Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19
Silver Price Trend Forecast 2019 - 9th Jan 19
Did Strong December Payrolls Push Gold Prices Up? - 8th Jan 19
How to Spot A Tradable Stock Market Top? - 8th Jan 19
Why 90% of Traders Lose - 8th Jan 19
Breadth is Very Strong While Stocks are Surging. What’s Next for Stocks - 8th Jan 19
Half of Investment-Grade Bonds Are Just One Step from Junk Status - 7th Jan 19
Stocks Rallied Again, Still Just an Upward Correction? - 7th Jan 19
Gold Golden Long-Term Opportunity - 7th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

ECB Panic Money Printing to Save Euro-zone from Economic Collapse as BrExit Looms

Interest-Rates / Negative Interest Rates Mar 11, 2016 - 05:24 AM GMT

By: Nadeem_Walayat

Interest-Rates

A little over a month on from the Bank of Japan's panic announcement of negative interest rates and money printing. Now it's the turn of the ECB to PANIC by firing it's own inflation bazooka in what is commonly termed as the currency wars (competitive devaluations) as nations attempt to import inflation and export deflation by means of manipulating exchange rates. This weeks ECB PANIC followed euro-zone inflation turning negative again (CPI -0.2%) and with virtually the whole of southern europe in a permanent economic depression, with debt mountains continuing to balloon in a perpetual state of imminent bankruptcy of the whole of southern europe as ALL central banks ONLY really have ONE objective which is to INFLATE debt mountains away for which they CREATE INFLATION by means of MONEY PRINTING and so without inflation the debt cannot be serviced.


And so the ECB cut already negative interest rates further from -0.3% to -0.4% for deposits held at the central bank, i.e. it costs the banks money to park their deposits at the central bank. Whilst also cutting the main financing rate to zero, thus allowing the banks to borrow at 0% from the central bank. And lastly to increase the amount of QE money printing from Euro 60 billion to Euro 80 billion per month mainly aimed at buying corporate bonds on top of government bonds (debt) thus forcing market interest rates lower by flooding the markets with billions of freshly printed euros (electronic) each month.

So what's going to be the REAL consequence of the ECB announcement ? We'll look at the stock markets, look at the housing markets because as has been the case for ALL QE announcements so will it be for the ECB's of INFLATING ASSET PRICES! Which means the perma bears are likely going to waste another year banging their heads against easy money driven bull market brick walls.

However, the problem at the heart of the euro-zone remains as I have literally voiced for the whole of this decade for the fundamental fact that the whole of southern europe and even France cannot compete against Germany without competitive currency devaluations which they are unable to do because they all use the SAME currency and so their economies are relentlessly being ground into dust, the only real solution is for the euro-zone to breakup into several smaller currency blocks. Whilst the alternative to this is for a full fledged political union which the euro-crat elite favour so that transfer payments from the likes of Germany take place to virtually the whole of the rest of the euro-zone in perpetuity, something that the German people are very unlikely to allow to happen for the obvious ultimate hyperinflationary consquences.

11 May 2010 - E.U. $1 Trillion Bailout, Detonates Nuclear Option of Printing Money to Monetize PIGS Debt

EURO II ?

This, first of a series of money printing debt monetization bailouts puts the Euro firmly on a trend towards high inflation as are all fiat currencies, i.e. the fundamentals of the Euro block composed of many small weak economies that cannot devalue internally against highly competitive strong economies will still remain. The only possible solution is for a Euro II, i.e. split the Euro into two currency blocks one for the weak that suffer higher inflation and interest rates and the more competitive countries as part of the Euro II block (could just be Germany on its own?) which would act as a safety valve in times of economic crisis that demands internal currency devaluations.

29 Jun 2011 - Bankrupt Greece Blackmails Europe, Bailout or Euro Zone Dies, Global Financial System Collapse

Which means the tax payers of Germany and France are effectively trapped into a lose, lose situation, where the only solution is for either collapse of the euro currency (savers wiped out) or for total political, economic and monetary union which means permanent financing of states such as Greece by means of internal transfer payments as occurs in nation states where wealthier areas are taxed to subsidise the poorer areas (UK example - London / South East subsidises most of the rest of the country).

And it is into this never ending saga of the european union jumping from one panic to the next where each results in more centralisation that the REMAIN referendum camp wants to drag Britain deeper into, a european union / euro-zone that have been teetering on the edge of collapse for 8 years now! Constantly adopting ever more panic measures and powers in the hands of un-elected officials so as to try to keep kicking the can further down the road that once more illustrates that the european union / euro-zone is utterly dysfunctional and ultimately heading for a very messy breakup which is one of the key reasons why Britain needs to vote to exit the european union as soon as possible, before the SHTF as illustrated by my recent series of videos (click to watch) -

 

And as I voiced many months ago, will the european union even survive until Britain holds it's referendum? Or will the EU go bust un spectacular style as a consequence of one Panic measure too far.

23 Sep 2015 - Poland, Czech, Slovakia and Hungary Refugee Hypocrisy After Flooding UK with 4 Million Economic Migrants

The bottom line is that the migration crisis as did just a few weeks ago the euro debt crisis illustrate that the European Union is BROKEN and is trending towards an apocalypse of sorts the magnitude of which cannot be discerned at this point in time. So this is a wake up call for the people of Britain to vote to LEAVE THE E.U. before it starts to disintegrate in unpredictable and probably very violent ways!

Again take this very seriously that the Euro-zone really could collapse even BEFORE Britain's referendum!

And remember that BrExit will not just mean freedom for the people of Britain but also the start of freedom for the peoples of the whole of Europe as BrExit should mark the start of the END of the European Project before it fully morphs into a EUSSR superstate.

Whilst my in-depth analysis of early February covered the prospects fro UK interest rates for 2016 and 2017 -

06 Feb 2016 - UK Interest Rates, Economy GDP Forecasts 2016 and 2017

UK Interest Rates Conclusion

Therefore the overwhelming picture is one of the Bank of England continuing to kick the interest rate can down the road for the whole of 2016 and probably for the whole of 2017 too, even if inflation rises to above 2%. Where even a BrExit induced mini-sterling crisis is unlikely to prompt the BoE to shift on UK interest rates. Especially as I expect the UK economy to significantly weaken to an average GDP of 1.6% per annum that compares against BoE expectations of 2.6% per annum.

The bottom line is that a paralysed BoE remains terrified of its banking brethren that could yet go bankrupt again, especially given Britain's continually expanding debt mountain, and thus will only hike rates when it is faced with an even worse crisis. In fact odds probably favour a CUT in interest rates rather than a RISE, maybe even going negative, though negative interest rates just do not work because they act as a tax on the economy instead of a stimulus.

Ensure you are subscribed to my always free newsletter (only requirement is an email address) for the following forthcoming analysis -

  • US Interest Rates 2016
  • US Dollar Trend Forecast
  • Stock Market Trend Forecast 2016
  • US House Prices Forecast 2016 and Beyond
  • Gold and Silver Price Forecast 2016

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 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