Have you ever asked yourself why the bond vigilantes aren't all over US treasuries? Our debt is unsustainable. Our growth is low, our economy is in shambles, we have unfunded liabilities out the wazoo, we have high unemployment, so what gives?
It's because Ben Bernanke will kill them if they do. If they even dream about attacking Us treasuries they better wake up and by the 10 year! This isn't the major role of the central bank but in times of crisis it's near the top of the list. Of course the ECB is not your run of the mill central bank. It has 17 different countries with different needs and capabilities to look after. It's mainly controlled by Germany and as I've written about they're super anti inflationary. All this makes it that much more difficult to for Mr. Draghi to do "whatever it takes" to save the Euro, but it shouldn't stop him from making statements like he did today. Truth be told Spanish and Italian bond yields were falling yesterday from talk of the ESM getting a banking licence before Draghi even stepped to the podium.
But his speaking up today the way he did is well over due. Up until now all he said mostly was that countries needed to get their houses in order. This was true but countries need time to get their houses in order and a central bank is the only one with enough money to by the time for them to do it. He can't use the podium all willy nilly but he should take a firmer stance with all the talk of the Euro's death floating around. The numbers are ugly, there is no doubt about that but ending the Euro is not the answer. To go back to tariffs for shipping goods 50 miles in any direction is not the answer. For people to have to change their money when they travel the distance from New York City to Connecticut and pay a fee to do so is not the answer.
The answer is a more unity. Even with the Moody's downgrade of Germany they're all better off together. But as I mentioned here it may take a catastrophe to push them towards that greater unity. The plan put forth by the Eurozone finance ministers in June to turn the EU into the PEU (Political European Union) (PEU is a bad acronym as it sounds like what you say when you smell something bad, need to add a letter or two) this plan is what's needed. In order to get the people on board there needs to be a way they can vote on the people that make up the central governance body. Every member state should be represented and states with the most people should get more representatives like we do with congress here in the U.S. or some iteration of it.
At any rate, this new Mario Draghi is a sight for sore portfolio's. If he can maintain this bad ass stance it would go along way to giving the weaker EU members exactly what they need... Time to clean up their messes.