We’ve already seen the impact of ECB President Mario Draghi’s TWIST effort to jumpstart the moribund economies of Greece, Spain and Italy on equities and commodities. Yet in the offing is confirmation of Bernanke’s QE3, 3rd round of quantitative easing, which probably hinges on the success of the Draghi TWIST. Draghi’s plan is to purchase bonds of at-risk countries with bottomless pursestrings essentially cutting considerably the cost of capital for these sick economies. As QE3 may overheat inflation while doing little to promote job growth without uptick in European demand and economic stability.
Mario Draghi, former head of the Bank of Italy, took over as president of the European Central Bank promising to follow the path of his predecessor, Jean-Claude Trichet who refused steadfastly all pleas that the ECB had a significant role to play in calming the panicked European markets by acting as a lender of last resort. This sea-change in Draghi’s approach may act to calm the sovereign debt crisis that threatens to destroy the Euro as a viable currency. Perhaps he has been convinced that should the Euro fall, it will take with it, no doubt, the political viability of the Eurozone as well.
We also heard the ever eloquent John Ryding discussing the Jackson Hole conference with Fed Chairman Ben Bernanke. He felt that the door was definitely left open by Bernanke that a third round of Qualitative Easing may well be in the offing post-election. Bernanke did not accept questions but stated that there was positive elements remaining from a potential QE3.
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