Albert Edwards is going after European Central Bank president Mario Draghi.
The super-bearish Societe Generale strategist is not certain that Draghi can deliver on his promise to do “whatever it takes”, like he said in 2012, to lift demand and stimulate spending in the euro area.
The ECB and national central banks in March began quantitative easing (QE), a stimulative program in which a central bank buys government bonds. The ECB is aiming to purchase €60 billion ($65.8 billion) per month until next September. Last week, Draghi said in a press conference that the ECB would reevaluate the program in December, which markets took to mean that more easing could be on the way.
But three years since Draghi made that comment – and about nine months into the ECB’s QE program – Edwards isn’t sure that “whatever it takes” is enough.
Edwards wrote in a client note on Thursday:
Regular readers will know I have long been an extreme critic of central bank policies, particularly of the Fed and the Bank of England with their negligent pursuit of ultra-loose money policy in the mid-noughties policies that ultimately proved ruinous in the 2008 Global Financial Crisis. I believe the Fed and BoE have learned practically nothing from their previous mistakes and we are heading down exactly the same road to catastrophe as the financial markets creak and groan under the strain of QE-inspired, excess valuations. I would definitely now also put the Draghi ECB firmly in that same camp.
He notes, via the chart below, that the bond-buying spree coupled with low interest rates, has not yet increased bank lending to the private sector.
- Societe Generale
Edwards has been critical of the Fed’s QE program and low interest rates. He said the era of loose monetary policy under former Fed chairman Alan Greenspan inflated net household wealth (instead of stimulating spending), and created an asset bubble.
And so, QE achieved the opposite of what it was intended to, and in fact, caused a recession. It’s a pattern that Ben Bernanke repeated, according to Edwards.
“Unfortunately it now appears from recent comments that ECB President Mario Draghi is also demonstrating the same hubris,” Edwards wrote. “Indeed it is becoming clear that ECB QE is already failing.”