European leaders, including Germany's Angela Merkel, effectively threw in the towel in their decades-long fight against inflation this week by naming IMF Managing Director Christine Lagarde to the one position in the world's largest economic bloc designed to control it.
Lagarde, a 63-year old lawyer and former French finance minister with no academic background in economics, was tapped late Tuesday to replace the uber-qualified Mario Draghi when his eight-year term as President of the European Central Bank expires at the end of October.
But while many in the media, along with investors and analysts with a stake in Europe's financial markets, have spent much of their time debating Lagarde's monetary policy bona fides, most are missing the central premise of the EU's decision to return Lagarde to the European fold:
Inflation is dead. It's not coming back and it's the least of the region's concerns if it did.
The ECB is rare among global central banks in that it has a singular mandate - price stability. It isn't tasked with keeping the job market humming, the currency fairly valued or the economy on track. It's only purpose is to ensure that the "single needle" on its compass is pointing in the right direction, which it defines as an inflation rate of "just below 2%".
Draghi, arguably the most talented central banker of our generation and the man credited with saving the euro from extinction in 2012, has only been able to put together a few short stretches during which inflation has met that 'just below 2%' definition, despite more than €2.6 trillion in bond purchases, many trillions more in targeted lending programs to the region's banks, a 40 basis point charge to park money at the central bank overnight and 0% interest on its key lending rate.
But while those efforts may not have had much impact on consumer prices -- currently languishing at 1.2% and forecast to slow further into the end of the year -- they have undoubtedly pulled government borrowing costs sharply lower.
That's allowed terminally-indebted economies such as Italy and Greece to sell 10-year bonds at rates below (for Rome) or just above (for Athens) the 1.95% cost investors currently apply to U.S. Treasury notes, the world's risk-free benchmark.
That ample benefit, meant to allow member states to either increase government spending and boost growth or invest in structural changes and boost efficiency, have largely been ignored by European leaders, drawing consistent pleas from Draghi and criticism from Lagarde in her role at the IMF.
This overlap is what likely drove EU leaders -- some of them near the end of their own political life -- to push for Lagarde over more qualified candidates such as Bundesbank President Jens Weidmann or the former Governor of the Bank of France, Benoit Coeure.
If trillions in cash, record low rates and unlimited lending can't stoke inflation, and changes in energy markets, personal consumption and business automation are set to add further downward pressures, then what's the point of hiring someone who specializes in old-school monetary tactics?
Best to find someone with expertise in persuading governments to get their financial house in order -- the region's true existential threat -- using the appropriate levels of charm, intelligence, diplomacy, with a sprinkling of European 'esprit-de-corps', honed over nearly a decade in Washington.
Much has been made -- and correctly so -- of the fact that Lagarde and Germany's Ursula von der Leyen, tapped to replaced Jean-Claude Juncker as President of the European Commission, will mean the region's two most important roles will be held by women.
But the larger implication of Lagarde's nomination is the tacit admission that decades of inflation fears, mostly expressed and exaggerated by politicians in Berlin, have finally been put to rest.
And the limits of monetary policy have finally been reached.