The (last) flight of the Easy Bee … how we learned to love the World’s favorite Central Bankline…

It’s nearly 6 yrs since Mario Draghi compared the euro to a bumblebee and uttered “whatever it takes” to calm markets. So was born the Easy Bee, re-opening the credit channel and promoting some semblance of economic growth through out the Eurozone. A success ? Well to win, at first you have to survive.

• It’s nearly 6 yrs since Mario Draghi compared the euro to a bumblebee and uttered “whatever it takes” to calm markets.
• So was born the Easy Bee, re-opening the credit channel and promoting some semblance of economic growth through out the Eurozone.
• A success ? Well to win, you at first have to survive.
• But their mandate is inflation “close to, but below 2% “
• Their latest projections show dramatic improvement from March ‘18
• No soft landing yet, but today The EasyBee made a “landing approach”
• (Thank you for traveling Easy Bee and we hope you’ll choose us again.)
• Now the Easy Bee projects no rate hike until deep into 2019. 
• That’s past Draghi’s departure date, so he thinks he will serve his term without ever firing his rate-hike weapon
• Those focused on the “quantitative tightening” of ending asset purchases miss an important point
• The Fed used “reinvestment” of maturing assets to “smooth” the stimulatory impact.
• Why does this matter ? Because the Easy Bee can buy longer dated bonds of countries struggling with short term solvency
• One might be prolonging the agony of the bankrupt, but first one prolongs the agony of the speculator….
• Perhaps Draghi’s motive really is saving the German taxpayer and saver from a fate worse than a bee sting.

It’s nearly 6 yrs since Mario Draghi began his immortal speech with these words…

“The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now — and I think people ask “how come?”– probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.”

He went on to use the phrase “whatever it takes” and the calm after the storm quickly followed. We will never know what would have happened if he hadn’t had the courage to say and do what he/they did, but viewing from the safety of the 10yr anniversary of the previous “storm”, perhaps one can guess….

So was born the latest creation, the Easy Bee, and it’s flight has been all a buzz, but one which has brought the cost of credit down and the some semblance of economic growth to the Eurozone.

As the best of traders will tell you, to win, you first have to survive.

So today we saw the first of many “landing approaches”, and while we’re a ways from that “soft landing” economists like to talk of, it looked a mightily smooth approach to me. Indeed, they were close to declaring victory in the only real mandate Central Bankers feel required to achieve – that of inflation. Compare today’s projections with those of only a few months ago.

Updated ECB HICP inflation projections vs March 2018

Q3 2018 now 2% vs 1.5%

Q4 2018 now 1.9% vs 1.4%

Q1 2019 now 1.9% vs 1.3%

Q2 2019 now 1.7% vs 1.4%

The result? More “easy buzz” from the Easy Bee, with the projection of no rate hikes deep into 2019.

As every law officer will tell you, the desire to complete the job without having to fire the weapon, is a job well done. So as Mario Draghi takes the usual disdain for attempting to complete his 8yr term without ever having hiked rates, spare a thought for his motive.

Those focused on the “quantitative tightening” of ending asset purchases miss an important point. The Fed used “reinvestment” of maturing assets to “smooth” the stimulatory impact many quarters after their purchases came to an end. Why does this matter ? Because the Easy Bee can buy longer dated bonds of countries struggling with short term solvency, preventing a funding crisis.  Some will argue they might be prolonging the agony of the bankrupt, but first they will prolong the agony of the speculator….

Maybe Draghi genuinely wants to save the German taxpayer and saver from a fate worse than a bee sting.

With that, I’ll buzz off…

And please note, these are all just Inflated Opinions of the authors. They should not knowingly be construed as investment advice.