The European Central Bank has dropped its long-standing pledge to boost stimulus if conditions deteriorate, signalling the triumph of German-led hawks and marking a major turning point in the eurozone’s monetary regime.
The approaching end to the QE-era pulls away the protective shield for Italy and the high-debt Latin states, and for thousands of “zombie companies” kept afloat on monetary life-support.Italy is the lynchpin of the euro. If Italy fails, the EZ fails. Stay tuned.
The Telegraph
Bundesbank back in charge of ECB, sending shivers through Italy
Ambrose Evans-Pritchard
The current policy is bankrupting the big German banks ...
ReplyDeleteIf they cant figure it out then each nation should just issue its own cryptos and set the exchange rate between them at 1.0 this would probably be better than current situation...
The fundamental problem is that Europe is a quasi-German Empire in the making.
ReplyDeleteTom
ReplyDeleteWhy do you view Italy as the lynchpin, as opposed to a country like Spain?
Size. Italy has the 3rd largest economy in the EZ after Germany and France.
ReplyDeleteTrump knows exactly what he is doing to China, Japan and the Eurozone. Raise those rates Jerome my boy raise those rates. Lets see how they get on when their currencies strengthen.
ReplyDeleteThe EU will never accept fiscal policy and break the 3% rule to weaken the Euro. So the correct response should be stop QE and start unwinding the balance sheets and start hiking the interest rates in the EU. That would weaken the Euro just like those polcies have weakened the $.
But Drahgi can't do it because he's lied for so long about it he would look like a clown and the markets would destroy him.
When we perform QE. Let's swap an interest bearing asset for a reserve blance and call it a fiscal stimuals
When we unwind our balance sheets. Let's swap a reserve balance for an interest bearing asset and call it tightening.
Then stand back and see how many chumps fall for it.
Let's swap an interest bearing asset for a reserve balance
So we can keep our inflation low and let's introduce the growth and stability pact and have a race to the bottom with wages so EU consumers can't afford imports.
This way we can protect the Euro for our export to growth model and continue to run large trade surpluses.
But we'll lie to the markets and call QE a fiscal stimulas. Lets repeat it over and over and over and over and over and over and over and over again every 15 mins and we'll parcel it up into soundbites.
Then stand back and laugh at them.
That's why Japan and China are so different to the EU.
Japan and China are not afraid to bring out the big bazooka ( fiscal policy) to protect their currency in their export to growth model. By announcing massive public sector projects.
The way the EU is set up by the neoliberals they are hopping on one leg with their hands tied behind their back. This is what happens when you take fiscal policy completely off the table and only allow your private sectorS to save 3% of GDP.
Why not allow more than 3% of GDP. Let's say 6% of GDP to get it all going and kick start it and bring unemployment down in the EU.
There's nothing stopping them from moving it back down to 3%, 2% 1% if it starts to heat up.
Does that not sound the more common sense approach?
Let's swap an interest bearing asset for a reserve blance and call it a fiscal stimuals
ReplyDeleteThat would depend on how much is paid for the asset. Who needs interest if one sells at a high enough price?
I see QE as welfare for the banks.
Most of it will probably be pensions or foreign savings ?
ReplyDeleteFoot,
ReplyDelete"Raise those rates Jerome my boy raise those rates. Lets see how they get on when their currencies strengthen."
I think you might give Trump too much credit... we'll have to see... he has demonstrated he knows that if the trade deficit goes down the other entry will bring the fiscal deficit down but that is as far as it goes...