While the entire financial world is hanging on to every Mario Draghi word in hope Europe finally improves the market’s (if not the economy’s) “fundamentals” to new record highs, and joins the rest of the “developed” world’s central banks in injecting trillions of liquidity into the Div/0 P/E stocks “whatever it takes” (because in a world where only multiple expansion is left, the ECB is the last wildcard at least until the US is dragged right back into the global recession and the Fed admits any pipe dreams of a rate hike in 2015 were just that), something far more different may be taking place behind the scenes. According to at least one journalist, the Fiscal Times’ Patrick Smith, “Draghi appears set to leave Frankfurt and return to his native Italy the first chance he gets.”
Has the former Bank of Italy exec and Goldman employee had enough of fighting Germany tooth and nail over every proposal, if mostly for dramatic media consumption? “Impossible” most would say, and yet…
[Draghi’s departure] could be as soon as January, depending on a variety of circumstances in Frankfurt and Rome, according to well-placed sources who include a prominent private investor and a senior journalist in Rome. “Draghi wants out, fed up and stymied by Berlin,†one of these sources wrote in a note just before the weekend. In a subsequent message: “I am hearing from several [official] sources that he is entirely fed up with the monetary politics he confronts.â€
To be sure, a far greater black swan to the market than even crude hitting $40 would be Draghi saying sayonara to Frankfurt and effectively admitting defeat at the hands of Weidmann, and the rest of the sound money advocates. It would also leads to a full-on market cataclysm, “no bid” peripheral bonds, and limit down equity futures.
Banish the idea: surely nobody in the statist establishment would permit their best-behaved (until now) Goldman alum to crush everyone’s hopes of kicking the can with merely verbal intervention: a stunning feat when markets demand trillions in actual monetization from both the Fed and the BOJ. Reality simply laughs in the face of such a preposterous notion. Still, Smith appears convinced: “Whether Draghi remains the European Union’s central banker now appears to depend on the political future of a man widely noted for his ambition. “The issue now is to engineer Draghi’s transition to the post of president in Italy,â€Â as one of my sources tells me—and as all of them agree. “He would leave the ECB only if they [Draghi’s supporters] can get the transition from Frankfurt to Rome in place.”
