Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

ECB Euro-zone Stimulus

Interest-Rates / Euro-Zone Jun 04, 2014 - 10:28 AM GMT

By: Raul_I_Meijer

Interest-Rates

Everyone expects Mario Draghi’s ECB to announce stimulus measures on Thursday. If the forward guidance, if we can call it that, which was ‘leaked’ by Draghi and his minions is accurate, we’ll see the bank’s main refinancing rate lowered, and the deposit rate perhaps even turned negative, with a less obvious set of measures that may include asset purchases also in the offing. The main goal must be to drive down the euro, which is still way too expensive from the point of view of exports and which therefore holds back ‘recovery’ in the eyes of policy makers, pundits and economists. But it would have to be driving down the euro without driving down stock markets at the same time.


There are a lot of things in just that one simple paragraph that are accepted as gospel, no questions asked, without having been tested or even really thought about. Now, I think that making the deposit rate negative is fine. Why would anyone want banks to be paid to store money with a central bank? Just tell them they can’t park a single eurocent with the ECB without paying a reasonable price to do so. And while you’re at it, the long-term refinancing operation (LTRO) could do with a revision. The stated aim for LTRO is to provide liquidity for banks that hold illiquid assets, but isn’t that perhaps just counter productive? If assets are still illiquid 5-6 years into the crisis, maybe it’s better to simply get rid of them, write them down, not aid and abet banks in holding onto them. It just makes it harder for anyone to know what a bank is truly worth if you help them hide their liabilities, and who needs that? Well, yes, bankers, but f you can’t get your ship and your gambling debts in order in 6 years, who needs you, really?

So trim down LTRO. And then do nothing else at all. Send a message to the world that you’re not intending to play the same game the US, Japan and China have been engaging in. If only because, well, look at where these countries find themselves. What’s to be jealous about there? And if Draghi announces “nothing else at all”, wouldn’t that drive down the euro all by itself? And yes, although we’ve seen markets ‘counter intuitively’ rise a few times recently on bad news, stock markets and other asset markets will probably get hit, perhaps even hard. But isn’t that what this world needs, isn’t it quite simply a good thing if as much of the free and cheap and zombie and ultimately empty stimulus money as possible is driven out of the system?

Zombie money is the biggest scourge of our times and our economies, not its savior, but just about everyone seems to have that completely upside down. The stated idea behind QE and other stimuli is to bring recovery through achieving an escape velocity that could help manage the debt load through – very – rapid growth, but there are no signs, other than some handpicked ones, that it is working. As long as it isn’t, the not-so-stated fact is that things are deteriorating, and quite rapidly too, since huge layers of additional debt are poured onto the already existing debt. Obviously, financial institutions and their shareholders are doing just fine at the cost of those who will have to pay back the debts.

But how does that fit in with Mario Draghi’s job description? What we have is rising stock markets and home prices – in many regions – combined with rising poverty, unemployment and not-in-the-labor-force rates. In what book is that a good direction to go in? How is creating an ever bigger divide in our societies going to help us in a recovery, or in life in general for that matter? If Draghi starts buying up sovereign bonds or asset backed paper, that may help banks and investors for a while, but at what price for the poorest in Greece, Spain or even Germany? And despite that price, there are no guarantees whatsoever that the benefits such actions may have will last. How much road to nowhere do we need to travel before we actually get there?

Tyler Durden ran a piece from The Diplomat written by Yang Hengjun today, Why Do China’s Reforms All Fail? . The reasons Yang gives, which are solidly interlocked, are the exact same as why present day central bank stimulus doesn’t work.

  • … all the reforms in Chinese history aimed to perpetuate the current system
  • … almost all of China’s reforms were done purely for the benefit of the ruler

Central banks seek to perpetuate a system that is already in place, even if it has failed dramatically and is even beyond repair, because central banks are not independent at all, no matter how much they are supposed to be. They instead control the money and credit supply of entire nations or associations of nations for the benefit of the rulers of the existing paradigm, be they political, financial and/or social. Central banks exist to make sure that if existing powers are broke or in danger, they get to feed off the wealth of the people. Therefore, while we may have democratic systems, though that is by no means assured from a political viewpoint anymore, these systems are really moot, since central bankers decide who rules and who pays for that rule, and they always pick yesterday’s favorites to hang on for another day. So if you’re looking for recovery and progress and sanity, you’re out of luck as long as Yellen and Draghi have the powers they do.

But don’t let me get ahead of myself. Draghi may still choose the way of the wiser, and do nothing on Thursday but to cut off a bunch of broke banks’ long overdue lifelines. And cause the very crisis that is the only way to get our economies and societies back on the way to real health, not the zombified kind we’ve been “living” for 6 years now. Hey, I can still dream and hope for another two days…

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Raul Ilargi Meijer Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules