And print more money, dangerous move imo. When there is another crash, which there will be, what tools do banks have left to stimulate growth? Will govts start getting involved?
ECB cut interest rates again
- Thread starter Stanley Road
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Who says so?
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I'm tempted to ask whether this is because of Brexit or despite Brexit.
But I won't....
But I won't....
Isn't it because various European economies are slowing down and indicating possible recession?
Pretty much and this action was expected anyway.
Probably but you cant cut interest rates forever. They've run out of ideas.
Negative interest rates
Some day there will be one, there is always one at some point
Bad times for savers
More interestingly, why are various European economies slowing down?
We are already there. -0.5
It's been bad for small savers for ten years or so, with interest rates below inflation, but on the other hand if you have had enough money to invest in assets such as shares or property you should have done well. Another way the less well off have paid more than their fair share for the 2007/8 crash, along with austerity in general.
I can see my house fetching 500k in a couple of years. All due to lack of govt investment during the crash. The next time my house loses value will be because of recession and not because of new houses being built.
Has Trump pointed at the ECB yet to throw the Fed under the bus again?
Yes, some 8 hrs ago.
On another note, a compete failure of our political system. Monetary policy has done all it can. We are so behind the curve it's incredible. I don't even think negative rates will boost lending that much. Not in this climate.
The growth was shit to begin with. Many European countries are tied to some sort of austerity programme. The monetary union means countries have tied hands fiscally. Then you have external factors like trade disputes.
Exactly, so i dont get the point of lowering further.
Neither do I. Perhaps Draghi felt he had to do something. He has been banging on for years that the politicians have to pick up the can but they have failed. Europe needs a fiscal stimulus package. Any self respecting economist would tell you this.
The ECB and EU states have been living artificially for years.
A bit like a deranged consumer with a maxed out credit card issued by the Bundesbank ( Mastercard Department )
Difficut to stop because the ECB trying to raise interest rates and to stop printing money would have the same effects as a drug addict having to go cold turkey and the shit really would then hit the fan.
So what else can they do to avoid splattering the shit on everyone, the innocent and the guilty, without finally admitting that a one-size-fits-all currency, FX Rate and Interest Rate is never going to have a happy ending for everyone involved.
Step forward Draghi and yet another short term fix to an increasingly critical long term problem
A bit like a deranged consumer with a maxed out credit card issued by the Bundesbank ( Mastercard Department )
Difficut to stop because the ECB trying to raise interest rates and to stop printing money would have the same effects as a drug addict having to go cold turkey and the shit really would then hit the fan.
So what else can they do to avoid splattering the shit on everyone, the innocent and the guilty, without finally admitting that a one-size-fits-all currency, FX Rate and Interest Rate is never going to have a happy ending for everyone involved.
Step forward Draghi and yet another short term fix to an increasingly critical long term problem
Tbf not much they can do within the current mainframe.
Any real idea to solve this isnt feasible with all the human factors involved
EU debt averages 86% to GDP (and that’s including the problem countries like Greece and Italy) compared to something like 125% in the US. Just saying like...
Btw, Afghanistan has 6%, so let’s all follow their prudent sensible fiscal policies.
Back to Stanley's question...
But who and how given that the ones that matter don't ( OK - Lithuania does, but.... ) control their FX rate and Interest Rate and also have to work within the EU's Fiscal Debt and Deficit Rules, so stimulus by local Tax Cuts isn't even possible for most of them as they're already at their deficit limits.
I can imagine that there are few Finance Ministers this morning looking jealously at Sweden and Denmark.
Correct action in the absence of correct fiscal policy from governments.
Plus, the other issue is not about deficits but surpluses. Germany running the worlds largest surplus at $276b while it can borrow at negative yields. Bigger than China or Japan. Meanwhile half of the eurozone is struggling with >20% unemployment and crippling debt.
The fiscal debt and deficit rules are part of the problem. They give no leeway for stimulating a recessive economy. If a country’s GDP is falling and that causes to have a deficit, the answer is always cuts to bring the deficit inline. Thus risk being caught in a death spire.
