After telling everyone last week that the E.C.B. would do everything necessary (he and Bernanke must shop with the same copywriter hired off of Elance.com) to save the Euro this week he made good his promise by not adding to the monetary misery the world is currently suffering from. Well, he actually said he would print a bunch, but hadn’t consulted the Germans obviously.
The E.C.B. lowered rates last month and added to existing bailout funds, why was anyone surprised by this?
But, obviously the markets were hoping that Draghi was a man of his word and had naked pictures of the heads of the Bundesbank on his iPhone so that he would print to oblivion this week, as opposed to some nebulous time in the future. All this week’s announcement did was confirm what I expected all week, that the Fed and the E.C.B. would stand pat because things are not quite bad enough yet and they don’t own literally everything on the planet. When that happens, they’ll be willing to destroy what’s left of their currencies, because they’ll be the only ones left with the assets to issue a new one that would be in any way acceptable to anyone with three firing brain cells.
In all of this Gold (AMEX:GLD) was sold down to $1590 per ounce, with still very tight spreads on the futures curve going out 6 months, less than $3 separates August from December. And the S&P 500 (AMEX:SPY) was sold slightly, but to hear the financial press talk it was like the world ended today after a mild 10.1 point drop, or 0.74%. Woo. Oh, and the banks were happy, bonds rallied, creating even more ponzi-esque momentum to take the 10 year yield on U.S. Treasuries down towards 1%.
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