European Central Bank President Mario Draghi has been busy this week trying to convince grumpy German bankers that his program of buying up Eurozone nations’ debt is not simply tantamount to firing up the printing presses, will not lead to price inflation and does not represent a bailout of profligate nations at German taxpayer expense. His justification for undertaking the program, which is similar to the Federal Reserve’s quantitative easing programs, now in their sixth and apparently endless, iteration, is that “the market is wrong.”
As Wealth Cycles readers know, the market, when left to function free of government interference, contains a universe of information about supply and scarcity, input costs, prices and demand—far more information than any individual, institution or government can encompass. A properly functioning free market is not wrong.
However, given the continuous manipulation of the markets by central banks in recent decades, tremendously accelerated since 2008, Draghi, today, probably is correct: the market is wrong.
Read More >