Plus ca change….September 6th 2012

The View decided that nothing was going to happen in August, which happened to be spot on, hence the radio silence. Having sat through Dr. Aghi’s plan to save the “irreversible” euro this afternoon it looks like ”nothing new” in September either! When asked if the council’s decision to go ahead with outright monetary transactions (OMT) was unanimous he replied in classic central bank speak. “The decision was not unanimous, but that is not to say that it was not unanimous.” The English double negative is often hard to grasp by those for whom it is not a first language, but I am not inclined to give him the benefit of the doubt.

 The dissenter was almost certainly Jens Weidmann the president of the Bundesbank, although both Austria and the Netherlands have said recently that they will not provide any further funds for other countries bailouts. So if the good doctor thinks he is going to get eurozone government approval for this latest in a long line of ineffective plans he had better have already started on the next one. I lost count of the number of times he used the word “conditionality” and that “the ECB would remain independent.”

 Conditionality means more austerity which will knock a big hole in the ECB’s estimates of growth. For 2012 their projected number is negative and for 2013 the range will be -0.4% to 1.4%. Yet equity markets are off to the races. This too we have seen before followed by a reversal as soon as some bright spark alerts the herd to the nakedness of the emperor. The ECB has in effect said that they will provide assistance to countries whose bond markets are “mispriced” – a dangerous assertion to make as any trader knows only too well – but if the rules of engagement are broken then the deal is off. How many times have the governments of Greece, Italy and Spain said one thing and done another – in fact I can’t think why I am singling out these three countries; name me any government, or central bank for that matter, that doesn’t follow this particular “strategy”!

 The German constitutional court is due to rule on the efficacy of the ESM on the 12th. If it was indeed Weidmann who voted “nein” and had the tacit approval of la Merkel and Dr Strangelove then the “irreversibility” of the euro is going to be tested. If not, and they give it the green light, then we await the to see the hand played by the King of Keynesianism who will be itching to give us QE3 (go and re-read his Jackson Hole epistle – he is seriously worried about US growth and unemployment). When that happens you had best be long a few bars of the barbarous relic.