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One for all, not all for one

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  • Today Mr Draghi unveils his Very Big Idea (buy Italian bonds). Except everyone knows he wants to buy government bonds, so markets are only interested in the details. We are looking for around EUR1 trillion. Investors seem to accept the risk of disappointment, lessening the risk of disappointment.
  • The integrated nature of the monetary union will likely be proudly displayed by the disintegrated nature of taking credit risk (national central banks bear the burden). This is a political gesture rather than a practical policy. Economically, the quantitative policy can also be viewed as a gesture rather than a practical policy.
  • The Bank of Canada's surprise rate cut has raised questions about whether policy will diverge among the world's central banks. However, as a commodity exporter the Canadian economy does not receive the unambiguous boost to growth from lower oil prices that other G7 countries receive.
  • The Bank of England minutes showed no dissent to the unchanged policy position, but the details very much kept the prospect of additional tightening alive (the regulatory tightening has already been aggressive). The US meanwhile remains aloof from all of this - good growth, falling unemployment, upside risks - why would anyone notice that?