Tag Archives: Mario Draghi

How Mario Draghi Broke Italy, by Thomas Fazi

Posted on July 27, 2022 | Leave a comment

Mario Draghi is a basket case of a human, he was leading a basket case of a country, on a basket case of a continent. From Thomas Fazi at unherd.com:

A crisis is brewing on the streets of Europe

Mario Draghi’s defenestration has left the Italian — and indeed international — establishment reeling in horror. This is not surprising. When he was nominated as Italy’s prime minister at the beginning of last year, Europe’s political and economic elites welcomed his arrival as a miracle. Virtually every party in the Italian parliament — including the two formerly “populist” parties that won the elections in 2018, the Five Star Movement and the League — offered their support. The tone of the discussion was captured well by the powerful governor of the Campania region, Vincenzo De Luca (PD), who compared Draghi to “Christ” himself.

Everyone agreed: a Draghi government would be a blessing for the country, a final opportunity to redeem its sins and “make Italy great again”. Draghi, they said, simply by virtue of his “charisma”, “competence”, “intelligence” and “international clout”, would keep bond markets at bay, enact much-needed reforms, and relaunch Italy’s stagnant economy.

Alas, reality hasn’t exactly lived up to expectations: Draghi leaves behind a country in tatters. The latest European Commission macroeconomic forecast predicted that Italy will experience the slowest economic growth in the bloc next year, at just 0.9%, owing to a decline in consumer spending due to rising prices and lower business investment — a result of rising borrowing and energy costs, as well as disruptions in the supply of Russian gas.

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Is Mario Draghi No Longer Davos’ Superman? by Tom Luongo

Posted on January 30, 2022 | Leave a comment

Mario Draghi is a bought and paid for Davos operative, but he’s not doing too well in his home country. From Tom Luongo at tomluongo.me:

ecb-draghi-failure

Draghi hasn’t even begun to fight Bitcoin, but he’s thinking about it.

Italian politics is nothing if not entertaining. Unfortunately, given current circumstances that entertainment value is more akin to watching a slowly unfolding horror show rather than a good time at the circus.

Last week was dominated by the machinations for the election of a new president, which ended after eight rounds with incumbent Sergio Mattarella elected to another seven-year term at the spry age of 81.

Mattarella was supposed to retire.

It was supposed to be the ascendance to godhood for Prime Minister Mario Draghi who would replace Mattarella controlling the fate of Italian politics for the rest of the decade.

That did not materialize, because Draghi, despite the endless platitudes thrown around in the Western press, is hated inside Italy, and not just by the people he’s turned into second-class citizens, but by his fellow politicians.

Reports of Draghi pulling a Justin Trudeau (You need to translate this from Italian) and ducking out out of Parliament for the vote because of an illness is the height of Davosian bullshit. (click here for the final results)

Draghi had no real support within the parliament if it meant them having to deal with him for the next seven years.

Davos finally lost a big move in Italian politics from within the government for the first time in the last decade. They’ve proven adept at external manipulation and betraying the Italian people regardless of how they voted previously, but it looks like their typical top-down head-chopping approach to politics has finally backfired on them.

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Lagarde: “We Should Be Happier To Have A Job Than To Have Savings”, by Tyler Durden

Posted on November 4, 2019 | Leave a comment

There are junior high school students who know more about how economies function than most of the world’s central bankers. From Tyler Durden at zerohedge.com:

Any hopes that the replacement of Mario Draghi, who on Halloween left the ECB more polarized than ever, as the core European nations revolted against the Italian’s profligately loose monetary policy in an unprecedented public demonstration of discord within the European Central Bank…

… with the ECB’s new head, former IMF Director and convicted criminal, Christine Lagarde would result in some easing of tensions, were promptly crushed when Lagarde picked up where Draghi left off, calling on Germany and the Netherlands to use their budget surpluses to fund investments that would help stimulate the economy, in a sharp rebuke that will not win the former French finance minister any friends in fiscally conservative Germany.

In an appeal to Germany’s sense of solidarity, and in hopes that Germany’s memory of hyperinflation has faded enough, Lagarde said that there “isn’t enough solidarity” in the single currency area, adding: “We share a currency, but we don’t share much budgetary policy for now.”

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Turkey Exposes Central Bank Incompetence, by Tom Luongo

Posted on September 14, 2019 | Leave a comment

Mario Draghi is all-in on wacko monetary nostrums—like negative interest rates—that haven’t worked in either Europe or Japan. From Tom Luongo at tomluongo.me:

Last year I asked whether Turkey would be “City Zero in Global Contagion.” That question was based on the crisis unfolding in the Turkish lira which materially threatened a number of major European banks, especially those in Italy.

This week highlighted something really interesting for me that, I think, sets in motion a similar thesis about Turkey but for much different reasons. The sovereign debt crisis will come about purely because of a failure of confidence in institutions.

