Yesterday, Mario Draghi compared the ECB QE with running a marathon and said the ECB had just finished the first kilometer. Draghi could also have said the ECB had just finished 5 kilometers for example but he did not. He chose for 1 kilometer. Now, it is important to remember that marathon is a long distance run with the total length of 41 kilometers and 195 meters.
The ECB has been ‘running’ its QE-program for a month now. If we put the two together, the time elapsed since the ECB begun with QE and the Draghi’s description that the ECB has covered its first kilometer, then 1 month of QE equals 1 kilometer. Put differently, the ECB has run 1/42nd part of the entire run and thus it still has to cover 41/42nd part. If 1 month of QE then equals 1/42nd part, the ECB’s QE-marathon will be finished in October 2018!
If that is not frightening – 0 percent interest rate until the end of this century and full-scale money printing operation until the fall of 2018 – then another parallel with the first marathon certainly is.
According to the legend, Pheidippides was the name of the Greek messenger who, in 490 BC, run all the way from the Greek hamlet of Marathon to Athens to bring the news of the Greek victory over Persians. When he conveyed the news he collapsed and died. Sure, it was not Draghi’s intention to point to this part of the legend when he compared ECB’s QE to running a marathon. Then again, Pheidippides did not intend to fall dead after his run too but that is what happened. ECB’s ultra-easy monetary policy for the rest of this decade could just as easy bring death to the euro or at the very least to that little purchasing power that is left in our fiat currencies since the central banks emerged.
Thu, 16 April