Doug Noland - Reminiscing about 2012 (EVALUATING "DO WHATEVER IT TAKES")

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"Whatever it takes" became a global phenomenon, both from the standpoint of central bank policies and securities market inflation. Replicating Draghi, BOJ head Haruhiko Kuroda unleashed shock and awe monetization and currency devaluation.

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Despite shoring up reflationary efforts earlier in the year, extraordinary ECB and BOJ monetary stimulus has not been successful. Underlying economic and inflation trends remain problematic in the face of major securities markets inflations. Indeed, the wide divergence between securities market prices and economic prospects ensures acute vulnerability to market risk aversion and risk-off speculative dynamics.

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Back in 2012, Mario Draghi recognized how even the notion that a country might exit the euro could unleash market dynamics that would rather quickly place Europe's markets and banking system in peril. "Whatever it takes" was orchestrated specifically to expel any market doubt with regard to the viability and sustainability of European monetary integration. On the back of a wall of liquidity and attendant inflating securities markets, Draghi's gambit held things together for a few years. That said, the ECB bet the ranch -- and was compelled to further ante up in response to market instability earlier this year. The outcome of the game is very much in doubt.

While Britain is not even a member of the euro, Brexit provides a test of ECB policymaking. Is Europe robust or fragile? Has relative financial stability been nothing more than a brittle ECB-fabricated façade? Are the forces mounted against integration and cooperation now too powerful to disregard? Is European integration -- along with the euro currency - viable long-term? It's an untimely test, with confidence in Europe's banks already waning. This test is furthermore untimely because of faltering confidence in the ECB and contemporary global central banking more generally. Global market instability has again resurfaced and there will be no resolution next week.