower rates, ECB is doing it for them, and NIRP won’t work in America. There is not enough alignment between political and economic policy to make it work. The rising value of the dollar, relative to declining purchasing power, should bring things to a head, but that is none of their worry. well maybe strategically, but the US promise to cut those ties is perhaps what this is all about. Oh and imagine Japan paying for their own national defense?

  26. Snydeman says:

    If I’m understanding all of this correctly, the only way the EU could “save” European banks from crashing would be to either shovel money directly at them, OR allow them to put capital controls on bank accounts which would prevent people from withdrawing money or closing accounts while interest rates are negative, OR allowing banks to literally “take” money directly out of deposit accounts. None of which sound very appealing or politically popular to me.

  27. Hkaan says:

    Speculating….Draghi taking down ECB bringing European banks. Creating introduction opportunity of Libra…or other crypto currency.

  28. Leser says:

    Super Mario taking the p1ss yet another time!

    Draghi can openly defy the national CB heads, even ridicule them, because he knows that the powers backing him weigh far heavier than any supposed institutional recourse at the ECB, or in fact any supposed EU democratic accountability.

  29. DR DOOM says:

    Whine, whine …. Boo …. Hoo ….Hoo . The people of the western world has outsourced its government to un-elected bureaucrats in order to shelter the political class. They all enrich themselves and then we call them public servants. Mario put it in the ‘ol Dario will get his reward for being the Un-stoppable Bad Guy. Then the new he or she will emerge as the Savior of the Realm, repeat process. Our Federal Reserve is a creation of Congress and was designed to shelter our political class from accountability. After 9-11 the entire CIA and FBI management should have been removed for failure. Curious George pinned a medal on CIA George as he split for a great retirement.This lack of accountability on this side of the Atlantic did not happen for the same reasons that Mario, put it in the ‘ol Dario will not be held to accountability on the European side of the Atlantic. In fact after he lied to them he gave them the look that said , you are all my bitches , shut up.

  30. MC01 says:

    Absit iniuria verbo, but I have to wonder what Messrs. Weidmann, Hansson and their associates hope to achieve by such “leaks”, something that has become common since the ECB refused to start QE unwind and put a bullet through the head interest rate “normalization”.

    It’s very obvious so far this “tactics” have been a resounding failure so why persist? The Fronde would have many other options to make their displeasure known including strongly lobbying for full transcripts (not minutes) of ECB meetings to be released to the public or substantial changes to be made to the decisional process. Failing everything else refusing to attend meetings or even handing in their resignation letters would be a strong statement: at least wash your hands of the whole matter.

    Or perhaps there’s another option: Messrs. Weidmann, Hansson & Co (a nice name for for a legal firm specializing in baratry) are just engaging in some theatrics, partly as a cheap insurance policy in case things turn hairy and partly to score some brownie points with all those affected by the effective death of fixed yield markets. My gut feelings is for the latter given the enormous size of the private pension fund sector in countries like Germany and The Netherlands and the risks it has been taking for the past three years to make ends meet.
    I doubt anybody will fall for this pathetic pantomine, but since this is Europe we have to pretend to, or at least we are expected to do so.

    • Xabier says:

      Theatrics, with the intention of being able to state, to enraged electorates when it all implodes, that they were not culpable.

      Not a serious protest at all.

      ‘What is Truth?’ said Pontius Pilate, and washed his hands……

  31. CoCosAB says:

    Still no QQE for the slaves! Too bad…

  32. Winston says:

    Binyamin Appelbaum: The Problem With Modern Economics

    Why do we have the economic policies we do today?

    These policies drive decision-making on Capitol Hill, corporate boardrooms, and on Wall Street. But who made them, why, and how did they come about? And how well are they serving us?

    Binyamin Appelbaum has made these questions the focus of his new book The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society, which shines a bright light on the rise of modern Economics and its dominating influence on society.

    From anti-trust law to central banking, Appelbaum explains how Economics has evolved (metastasized?) into its current form, where the solutions it now offers may be no better (and possibly substantially worse) than the problems it’s designed to address.

  33. catbell4 says:

    Re: “there is no emergency”

    This is an onerous time, when there is polarity among those who want zero rates and those who think this period we’re in is not an emergency. The zero rate people seem to be either politically motivated or criminally minded, versus those that simply want the bigger picture to unfold un-molested and manipulated.

    If we are at a point of critical emergency , then banks must be ready fail and liquidity at a freezing point, and in that light, how can anyone paint the trump years as successful in any way — if we have all been living in such a decaying time, doesn’t this reflect on all our leadership — including bank regulators, who are unable to provide a clear picture of where we stand?

  34. timbers says:

    Somebody should tell Dat Fed it needs to help the global economies in China, UK, Italy, Germany, Japan, and Europe. But not fly-over-country.

    We need NIRP now to help the global economies, who need the Fed’s help.

