Darth Vader looms over Davos

The world's top power brokers may be gathered in Davos, but these days all eyes are fixed on the other side of the Swiss border, where, on Thursday, Mario Draghi is expected to walk to the podium of the European Central Bank (ECB) in Frankfurt to declare war on deflation. The ECB Chief's arsenal: A massive bond-buying program meant to stop the 19-member single currency bloc from sliding deeper into the dark side.

The problem is that the average citizen does not understand the consequences of what deflation is, argued Anthony Scaramucci, founder and Co-CEO of the New York-based investment firm SkyBridge Capital.

"It's an annihilation. It's the Darth Vader death star outside of the atmosphere of the earth, shooting a laser to blow up the world's economy."

That may be overdoing it, says Harvard economist Kenneth Rogoff. But he agrees that the central banks appear to be in over their head.

" I think they have been a little surprised that they have trouble creating inflation. I don't think they knew that. "

Russian humor

While the US Fed is considering tightening its credit reins after seven years of rampant money printing, Europe's and Japan's central banks are now lining up to mimic Washington's daring monetary policy, hoping that will be the death knell for deflation. But Rogoff remains skeptical: "Frankly, the markets have lost confidence that [the central banks] will ever [create inflation]."

"If you need to know how to get high inflation, come to Russia," Arkady Dvorkovich, a Russian Deputy Prime Minister, told a laughing audience at the World Economic Forum.

His country's economy may be suffering from crippling Western sanctions and oil prices that are anything but golden, but at least the highest-ranking Russian in Davos showed he's not lost his sense of humor. Not even Russia's double-digit inflation rate, or the ditto key interest rate of its central bank can change that - although they inarguably do make it harder to do business.

"It just keeps adding layers of risks," said Guillermo Ortiz Martínez, Chairman of Management Committee at the Mexican Grupo Financiero Banorte bank. In addition to the problems of monetary policies and overall weak growth, Martínez counted geopolitical risks like terror, civil wars and political instability. "[All of these risks] beget uncertainty, and that obviously causes volatility. "

The Era of Intervention

It's against this backdrop that politicians like Dvorkovich, but also the Italian Prime Minister Matteo Renzi, called on governments to take steps to ensure a return to calm and stability.

Anthony Scaramucci argued that this is exactly what governments have been trying to do - but that they've failed in their efforts to create stability.

"If somebody was writing an economic history of our time fifty years from now, they would be saying this was the age of major governmental interventionary forces," said the New York hedge fund investor. He added that each government was going use its every weapons in its arsenal - like the US using its monetary and military policy, or Saudi Arabia using oil.

China, however, has consciously chosen to scale back its explosive growth to refocus on rebuilding its economy around domestic consumption and creating a social welfare system, Scaramucci said. Likewise, he argued, Russia and European Union members are pursuing their own goals.

"As an investor, you now have to calculate governments intervening in the markets, which are going to create huge unexpected volatility torrents," he said.

Until things get better, he warned, there's little chance that calm will return to the markets any time soon.