Eurozone Collapse? Unmasking the Illusion
We live in a world where the main driving force behind this illusory economic recovery is hot money and fraudulent data manipulation. According to Government stats, inflation is nonexistent, but anyone with a grain of grey matter understands this is not the actual case. Rents, education and medical costs are soaring, and salaries are dropping when inflation is factored in.
Simply put, you are working more and more for less and less. This is not the American dream, but it is more in line with one of the worst scenes from a terrifying movie. The primary driver, however, is hot money; cut this supply, and the economic recovery ends. Central bankers are aware of this, which is why they are embracing negative rates, as it’s the only way to maintain this illusion. But, the m…”
If you wish to read the full article, please click the link below: Why everyone should own some Gold & Silver Bullion
Unravelling the Currency War and ECB’s Monetary Policies
The intricacies of the global financial landscape often play out like a high-stakes game, where narratives shape perceptions and central bankers wield significant influence. Amid this complex terrain, we find ourselves entrenched in a currency war, a race to the economic bottom, where strategies are devised to vie for the last position. While undeniably important, the Eurozone crisis follows a long tradition of crises throughout history, each marked by varying degrees of hysteria.
As we approach the end of Mario Draghi’s term as the head of the European Central Bank (ECB), he aims to leave an enduring legacy. Draghi seeks to bind his successor, Christine Lagarde, to a council decision establishing a clear mandate: to strive for 1.9% inflation with an asymmetrical concern for potential deviations. In simpler terms, the ECB will aim to achieve this inflation target on average over time, accounting for future above-average inflation rates by offsetting them with below-average inflation experienced in recent years.
The justification for the ECB’s forthcoming expansionary monetary policy is rooted in Draghi’s concerns about the rapidly deteriorating state of Europe’s manufacturing sector. He believes that monetary policy should complement a more expansive fiscal policy, a combined effort necessary to reinvigorate the European economy.
However, as the ECB prepares for this new phase, questions arise regarding the ammunition it can muster for the battle ahead. Over the past four years, the ECB has substantially increased its money stock from €1.2 trillion to €3.2 trillion. Additionally, it has engaged in securities purchases totalling €2.6 trillion, including €2.1 trillion of public sector bonds – a policy seemingly at odds with Article 123 of the Treaty on the Functioning of the European Union. Furthermore, interest rates remain at or near zero, with some even in negative territory.
This complex landscape underscores the challenges and choices facing the ECB and, by extension, Europe’s economic future. The delicate dance between monetary and fiscal policies, the pursuit of inflation targets, and the ever-present financial crisis demand careful consideration. As central bankers navigate this intricate terrain, they will continue to shape the narratives that influence global markets and economies, a power that carries profound implications for us all. Full Story
The Enduring Challenge of Negative Interest Rates in Europe
For half a decade, European nations have grappled with a financial problem initially considered a radical, short-term remedy – negative interest rates. However, what was intended to be a temporary fix has become a lasting fixture, with central banks unable to wean their economies off this unconventional policy. In this article, we will explore the persistence of negative interest rates in Europe, their challenges to banks and businesses, and their impact on the region’s economic landscape.
European central banks embarked on the negative interest rate experiment to respond to the continent’s economic woes, particularly during the debt crisis. The idea was to stimulate economic activity by penalizing banks for holding excess reserves, thus encouraging lending. However, despite initial hopes of a quick recovery, this policy has proven challenging to reverse.
The New Normal: A Persistent Painkiller
As years have passed, it has become increasingly clear that negative interest rates are no longer viewed as a short-term remedy but a persistent painkiller. Businesses and banks alike have adapted to this new financial reality, with few signs of a return to favourable interest rates on the horizon.
Tamaz Georgadze, CEO of Raisin GmbH, a Berlin-based platform facilitating deposits through numerous banks, aptly describes the situation as stuck on a painkiller. Getting off this monetary regimen has proven exceptionally challenging, and negative interest rates have become deeply ingrained in the financial landscape.
Bank clients and businesses have also come to terms with negative interest rates. Alternative Bank CEO Martin Rohner notes that banks and their clients increasingly acknowledge this as a permanent feature of their financial lives. It is no longer a temporary measure but an enduring aspect of the financial environment.
From the European Central Bank’s perspective, negative interest rates have been a calculated strategy to boost the economy. The ECB estimates that these policies will have contributed approximately 2 percentage points to inflation-adjusted GDP in the eurozone from 2016 to 2020. ECB President Mario Draghi has touted negative rates as a potent instrument for promoting economic recovery and achieving the central bank’s objectives.
Conclusion
As European nations grapple with the persistence of negative interest rates, it is evident that what was once considered an extraordinary economic remedy has become the new normal. The challenge now is to navigate this prolonged era of unconventional monetary policy and its impact on banks, businesses, and the broader economy. While negative interest rates have played a role in addressing economic challenges, they also bring complexities and uncertainties. As Europe continues to adapt to this financial landscape, it remains to be seen how central banks will steer their economies in the coming years, and whether the painkiller will eventually be replaced with a different prescription.
Other articles of interest:
Negative Interest Rates favour Speculators & Punish Savers (18 Jun)
Making Money in a low-Interest Rate Environment (18 Jun)
Fed Interest Rate Hike Cycle Illustrates Economic Recovery is a Hoax (18 Jun)
Currency Wars Force Swiss Bank to Abandon Targets For Swiss Franc (18 Jun)
Negative Interest Rates Help Foster Economic Recovery Illusions (18 Jun)
High-Interest Rates not necessarily Good for Banks (17 Jun)
Safe Sales Skyrocket in Japan due to Negative Rates (17 Jun)
Putin betting On Britain leaving the EU (17 Jun)
Bank of England States Brexit Could destroy British Pound (17 Jun)
Why are Bankers Panicking Over Brexit? (17 Jun)
Polls Indicating Chances of Brexit surging (17 Jun)
Bamboozled: After Chicago retirement account breach, could NJ pensions be next? (16 Jun)
How Clinton fares against Trump after clinching the Democratic nomination? (16 Jun)