    It’s in the tool box, after all. Just like NIRP has been normalized for non emergencies in Europe, just like QE and 0 interest rates pushing on a string has been normalized in US, soon NIRP may be normalized in US, too.

    Can you buy mattresses with safes built into them?

  35. GSH says:

    Interesting interest rate reversal with TNX now back up to 1.90%. Up from 1.4x. Somebody is losing their shirt in bonds.

  36. Rat Fink says:

    ZeroBrain. I don’t idealize Ben Bernanke, in fact I was one of the millions baying for his head post GFC.

    How dare he and those corrupt bankers do this to us!

    But then I came to my senses. Yes, they have lit our house on fire, but they live in the same house.

    As they are fond of stating in Hong Kong at the moment ‘We burn – You burn’ We all live in the same house, so they burn with us.

    As those thoughts permeated my thick skull, I finally asked the right question – which obviously is, why burn down your house?

    What do you fear more than an all engulfing fire in your house when all exits are locked tight and there is no escape for you and your family?

    The central bankers will never come out and tell us why they did this because to tell us would be to kill all hope.

    But they will drop hints. Here is one of the earliest hints.

    JUNE 13, 2003 – There is increasing evidence that massive economic stimulus — monetary, courtesy of the Federal Reserve, and fiscal, thanks to the president and supply-side minded lawmakers — is taking hold.

    The magnitude of the policy turnaround, which caps a constructive, multi-year reflation process, should overwhelm the economic negatives — including the drag from expensive oil and poor finances at the state- and local-government levels.

    Expensive oil and its impact on other energy costs remains a concern.

    The current level of U.S. monetary stimulus is massive. Real interest rates have fallen 5.2 percent from December 2000 to March 2003, reaching -1.2 percent. A swing of this magnitude may be historical.

    Read more at:

    Let’s ask another question:

    Why, if we have so much cheap conventional oil remaining (actually it is acknowledged that we peaked on conventional oil in 2005) are we sucking the dregs from expired oil wells and losing money on every barrel of fracked oil?

    Why are we steaming oil out of tar sands in Alberta?

    One does not need to be brilliant to recognize the true nature of what is behind this seemingly insane situation.

    Actually a village idiot, or even an average 10 year old could be made to understand this.

    The reason people refuse to acknowledge what is happening is because to acknowledge this is to lose all hope. Because there is no solution.

    Much better to rant and rave at the corrupt and stupid central bankers.

    Or better still, embrace the false gods that the PTB invent to convince us that there is a solution.

    Elon Musk and his electric contraptions and his rocket ships that will deliver us to a new utopia on Mars.

    Solar panels and wind intermittent energy (that inconveniently need to be backed up by fossil fuel or nuclear powered plants that, as we have seen in Germany , drive electricity costs through the roof).

    And let us not forget the fake meat companies like Beyond Meat. Industrially processed GMO pesticide-laced Messiah burgers, that will save the day.

    And what’s that Wework slogan — A place you join as an individual, ‘me’, but where you become part of a greater ‘we’.

    There’s a full court press of techno-Jesus Christs being thrown at us along with legalized pot and Fentanyl (for those who aren’t buying the hope and change meme)

    All aimed at keeping us from brooding over the true nature of the problem.

    Which of course is that we have run out of cheap oil and other resources, which has the global economy and all but the very rich gasping for oxygen as if they were trying to run up the last mile of Mount Everest.

    I would argue that every policy out of the central banks for nearly two decades has been aimed at trying to get oxygen to the organism that we refer to as the global economy (stimulus). They are desperately trying to keep it alive because when it dies so too do they.

    Do they always get it right? Definitely not.

    But I do not believe that their motivations are venal in nature. Nor, obviously are they stupid.

    • ZeroBrain says:

      Okay, this I agree with. Cheap energy is (has) coming to an end and resource exhaustion is occurring because of the population explosion. We could all drive around in 1mpg tractors and dump untreated sewage in the ocean if there were few enough of us, which the environmentalist movement never seems to want to address. Population is the problem.

      Arguing about central banks (or anything really) is somewhat intellectual masturbation I suppose, but it’s fun. Maybe we’ll invent our way out of this…

  37. Sadasivan says:

    @Rat Fink
    Crude went $140+,due to the so-called Indo-US Nuclear Deal”.There was heavy opposition to the said deal,but the USA wanted it badly.So to justify it in he parliament as “cheap energy”,the Crude price was manipulated by TPTB,who can set whatever price they want.
    Now it is low,from 2014-15,as India removed the subsidy on petroleum fuels and the FPIs [Foreign Portfolio Investors in Indian Stocks ] minted money as the Oil Marketing Cos in India made huge profits.It is suspected that India demanded low Crude price for removing the said subsidies.
    Moral:-TPTB can fix Crude and other Commodities’price.Can strengthen or weaken a Currency or a Stock.

