Where There's Smoke, There's Fire
"Bundesbank Chief Jens Weidmann Threatens to Quit," read last Friday's German tabloid, Bild. After reports surfaced that Mr. Weidmann had contemplated resigning "several times," Weidmann followed up the rumors by saying to the more respected German magazine Der Spiegel that he "won't comment on speculations."
In our opinion, it seems that Mr. Weidmann is angry about the acceptance of ECB president Draghi's ploy to bail out the European sovereign nations and banks. To us it appears probable that Weidmann is on the losing side and may well be saying to himself: "Hey, I have lost the battle to keep QE from happening on a big scale in Europe, so why preside over an outcome I do not want? Is it wiser for me to quit?"
Enter the politics... Politically, it would be a disaster if he quit and his quitting would cost Chancellor Merkel of Germany dearly. She has had two other prominent economists quit in the past year over ECB monetary policies. It is likely that Weidmann is being talked into staying for appearances' sake. Mrs. Merkel told German ARD television that she welcomes Weidmann's input, and praised him for continuing to "make demands on policymakers."
The following represents our opinion on the subject. It is becoming clearer every day that QE will be the course of action in Europe, Japan, the U.S., and many other countries. We need only to look at the recent strong price action in gold to confirm that others share this view. The markets are speaking. One of the things they are saying is that the hawks opposed to QE are losing in the halls of government.
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