Draghi's New ECB QE4EVA Is A Mistake. Here Is What He Should Have Done... | WHAT REALLY HAPPENED

Draghi's New ECB QE4EVA Is A Mistake. Here Is What He Should Have Done...

Authored by Daniel Lacalle via DLacalle.com,

The ECB is creating a dangerous bubble and should not have cut rates by 10bps nor added a new purchase program of €20 billion per month.

1) Eurozone states are already financing themselves at negative rates. There is no need for lower rates and this disguises real risk.

This has saved governments more than 1 trillion euro in interest expenses (handelsblatt.com/today/finance/…)

2) The ECB has not abandoned its stimulus. It repurchases all maturities, launched a liquidity injection (TLTRO) in March 2019 and balance sheet stands at almost 40% of eurozone GDP.

3) Excess liquidity is 1.7 trillion euro. More liquidity does not lead agents to spend/invest more.

There is no higher solvent credit demand because monetary policy perpetuates overcapacity and zombifies the economy. Share of zombie companies has soared c30% since 2013. (BIS)

Webmaster's Commentary: 

To all those investors with intense exposure to the Euro right now, you may want to rethink your options.

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