Doug Noland: Five Years of Whatever it Takes

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
July 25 – Bloomberg (Paul Gordon and Carolynn Look): ‘Five years ago today, Mario Draghi was talking about bumblebees. The European Central Bank president’s speech in London on July 26, 2012, became instantly famous because of his pledge to do ‘whatever it takes’ to save the euro. But for all the power and clarity of that phrase, he started his remarks more obliquely. ‘The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now – and I think people ask ‘how come?’ – probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.’ At the time, the currency bloc was being buffeted by soaring bond yields in peripheral nations as speculators bet the union’s fundamental flaws would rip it apart. Draghi’s answer was to state unequivocally that the immediate crisis fell under the ECB’s responsibility and he would deal with it. ‘The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.’ That pledge was followed by a program to buy the debt of stressed countries in return for structural reforms, and in that respect the words alone proved to be enough. Yield spreads collapsed even though the program has never been tapped.’

This post was published at Wall Street Examiner by Doug Noland ‘ July 29, 2017.