ECB's Draghi Offers No Solution to European Debt Crisis; Markets Tank

After last week's explosive rallies - based entirely upon notions that Fed Chiaman, Ben Bernanke, and ECB president, Mario Draghi, were committed to fixing their ailing economies, this week's reality show fell flat on its face on both continents.

On Wednesday, when the Fed announced the usual no change in federal funds rates, it also added no stimulus for the US economy or even language that would lead investors to believe that another round of QE was son to follow.

Today's speech following the no-event in Brussels, in which the ECB kept interest rates pegged at 0.75%, Draghi's rhetoric could not have been less encouraging, especially after the strong words he uttered just days ago, saying that the ECB would employ all of its tools to keep the Euro strong and the Eurozone of 17 countries that use the common currency, intact.

The lack of follow-through by the two central bankers proved once more that monetary policy is stuck in a morass of debt and delusion, and also, that whatever measures they might employ now or in the future will have little effect upon the general economy.

Essentially, the policies currently in place - near-zero interest rates, massive bond-buying schemes and general criminality amongst the banking crowd - will continue without change or revision, and, thus, will do nothing to disengage the European and US economies from the slow-to-no-growth regimen they have been anchored in for the past three to four years.

With stock players taking their cues from the big-talkers, shares in European indices were smashed down hard, with declines across nearly all the major exchanges of 1.5 - 2.5 percent.

In the US, the losses were lighter, but beginning to accumulate, as fears arise over the size of the jobs number due out Friday morning.

The markets now have become conditioned to reacting immediately to rumors and headlines, a condition not conducive to profitable investing, the general pattern being dead markets when there is little of substance in the news, and wild swings whenever a central banker opens his or her mouth. Ironically, when central bankers do speak, what they say has little actual bearing on the economy, though they and the stock pickers and players like to think it does.

Capital markets have, for some time, been in an overpriced consolidation phase, with confidence waning even among professionals. The retail investor has all but abandoned stocks as a reliable instrument for sound investment, as the entire rigged affair has become too driven by insiders with specific knowledge and too risky for such small returns.

Both the Fed and ECB have managed to paint themselves into their own corners, with seemingly no escape route. All that matters is to keep markets in a manner that makes them look like they're functioning as normal.

While that plan is barely working, the rest of the planet plays dutifully along, waiting for some kind of dramatic event that will alter the investing landscape. Unfortunately for the waiters and current investors, such events usually tend to be of the negative variety.

The continued can-kicking by the authorities hasn't done the trick to this point, so it's folly to believe that even more stimulative efforts by central banks will offer any kind of relief. The trouble with this kick-the-can-down-the-road style of monetary policy is that the road eventually ends and with it, so too the power to create debt out of thin air and pass it along to the taxpayers.

That happens to be about the only glimmer of hope in this sordid chapter of Keynesian economics: that the system itself will eventually fail, prompting a return to sound money and economic principles that do not rely on debt.

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