Sunday, September 24th, 2017 MST

Draghi doubles down

Mario Draghi, ECB chief, again reaffirmed his pledge to print more euros next month in a Keynesian effort to fillip economic activity in the eurozone. In December, the ECB’s measures fell short of market expectations, and stock markets declined. This time Draghi does not plan to disappoint.

“The risks of acting too late outweigh the risks of acting too early,” he told an audience that included Jens Weidmann, the head of Germany’s central bank, who has long been opposed to monetary creation. With Germany’s history of hyperinflation, Weidmann’s position is understandable, but with Draghi’s “in your face” proclamation, he is committed.

Draghi vowed not to surrender to “low inflation.” In other words, he wants the people of Europe to pay more for the goods and services they purchase. Locked in this confusing theory is that they will earn more money to pay for things that cost them more.

Draghi backed up his position to print by pointing to Japan, where, nearly all Keynesian economists affirm, waited too long to employ an expansive monetary policy. However, as soon as Japan signaled a commitment to reach 2% inflation, inflationary measures rose–as did Japan’s stock market.

Because December’s announcement disappointed, we can expect Draghi to go with a substantial, if not massive, quantitative easing program for the eurozone. With gold and silver near four-year lows, they are favorably priced for the inflation that is coming.

One Response to “Draghi doubles down”

  1. Carole Foryst

    Assuming that the Fed continues to be soft on monetary policy, and does not start dropping hints of another round of QE for the next few months, the dollar may resume it’s ascendance against the euro when Draghi actualizes his intentions. Under those circumstances, gold may decline in dollar terms, offering perhaps the real true bottom after which we may see beginning that parabolic rise predicted by sound money investors.

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