Trichet and the Germans: They Know Nothing

The machinations in Frankfurt at the ECB are fascinating to watch....and mandatory in attempting to connect the dots in the global economy. Were you questioning your investment posture in June as the Euro finally cracked? It was the one of the hints that commodities could come unglued.

And I was not really joking when I suggested that the ex-Bundesbank technocrats might harm Trichet if he considered cutting interest rates:

Will Trichet soften his posture? And if he does, will the Bundesbank technocrats at the ECB poison him (like that Pope)? 1440 Wall Street

There is probably nothing more noble than fighting inflation, but you have to keep your eyes and ears open, something German hardliners apparently refuse to do. How clueless can these guys be? They finally saw the writing on the wall, but these guys are buffoons in my book, and David Marsh of London and Oxford Capital Markets is slamming them hard in a piece in Marketwatch today:

Jean-Claude Trichet, like a general who has been following the wrong orders and fighting the wrong army, has to ensure that the foot-soldiers are still behind him when he makes an embarrassing retreat. Only four months after the European Central Bank imperialistically raised interest rates to defeat the supposed main enemy of inflation, the ECB - for the second consecutive month - has reduced leading interest rates by 0.5 percentage points to attempt to curb the European economic downturn....Trichet’s two principal inflation-busting lieutenants, the ECB council’s German members Jürgen Stark and Axel Weber, who were whining about price rises as late as September should now be feeling that they totally overdid the martial language. Marketwatch

By late September base metals had been annihilated and oil had essentially been cut if half from its summer highs. I really cannot explain their behavior, but this is one of the best articles I have seen written on the politics that dominate the Central Bankers in Europe.

Apparently scars do not heal in Germany, but they were way to slow to react to reality.
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Trichet the chameleon changes tack
Marketwatch

June 16th
Rumors of Fed Rate Hikes Dead Wrong, says Novak
1440 Wall Street

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