Draghi Announces ECB Exit From Easing Remains Far Off; Think the Fed Has an Exit Strategy?

June 26th, 2013

by Mike Shedlock

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The Financial Times reports ECB exit from easing remains far off, Draghi says.

Speaking to committees in the French lower house of parliament, Mr Draghi said there were still downside risks to growth in the eurozone economy and the ECB was ready to take fresh action if needed.

"On our policy stance, let me say that it's been accommodative in the past, it is accommodative in the present time and will stay accommodative for the foreseeable future," Draghi said.

"Our exit – as Benoit Coeure [ECB executive board member] said a couple days ago – remains distant. At the same time we have an open mind about all other possible instruments that we may consider proper to adopt … we stand ready to act again when needed."

Taper Talk on "Strength" of US Economy

Bernanke says the US economy is solid enough that the Fed can begin tapering its balance sheet purchases later this year.

Given the stock and bond market bubbles the Fed has created, the Fed of course should taper (not that it should ever have expanded its balance sheet in the first place).

4th Quarter GDP barely crossed the zero line with 0.4% growth. That growth was via questionable GDP deflators.

Today, 1st Quarter GDP came it at 1.8% annualized, a dramatic downward revision from an estimate of 2.4% released last month. In turn, 2.4% was a downward revision from the first estimate of 2.5%.

GDP Trends

The above chart is courtesy of Doug Short at Advisor Perspectives who reports GDP Q1 Third Estimate at 1.8%: A Surprising Downward Revision

Note the linear regression trend of lower GDP over time.

Taper vs. Exit

There is absolutely no chance the Fed has any real "exit" strategy other than to hold its entire bloated balance sheet to maturity.

If the Fed "tapers" its purchases, it will not be because the economy is picking up steam, but rather because the Fed is clueless about the prospects for the economy, or perhaps out of very belated concern over the stock and bond market bubbles that it has created (nothing the Fed would ever admit of course).

Originally posted at Mish's Global Economic Trend Analysis

© Mike "Mish" Shedlock

Investment Advisor Representative

Website by the Boston Web Company