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Thursday, September 4, 2014

Jim Cramer: Draghi Pulls a FDR

     This is the spectre he raised this morning on CNBC's Squawk on the Street likening ECB President Mario Draghi's latest moves to FDR. Draghii has now official pulled a play out of Bernanke's playbook with the ECB's foray into QE-the ECB also lowered interest rates. 

     "The European Central Bank has acted in the face of stalling European growth. Cutting three main interest rates, including one that was already negative, ECB President Mario Draghi also announced plans to buy private-sector assets, suggested quantitative easing is still on the table and that rates are the lowest they will go. The message was clear that banks should accept this, start borrowing money from the ECB and lend it to the real economy."

      http://blogs.wsj.com/moneybeat/2014/09/04/ecb-live-what-will-mario-draghi-do-now/

       To be sure whether or not this is kind of QE is up to some debate-semantics-but no one questions taht this is virgin territory as it were for the way  behind the curve ECB. 

         I'm a big Cramer fan and I also liked his imagery of FDR. He expiciltly made the poiint that it was a conscious decision of his to reference not Draghi following Bernanke but rather as following FDR. In many ways Scott Sumner would probably agree with Cramer here-he too has talked about 'Rooseveltian Resolve'-Bernanke wrote a paper on this. 

         http://delong.typepad.com/sdj/2013/03/ben-bernanke-1999-rooseveltian-resolve.html

          https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CDYQFjAC&url=http%3A%2F%2Fwww.themoneyillusion.com%2F%3Fp%3D3587&ei=Q5UIVKLsDZTG7AaYx4HgCw&usg=AFQjCNHmpPwYaUhDjv5rRjNke1u-9ZJqhQ&sig2=E-rxfDISBAKdqx8Rf2yHxQ&bvm=bv.74649129,d.ZGU

         However,  what Sumner praises FDR for was what he did about the gold standard. Cramer described Draghi here as basically an end run around the Germans in order to get an 'autobahn' project, basically a New Deal for the Eurozone. 

           Cramer isn't always right but he's always worth listening too and Iet's hope he's right on not just the market picks he gave us today but also his NFL pick: he has Seattle beating Green Bay. I just made my first ever bet on an NFL game with Seattle over Green Bay. The reason why I think this is a good idea is it's straight up. GB is a very good team lead by one of the best QBs in the NFL with Rogers but Seattle in recent years has been a total lock at home.

           I put $600 on them and after this I'll try a bet on the Eagles over Jacksonville in Philly. The Eagles surely have to be as close to a sure thing at home against the Jags as you're going to get-they're Cramer's team of course. So this weekend Cramer and I are simpatico on football as well-not a bad place to be in either the NFL or the markets.

1 comment:

  1. The buying of "private sector assets" is the most interesting phrase. If he means bonds held by private sector or stocks, I don't think you will see much improvement in their economy. You might see some of their market prices jump for those assets but unless it becomes a continuous thing, those rises won't be sustaining in my view.

    Now, if they mean private sector nonfinancial assets like real estate or bags of dirt, then this is more like fiscal activity and may make a difference.

    Im not gonna hold my breath though, this is a central banker after all, this is likely just another accounting trick to goose markets and try to stimulate banks to loan out money...... money that they already have unlimited capacity to lend provided a solvent borrower comes through the door.

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