While Mario Draghi had equity markets salivating last week, the Germans will be wincing in the knowledge that their monetary policy is now firmly in the hands of the money printing Italian, with reports of an increasingly fractious relationship with Angela Merkel. At the ECB press conference on Thursday, Draghi appeared to show his frustrations with those questioning his tactics. It was almost like a blend of an England Roy Hodgson press conference with a Manchester United Luis Van Gaal (LVG) press conference in terms of answering the media, the long winded waffle of Hodgson and the tetchiness, bordering on arrogance, of LVG. One exchange in particularly stands out:
Q: “What would you say to those who are concerned that when the ECB is buying up bonds, electronically printing money, whatever one calls it, this is the first chapter in a story that leads inevitably towards hyperinflation”?
Draghi: “I think the best way to answer to this is, have we seen lots of inflation since QE programmes started? Have we seen that?….We did OMT. We did the LTROs. We did TLTROs. And somehow this runaway inflation hasn’t come yet. What I’m saying is that certainly the jury’s still out. But there must be a statute of limitations. Also for the people who say that there will be inflation, yes, when, please? Tell me, within what?”.
As we know there is a fine line between confidence and arrogance. For me, real confidence is self-belief tempered with self-awareness and acceptance of fallibility whereas arrogance is self-belief magnified with a misguided notion of infallibility. My take on the latest ECB press conference is that Mario Draghi is running dangerously close to crossing the line. I understand he has to portray a position of confidence that his policies will work, but many of his responses were too dismissive of real concerns and will also have antagonised the Germans further.