Competence is the key to staying at the top of human dominance hierarchies, not force. Those built on competence tend to last and those built on force are, at best, meta-stable for a specific period of time.

The difference between what’s happening in Turkey with President Erdogan taking control of the Turkish central bank and the end of Mario Draghi’s term heading the ECB cuts to the heart of this issue of competence versus force.

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Feeling the Heat of a Civilization on the Downside, by MN Gordon

Posted on June 23, 2019 | Leave a comment

The old order is fighting an impossible battle to preserve itself. From MN Gordon at acting-man.com:

An Epic Folly for the Ages

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel. Donald Tusk. Mario Draghi. Donald Trump. Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May. Boris Johnson. Mark Carney. Xi Jinping.  Emmanuel Macron.  Vladimir Putin. Justin Trudeau. Juan Trump.  And many, many more…

Politicians and bureaucrats of the modern age of statism and central planning… fighting a rearguard action doomed to fail. [PT]

These central planners – though they may not know it – are facing a no-win situation. They have extrapolated the past and are attempting to preserve the status quo into the future.  Yet their efforts to perpetuate the upward growth curve of their countries and unions are useless against the relentless turn of history.

The political, financial, economic, and social foundations that have been in place over the last 75 years – and perhaps, over the last 220 years – are breaking down.  And no policy directive, no interest rate adjustment, no trade tariff, no five year plan, no extraordinary measures, no green new deal, and no technocratic prevarication is going to stop it. Big Government doesn’t stand a chance.

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Draghi Punts, Trump Grunts, Gold Bunts, by Tom Luongo

Posted on June 19, 2019 | Leave a comment

The world’s central banks are running out fingers to stick in the dyke of the increasingly leaky global financial system. From Tom Luongo at tomluongo.me:

For months now the markets have been in denial that ECB President Mario Draghi has any answers to the Euro-zone’s problems. Today’s statement confirms what anyone with eyes to see has been saying.

There is no Plan B.

Draghi started the year saying he would end his various QE programs and by June he’s not only put them back on the table (New TLTRO in September) but has now opened up the possibility of taking rates lower.

Draghi told an ECB conference in Sintra, Portugal, that “further cuts in policy rates… remain part of our tools.” He added that there was “considerable headroom” to re-start bond purchases, which inject newly created money into the financial system in the hope of boosting lending and economic activity.

Draghi has been exposed as swimming naked, as Warren Buffet would put it.

The fun part is that Draghi used the cover of Trump’s trade war with everyone to justify a policy that was inevitable anyway.

In response, President Trump piled on accusing Draghi of being a currency manipulator. And then announced his upcoming meeting with Chinese Premier Xi Jinping to hammer out a trade deal.

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Super Mario Draghi’s Day of Reckoning Has Arrived, by Tom Luongo

Posted on March 10, 2019 | 3 comments

As SLL has been saying for at least a decade, a central bank exchanging its fiat debt for a government’s fiat debt is not an economic strategy, it’s a fingers-crossed wish and prayer that ultimately does more harm than good. From Tom Luongo at tomluongo.com:

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

— MARIO DRAGHI JULY 26TH 2012

No quote better defines Mario Draghi’s seven-plus years as the President of the European Central Bank than that quote. Draghi has thrown literally everything at the deflationary spiral the Euro-zone is in to no avail.

What has been enough has been nothing more than a holding pattern.

And after more than six years of the market believing Draghi’s words, after all of the alphabet soup programs — ESM, LTRO, TLTRO, OMB, ZOMG, BBQSAUCE — Draghi finally made chumps out of traders yesterday.

Draghi reversed himself after December’s overly hawkish statement in grand fashion but none dare call it capitulation. For years he has patched together a flawed euro papering over cracks with enough liquidity spackle to hide the deepest cracks.

The Ponzi scheme needs to be maintained just a little while longer.

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The Eurozone Is in a Danger Zone, by Alasdair Macleod

Posted on January 7, 2019 | 3 comments

ECB liquidity has kept the European economy and European government bond markets afloat. What happens when the ECB tightens the spigot? From Alasdair Macleod at mises.org:

It is easy to conclude the EU, and the Eurozone in particular, is a financial and systemic time-bomb waiting to happen. Most commentary has focused on problems that are routinely patched over, such as Greece, Italy, or the impending rescue of Deutsche Bank. This is a mistake. The European Central Bank and the EU machine are adept in dealing with issues of this sort, mostly by brazening them out, while buying everything off. As Mario Draghi famously said, “whatever it takes.”

There is a precondition for this legerdemain to work. Money must continue to flow into the financial system faster than the demand for it expands, because the maintenance of asset values is the key. And the ECB has done just that, with negative deposit rates and its €2.5 trillion asset purchase program. But that program ends this month, making it the likely turning point, whereby it all starts to go wrong.

