Mario Draghi Reveals the Grand Plan
Cam Hui | Feb 26, 2012 11:46PM ET
Policy in Europe has generally been done in the back rooms, with the theatre, e.g. PIIGS debt re-negotiations, done in the front rooms. Last year, the markets were panicked because they perceived the backroom elites had lost control of the situation and events were spiraling out of control.
Today, it appears that the elites have calmed things down and there had always been a Grand Plan. We got hints of this when Angela Merkel said that there was no silver bullet to the eurozone crisis, but resolution was a "long process".
Now ECB head Mario Draghi, in a 77% want to stay in the eurozone "at all costs" .
As well, you need to have an accommodative Dr. Draghi (and Dr. Bernanke) standing by to inject the patient with additional quantitative easing morphine if necessary while he is still in recovery. That appears to have been accomplished. Note how Draghi did not rule out another round of LTRO despite other quarters of the ECB voiced concerns about the banking system becoming overly dependent on ECB support:
WSJ: Would you be open to doing more, or longer, LTROs if needed?
Draghi: You know how we answer these questions. We never pre-commit.
Also notice how the ECB's LTRO program amounts to de facto quantitative easing and money printing, but there hasn't been a single word of protest from the German hardliners? That's an indication that there is a Grand Plan which the elites are executing.
The jury is out on the Grand Plan but if this all works, Merkel could be lionized as the new Thatcher and Draghi as the new Maestro.
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