Mario Draghi, the new President of the European Central Bank, is often derided for trying to be more German than the Germans. Unfortunately he seems to be living up to this reputation. Not in terms of efficiency and toughness, however, but in terms of the current lack of any imagination or even intelligence in trying to deal with the Great European (not debt but idiocy) Crisis.
In all the frantic running around in circles Europe has been exhibiting under the iron boot of The Frau over the last two years, the ECB decided to make unlimited cheap loans available to European Banks. At first glance this was greeted with relief in that it was assumed that these cheap loans to the banks would lead to greater liquidity in the market.
It didn’t work that way though, did it? Because as usual the root problem is not only never tackled but not even mentioned. The banks are the problem. But you mustn’t say so out loud. So, inevitably this one back fired too. The European banks drew some 500 billion in cheap funds from the ECB only to… make loans available to businesses in Europe? Boost consumer demand? No! Nothing of that! Are you stupid or something?
If anything, the Bankers are not stupid (at least from their own selfish point of view). So what did they do? They went and deposited all this lovely money back at the ECB for safe keeping.
You can’t really blame them. They are merely responding to the policies (or blatant lack thereof) imposed by The Frau.
So this time the Fix has made Europe look a bit like the snake chasing its tail and then sucking it down till it swallows itself.