After the Federal Reserve declined to spike the punchbowl Wednesday, fans of monetary stimulus are now entirely dependent on the European Central Bank for a fix.
In leaving its policies unchanged, the Fed gave investors what they expected, but not what they wanted. Now, all eyes are turning to Frankfurt, where top ECB officials will meet Thursday for their monthly policy discussion.
ECB president Mario Draghi raised the stakes last week when he said the ECB will do “whatever it takes” to preserve the euro currency. In a coda that caught the attention of many stimulus-hungry investors, Draghi added: “Believe me, it will be enough.”
But investors who think that Draghi is going to do something big and bold as soon as Thursday morning are much more likely to be let down if he fails to deliver. Beware, this could end in tears.
“We think there is plenty of scope for disappointment,” said John Higgins, senior market economist at Capital Economics. “The ECB’s bark could prove louder than its bite.”
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Along with trying to keep our sputtering, missing US economy running, The Bernank is engaged in a win big or go home international poker game with the EU players. The object of said poker game is to make sure your competitor winds up with a worse debt picture than you when the game ends.
My personal belief is that Draghi has his best poker face on and knows he does not have enough cards to back his claim. There aren’t enough $$ anywhere to backstop Europe.
Waiting for the other shoe to drop just before the election giving 0bama an opportunity to declare martial law if it looks like he may lose.
Such pleasant thoughts in my head this morning……