Plus, the other issue is not about deficits but surpluses. Germany running the worlds largest surplus at $276b while it can borrow at negative yields. Bigger than China or Japan. Meanwhile half of the eurozone is struggling with >20% unemployment and crippling debt.
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No it isn't. Not even close.
The unemployment figure was massively exaggerated heat-of-the-moment talk. I retract.
No problem. Agree with your general points.
I spoke to some dutchies at work today, all agree it was a pointless move and all this shit was brought about by lack of investment during the crash. One might say neoliberal politics.
Exactly. Volatility in the markets is increasing again and there's going to be nothing they can do to stave off the next recession cycle. Imo its the current lot trying to kick the can down the road so a crash doesn't happen on their watch.
As I see it, but I'm not an economist, the volatilty is being caused both directly and indirectly by the clowns we seem to have accumulated every where as politicians during the past couple of years.
Akmost everything they do seems to be the opposite of what the rest of us would consider as common sense and normal.
And when they're not doing stupid things, they're doing great impressions of two year olds.
Sad really, because righ now should be the golden age of peace and prosperity before mankind's next big shakeout which is due within the next couple of generations.
All very philosophical, I know, but that's how I'm preparing myself this morning because we'll stuff up against Leicester and being philosophical about it is the only way to get through to the next disappointment.
Akmost everything they do seems to be the opposite of what the rest of us would consider as common sense and normal.
And when they're not doing stupid things, they're doing great impressions of two year olds.
Sad really, because righ now should be the golden age of peace and prosperity before mankind's next big shakeout which is due within the next couple of generations.
All very philosophical, I know, but that's how I'm preparing myself this morning because we'll stuff up against Leicester and being philosophical about it is the only way to get through to the next disappointment.
It's partly that, but the markets are at all time highs and shouldn't really be there. People are nervous and any little change from the idiots currently running the world is amplified in the market reaction.
People don't see it this way but slowdowns and recessions are a necessary part of a functioning economy. We shouldnt be trying to stave it off.
Well at least we can say with confidence that prediction was off, might be right about the rest though.
Markets are high, higher than the fundamentals and current political risk merit, but isn't that because interest rates are so low ?
Double edged sword - low interest rates mean grief for savers and those of us with PPS, but higher interest rates men grief for borrowers, both personal and corporate. So one group have to lose out, and for 10 years or so, it's been the former group, and personal and corporate investors have piled their cash and savings into equities in the hope that dividends and share price rises will at least provide some income instead of having to rely on 0.5% interest income when infaltion bounces around 2%.
Layer on top basic economic law about supply and demand, and hey presto prices go up for no other reason of supply and demand of ' safe ' stocks caused by low interest rates.
Lower interest rates any more, and the markets will probably continue to rise, no ??
And yes....The doom and gloom of yesterday morning lifted sufficiently last night to enjoy a good full bodied red with dinner.
I think USA is about 105%
Believe EU is lower overall but Greece at 180% and Italy at almost 130% are probably going to be difficult to manage with a centralised policy
That said Japan is almost at 250%... That's higher than my mortgage!
http://worldpopulationreview.com/countries/countries-by-national-debt/
Don’t worry, if enough people flock to the new Libra Facebook currency then Mark Zuckerberg will continue on his goal to be supreme overlord of the world and he will decide what is best to stimulate the world economy.
Thats what i mean, markets are artificially high. Stocks are way above their real valuations at the moment and when that happens they become very unpredictable.
Japan and Greece are very different cases (needless to say). Greece’s debt-to-gdp seems yuge because severe austerity shrunk the GDP from its peak considerably thus causing the ratio to explode, while Japan had a naturally growing debt for decades. However both countries are now running surpluses.
Italy has had a ratio hovering at ~125% since forever. Talking as far back as mid 90s, before the entry to the euro. It’s nothing new. However they are still running a deficit and their nominal debt is rather large, thus more dangerous to the Eurozone.
USA is a different beast altogether. I reckon they could get to Japan levels and their own massive bond market would probably prop them up for fear of doomsday scenario.