What of Draghi's plan to save the Euro.
When all is said and done this is QE for the EU. That's by and large worked for the UK (the fact that Saga disagree with that statement probably being the surges evidence that it is right).
There are real problems though. The enthusiasm of the markets for the plan reveals just who it is meant to favour, which is the markets themselves. It achieves that in a very straightforward way: the QE that will provide relief for any state, and we're talking Italy and and Spain here for all practical proposes, only happens when that country has signed up to the most severe austerity package.
That austerity is designed to do three things. First it will cut government spending and investment and so employment. Second it will cut benefits and so increase poverty. Third, it will slash demand and so exacerbate recession or depression: the UK proves that.
So this plan that so pleases the markets does so because it preserves the wealth of those already wealthy at straightforward cost of imposing mass poverty, fear and hopelessness on the majority in Europe.
That the supposed sanctions in the plan won't work is not the point, even if that is the focus of many commentators this morning. The fact that this plan increases the already immense social divide in Europe is the real crisis precipitating flaw in what s proposed. And that crisis wills seen on the streets, not n the markets, but ultimately it is the streets that matter and much as I wish for order I cannot see how it is sustainable in the countries that will suffer so badly for what is so obviously a plan designed to appease wealth.
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The market likes it because, rightly or wrongly, the market thinks it will lead to growth. That is why, if you look at individual share prices, miners and financials have responded very positively to the move, whereas defensive stocks like Diageo, Tesco and Vodafone have not.
Now, it might be that the markets are wrong, but the reaction in the share price of big miners like Rio Tinto and Vedanta indicates a belief that the prospects of growth, particularly in the developing world, have been improved by the announcements. Whether that is rational or not is another thing, but Rio Tinto isn’t up 6% in 24 hours because of any enthusiasm for austerity.
No, it’s up because it is known cash will be released and that will be used for commodity speculation as happened in the UK in 2010 leading to significant price rises
That had nothing to do with growth and everything to do with speculation
Kevin O’Rourke blog ‘What do markets want’ October 2010:
‘The markets want money for cocaine and prostitutes. I am deadly serious. Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense–and with knowledge, everything does.What the markets, bond and speculators, etc, want right now is for Ireland to give them a feel good feeling, nothing more. A single sharp, sweeping budget would do that; a four year budget plan will not. Remember that most of these guys won’t actually still be trading in four years. They’ll either have retired or will have been promoted to a position where they don’t care about Ireland anymore. Anyone that does will be a major speculator looking to short the country for massive profit. In lieu of a proper budget, what the country can do–and what will work–is bribe senior ratings agencies owners and officials to give the country a better rating. Even a few millions spent on bumping up Ireland’s rating would save millions and possibly save the country. Bread and circuses for the masses; cocaine and prostitutes for the markets. This can be looked on as unethical obviously, but since the entire system is unethical, unprincipled and chaotic anyway, why not just exploit that fact to do some good for the nation instead of bankrupting it in an effort to buy new BMWs for unmarried 25 year olds.’
An antidote to this poison is explained here by the great Bill Mitchell
Fantastic that the great Bill Mitchell is being asked to speak to the European Commission’s Jobs for Europe Conference…. well worth watching!
“As humanity perfects itself, man becomes degraded. When everything is reduced to the mere counter-balancing of economic interests, what room will there be for virtue?”
Gustave Flaubert