Draghi Won’t Show His Hand Until Last Minute: Elser

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June 5 (Bloomberg) –- Advicorp Partner Marco Elser discusses Italy’s economy and the ECB policy decision with Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Thank you for joining us.

Thank you, mark.

If i transported you today into mario draghi's body, what would you do if you had carte blanche to do whatever you wanted?

What would you do as draghi?

That is actually -- wow.

You're putting me on the spot here.

Well, first of all, what he is going to do what happened the markets are going to expect are certainly going to be very, very different things.

Draghi is a very experienced poker player and he is not going to show his hand literally until the last minute and he still may have some ace up his sleeve.

I think he is going to bring interest rates down to 10 basis points and implement a.b.s. purchases in the form of ltro.

The important thing is he or is he not going to start charging banks negative interest rates because that is really going to be question that everybody is asking themselves because at the end of the day, do people want to pay for the privilege of having cash?

That is the question that mario draghi is asking himself.

I have had a guest on already today that said it doesn't matter anyway.

It is only about 29 billion parts to the e.c.b. anyway.

On the big scale of things, if that is reinvested, lent to businesses.

That is not a huge amount of money.

Not as much as the 700 billion which was part of the e.c.b. at the height to have crisis.

That is absolutely -- of the crisis.

That is absolutely correct.

You take 10 basis points of that, that still comes out to lots of nun the e.c.b. could use and it sends a signal to the markets.

Remember what happened in 2011 where draghi was saying he is going to defend up to a certain am and then one day all of a sudden, he announced whatever it takes.

That whatever it takes smufe what really got the investors thinking.

That is the reason why the spreads on i stallian government bonds went from 400 down to where they are now, well below 160 basis points.

The problem really is deprothe.

How do you -- growth.

How do you stimulate growth?

You can bring a horse to water but you can't force him to drink.

There is very high unemployment.

He is going to try to come up with new tricks.

Doesn't new tricks -- unt ultimately new tricks mean i'll do whatever it takes?

Doesn't that lead to q.e. ultimately?

Isn't that what it is all about?

The markets, the bond markets, especially peripheral bond markets, they seem to be pricing in something bigger?

Well, i think history really should give us a lesson.

Look at what happened in japan after the 1980's and 1990's after their spectacular growth, serious growth, they went through a long period of no growth and low, low interest rates.

I think draghi is going to take a lot from that playbook and learn from the negative lessons that the japanese had of suffering tremendously.

There are a lot of similarities.

Both of these economies have aging populations.

And very, very strong protection for labor.

Things are going to have to change.

I've been saying this for a very long time.

The best solution is not going to be an economical solution.

It is going to be a political solution and it has to be dictated by the actual countries.

Bear in mind one more thing.

Mario draghi is chairman of the european central bank based in germany and germany still has after 90 years, an aversion to inflation.

It is in the d.n.a. of germans, this fear of inflation and they are very, very scared that its ugly head could rear up again in any way, shape or form and they are going to doverpbing to prevents that from hang.

-- to do everything to prevent that from happening.

It ultimately has to be a political solution leads me to ask you my question on your prime minister there, mr.


I liked his quote after his success in the european parliament elections.

He said the demolition can now begin.

What is your renzi scorecard looking like now?

Well, i said this a few months ago and keep repeating it now.

I'm rooting for him 100%. i hope he buries those darn unions.

They are really the most despicable corporative protectionist entities that have really -- that have stalled any progress in italy.

If they simply took a step back and looked at themselves in the mirror and said wow, have we caused this much damage and if they were humble enough to do that and come to the negotiating table in good faith, i'm not going to go into detailsings but look what's going to happen tomorrow in italy, in rome.

All of the big players are going to go on strike.

For what?

Because they don't want to take a pay cut?

Everybody has to tighten their belts.

Lead by example.

The politicians are going to take a pay cut.

Renzi is going a great job.

I hope he keeps going forward and forward and forward.

Demolition team.

This text has been automatically generated. It may not be 100% accurate.


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