    • Rat Fink says:

      I highly recommend reading this research paper. It is long so try starting at page 58 and reading that few page section. You may feel compelled to read the entire document once you have the punch line.


      The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.

      • Normansdog says:

        of course you are right, Discussing the role of money is only useful in as far that we need to maintain money in order to restructure the world economy to survive the resource crisis.
        I read an article suggesting that money be split into “local money” and “general money”, whereby only localy produced goods can be bought with local money, and this money is kept cheap. General money must be very expensive so it radically reduces purchases of avocados imported to the UK from Brasil etc etc.
        Money is still a useful tool, but it is getting less useful as time goes on.

  38. raxadian says:

    Hey Wolf here is a good question for you. What would happen if the Euro Zone went from negative rates to zero rates?

    Also I think we should start to call the guy Super Wario Draghi, he has the exact same greed and morals.

    • They are at zero rates, the negative yield is reflected in the buyers paying premium to hold zero rate bonds. This is enforced by setting bank deposits at negative rates. To break that cycle, the EU, (or US) could legislate against negative saving rates. And they might.

  39. Lisa says:

    from the IMF:
    “Globally, phantom investments amount to an astonishing
    $15 trillion, or the combined annual GDP of
    economic powerhouses China and Germany. And
    despite targeted international attempts to curb tax
    avoidance—most notably the G20 Base Erosion and
    Profit Shifting (BEPS) initiative and the automatic
    exchange of bank account information within the
    Common Reporting Standard (CRS)—phantom FDI
    keeps soaring, outpacing the growth of genuine FDI.
    In less than a decade, phantom FDI has climbed from
    about 30 percent to almost 40 percent of global FDI
    (see chart). This growth is unique to FDI.”

    ZH goes into the details….

    Aren’t we all kind of dealing with the legitimacy of
    absolutely nothing? Von Mises was a whole lot more
    truthful, a long time ago. Central Banks are dealing
    with playing out the losing battle Von Mises described.

  40. Mike says:

    Draghi’s leaving is irrelevant. He needs to get the ECB to bail out numerous banksters that are again in trouble, which apparently does not include all of Europe’s banks. The system that he wants to set up would again give huge benefits to banks that already had received massive aid after the 2008 collapse.

    Follow the money, if you want to determine an ECB leader’s motivations. The public will not erect a statute to him for bailing out the banksters, which they will realize is occurring sooner or later. Italians are no more likely to lie than other groups, e.g., the banksters, except for those that support the mafia.

    However, various other groups have similar portions of their population that support their own organized criminals: read Wikipedia’s organized crime entries. Italians will not be benefitted, albeit some banksters that invested in Italian banks may be bailed out.

    The ECB president is also not bailing out the poor, as some have implied as to the 2008 collapse (when it was falsely claimed that the “Federal” Reserve was bailing out banks that tried to help the poor.) It is astonishing that anyone could look at the gigantic profits that the biggest US and EU banks made from 2000 to 2008 and how those funds were rapidly transferred to the control groups of those banks, before those banks demanded to be bailed out in 2008, and blame the poor.

    Were the poor coming into banks and pulling out guns to force them to make loans? No. In fact, there were thousands of advertisements for loans by banksters and the loan brokers were encouraged by banksters to cause borrowers to lie. Loan officers with the gigantic banks (like my mother) were threatened by banksters that they had to make bad loans and would be put on a commission basis and not paid unless they made bad loans.

    The gullible investors that bought the fraudulently AAA-rated, bad, mortgage-backed securities, which the banksters bet with derivatives would never be repaid, were the intended victims of the banksters. The banksters were making the subprime loans not to help the poor but to help themselves by earning commissions, appreciation, etc: they knew that when unable to pay the loans the poor would lose their homes. The poor did lose their homes, except for a few that the government helped.

    The banksters’ banks got caught holding these bad loans and through their control of US and EU, corrupt, purchased politicians caused Americans (and other countries citizens, like the Irish) to bail out the corrupt banksters. They even allowed them to keep funds distributed to the bankster shareholders (e.g., dividends) after the banks became legally insolvent: under most US and EU laws, those transfers were fraudulent and reversible.

    Banksters’ crimes were consistently ignored: watch Steve Croft’s reports on 60 minutes. If any non-connected person had done the same, they would be in prison for decades. I represented persons who made mistakes in loan applications that were minor, and they faced years in prison.

    We are seeing more of the same now. The new EU QE is another attempt to MASSIVELY transfer wealth from the citizens to the banksters, many of which are the same banksters that controlled and control US banks.

    The number of such billionaires and millionaires (who are part of the bankster control groups) is not that great: maybe at most 15,000 people control most of the financial world’s wealth. I hope that Americans and EU citizens will come to their sense and realize that we are all the victims of a limited number of crooks, who should be put in prison.