Most of the ECB’s money has been spent on government bonds for a secondary reason, and that is to ensure Eurozone governments remain in the euro system. Profligate politicians in the Mediterranean nations are soon disabused of their desires to return to their old currencies. Just imagine the interest rates the Italians would have to pay in lira on their €2.85 trillion of government debt, given a private sector GDP tax base of only €840 billion, just one third of that government debt.

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Draghi’s Membership in Murky G30 Financial Group Under Fire, by Don Quijones

Posted on January 22, 2018 | Leave a comment

There’s nothing questionable about this at all. From Don Quijones at wolfstreet.com:

A private club for central bankers, regulators, and bankers.

On Wednesday, ECB President Mario Draghi suffered the rare ignominy of being criticized in public by the EU’s Ombudsman, Emily O‘Reilly, whose job it is to arbitrate public complaints about EU institutions. The complaint against Draghi was that he had compromised his public role by regularly attending the Group of 30, a secretive club of corporate and central bankers.

In her response to the complaint, O‘Reilly recommended that Draghi should suspend his membership of the group for the remaining duration of his term.

“The implied closeness of the relationship through membership – particularly between a supervising bank and those it supervises – is not compatible with the independence obligation of an institution such as the ECB,” O’Reilly said.

Previously called the Consultative Group on International Economic and Monetary Affairs, the Group of 30 (or G30) is a Washington DC-based private group whose members consist of central bank governors, private sector bankers and academics. Membership is by invitation only.

Its current membership list reads like a Who’s Who of global finance. It includes current and former central bankers, many of whom now work or worked in the past for major financial corporations, such as:

  • Mario Draghi (ECB, Bank of Italy, Goldman Sachs)
  • Ben Bernanke (former Chairman of the Federal Reserve)
  • William Dudley (New York Fed, Goldman Sachs)
  • Timothy Geithner (Warburg Pincus, former US Treasury Secretary, New York Fed)
  • Mark Carney (Bank of England, Bank of Canada, Goldman Sachs)
  • Axel Weber (UBS, ECB, Bundesbank)
  • Haruhiko Kuroda (Bank of Japan)
  • Christian Noyer (Bank for International Settlements, Bank of France)
  • Jaime Caruana (Bank for International Settlements)
  • Agustín Carstens (Bank for International Settlements, former Chairman of Bank of Mexico)

To continue reading: Draghi’s Membership in Murky G30 Financial Group Under Fire

 

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This is How Draghi Will Sock it to Investors that Weren’t Invited to the Secret Meetings, by Wolf Richter

Posted on June 7, 2016 | Leave a comment

Fun, games, idiocy, and corruption at the European Central Bank (ECB). From Wolf Richter at wolfstreet.com:

They’re all getting ready for Wednesday.

Here’s what Draghi has accomplished recently: the prices of euro-denominated corporate debt have soared. The average yield of investment-grade debt is on the verge of dropping below 1%. A good part of the €916-billion market for corporate euro debt is already below 1%, according to Bloomberg. Highly rated corporate debt with shorter maturities is trading at negative yields, where brainwashed investors engage in the absurdity of paying for the privilege of lending money to corporations.

Companies, including US companies, are scrambling to take advantage of this free money: They issued over €50 billion of euro-debt in May, the second-busiest month on record. On Monday, at least six investment-grade and junk-rated deals were announced. One of them was Air Liquide SA, which sold €3 billion in investment-grade debt. Four of the five parts of the deal priced with a yield below 1%!

They’re all getting ready for Wednesday.

June 8 is the propitious day everyone has been waiting for: the ECB – which is already buying government debt, covered bonds, and asset backed securities – begins buying euro-denominated corporate bonds. Maturities will range from six months to 30 years. It will buy these bonds either in the secondary market, where previously issued bonds are traded, or in the primary market, thus handing its freshly printed euros directly to the companies (“helicopter money” for corporations).

“The prospect of average yields below 1% is very scary,” Juan Esteban Valencia, a credit strategist at Societe Generale in Paris told Bloomberg. “Investors are being pushed outside their comfort zone to sectors like high-yield debt, where they may not have expertise.”

And where they won’t be paid for the risks they’re taking.

So junk bond yields have plunged as conservative investors are getting pushed into risky paper with a good chance of default, though the ECB won’t be buying junk bonds under the current program. According to the BofA Merrill Lynch Euro High Yield Index, the average junk-bond yield fell from over 6% earlier this year to 4.16% as of June 6.

But investors that jumped on the bandwagon belatedly might be in for a rough ride. That’s how it always happened before.

It’s how Draghi does business. A decision is made in secret to buy a certain type of asset or to lower interest rates. That decision is then communicated in secret meetings to hedge funds and certain other market participants so that they can buy into those positions and start pushing up prices. The ECB has gotten into hot water over this when it came out, but hey, that’s how the ECB operates.

To continue reading: This is How Draghi Will Sock it to Investors that Weren’t Invited to the Secret Meetings

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