Once again we see that even the merest hint of expansionary monetary policy in major developed economies is enough to send real growth expectations soaring, as stocks rose sharply on the word that ECB Chief Mario Draghi says he'll do "whatever it takes" to prevent the eurozone from falling apart.
Just imagine what might happen if he actually took strong action!
This is the paradoxical state of the monetary policy debate in today's world. There's enormous notional skepticism about the efficacy of additional monetary action. But whenever central bankers give any indication of expansionary policy, financial markets soar and the press correctly reports on the links. Nobody seems to actually think bankers are "out of ammunition" or unable to further influence forward-looking expectations. Imagine where we'd be if Draghi held a summit with the leaders of the Federal Reserve, the Bank of Japan, and the Bank of England and the four banks together announced nominal growth targets and promised to keep doing balance sheet easing until they hit those targets?
Instead we're in a situation in which a central banker simply stating that he's not willing to let the currency he oversees completely collapse is the best we get in turns of expectations guidance.