    The SEC and other similar organizations should learn about wiretapping, forensic accounting, and giving breaks to lower level banksters to catch the upper level banksters. They have been captured (as IMF economist Simon Johnson said generally of the US government in “The Quiet Coup”), to they supposedly claim to be unable to gather the required evidence. They should all be fired and other organizations should be tasked with their jobs.

  41. Normansdog says:

    Wolf is always complaining bitterly about ZIRP and NIRP but he never actually suggests an alternative.
    Presumably he wants positive and probably high interest rates, so maybe 5% in the US and 3% or 4% in Europe.
    How exactly the average citizen of these places who has debt up to his/her eyeballs would service this debt at these interest rates is a mystery to me, but Wolf appears to think that this will be no problem, in fact it will somehow be positive for growth! I would like to see Italy servicing its national debt at maybe 6% – or Spain or California or Detroit at maybe 7%.
    A few savers would appreciate the income, but the majority of borrowers would simply go under.
    I just do not understand Wolf’s reasoning here.

    • Wolf Richter says:

      “Wolf is always complaining bitterly about ZIRP and NIRP but he never actually suggests an alternative.”

      I have suggested two very simple alternatives many times (to the point where I sound like a broken record), and those alternatives should happen simultaneously:

      1. Short-term policy rates that central banks set need to be above the rate of inflation at ALL TIMES, sometimes a little above inflation, sometimes a lot above inflation — so that the short-term “real” cost of capital is always positive, never negative.

      2. Central banks should stop QE and start unloading their assets, and should be barred from engaging in QE.

      • Normansdog says:

        but how is the patient, who is now addicted to these rates, going to survive this treatment? You can’t just mess with interest rates now, the economy would not survive it – Italy would be bust. Your remedy sounds a bit like the advice that Hoover received from Mellon in the great depression “Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate.”
        It is more like a religious mantra than a policy.

        • Wolf Richter says:


          The US was doing just fine last year when short-term rates moved above the rate of inflation. You have to remember: there are two sides of debt: the borrower and the creditor (owner). This owner are the people and companies and banks who’re suddenly earning more on their money.

          How much more?

          There are about $40 trillion in fixed income products in the US — a quarter of which is bank savings products, the rest are bonds of various types. An increase of 2 percentage points across the board in yields generates $800 billion a year in income, much of which gets spent and invested, which adds a lot of oomph to the economy.

        • normansdog says:

          Hi Wolf,
          two points, firstly my guess is that most i.e. at least 90% of those savings are being held by entities who will not spend the interest. The folks that need the cash and would spend it have no savings.All you are doing is killing them with higher repayments on their debt.
          Secondly, your wish for fixed interest rates is granted by MMT, you can set them wherever you want, Stephanie kelton suggests somewhere just above 0%. That solves the whole problem as no one would any longer be talking about the interest rate as it would never change.

    • Rat Fink says:

      The central bankers do not want to see the global economy collapse any more than any of us do.

      They saw what nearly happened when Lehman was allowed to crash and burn. They much prefer to continue living large as opposed to starvation and death.

      One must assume that every policy introduced by the central banks has been ‘war-gamed’ by teams of very bright people who think through the likely results of the policies.

      They would be looking under every rock trying to find a way to keep this sh&t show on the tracks for as long as possible.

      Amazingly, we are 11 years on from the GFC and we are still chugging along.

      If anyone thinks that a single person could do a better job than the central bankers that is just plain ridiculous.

      Do you think that they have not looked at the many ‘solutions’ that are floated by people on internet sites like this? Do you think they have not already thought of these ‘solutions’ and dumped them in the rubbish ban after determining they would not keep the sh&t show going – or that they would knock the sh&t show off the tracks if implemented.

      The central banks are doing exactly what needs to be done to delay the inevitable.

      • Rat Fink says:

        A good analogy would be that of the arm-chair quarterback.

        Some fat slob in his family room gorging on Doritos and Budweiser watching the Patriots and second guessing Belichick and Brady convinced that he knows better.

        Meanwhile Belichick and Brady spend every waking moment dedicated to winning. They pour through films looking for weaknesses in the other team, they train and practice plays over and over and over.

        To think the CBs are not doing this and more is just naive.

        There is a lot more at stake here than a victory in a silly game.

  42. historicus says:

    The ECB is attempting to save failed socialist endeavors in Europe.
    The attempt is being made via other socialist activities….economic decision making by committee.
    30 hour work weeks and retiring at 55 on the public dole doesn’t work.
    And who is watching the ECB, and the misinformation and deceit?
    Who empowered these central bankers?
    Quis custodiet ipsos custodes?

    • Normansdog says:

      …and I suppose the FED is pumping trillions of dollars into the US economy and pushing down interest rates in order to save it from failed neoliberal/capitalist/free-market activities?

Comments are closed.