The ECB is hopelessly stuck.
It is unimaginable how many years a completely incompetent group of people has been allowed to conduct (mis)policy on Europe's most important financial institution.
Last year, my former colleague Marcel wrote two articles on CSTV about the destructive policy pursued by the European Central Bank.
It already predicted exactly what is happening now:
A screeching out of control, uncontrollable inflation!
The main task of a central bank is to ensure the stability of the currency, in the case of the ECB the stability of the Euro. Let's not talk about whether or not the Euro should have been introduced, that discussion is pretty pointless. However, with the introduction of the Euro, a number of well-intentioned agreements were made that just about all participating countries did not give a damn. Agreements such as the amount of the maximum permitted budget deficit and the maximum permitted government debt, for example, have been violated by the participating Euro countries. The ECB stood by and watched. But the main misstep is the violation of the rule that the ECB is not allowed to finance the deficits of the participating countries. That should be left to the free market. If not, the ECB's most important task would come under pressure or even become unfeasible. And that's exactly what's going on right now.
Borrowing and spending money is the main hobby of governments.
The biggest mistake was made during the Greek debt crisis that came to light in 2010. Due to the low interest rates of the participating Euro countries, it was (not only) cheap for Greece to borrow and spend money. In no time, Greece was up to his ears in debt. By cheating, the Greeks could keep that out of sight for a long time. But when it turned out that the debt mountain was more than twice as high as allowed and when the financial markets started to lose confidence in Greece, the yield on Greek debt rose. Borrowing even more became virtually unaffordable for the Greek government. There would have been nothing for the Greeks other than to tighten their belts.
And that's how the game should work.
If your debts are too high and borrowing becomes too expensive, you have to cut costs and therefore the expenditure should at least not exceed the income. In the long run, the housekeeping book will be in order again. That hurts a bit in the beginning, because cutting back is not fun, but it was very much necessary.
Anyway, at that moment things went horribly wrong because instead of letting the game run according to the financial laws of nature, the debt crisis was solved with………..
Even more debt!
Huge sums of money were lent to Greece at unnaturally low interest rates and the over-the-top policy could be continued. In addition, Greece was rewarded even more for its mismanagement by canceling a lot of debt. This has caused enormous damage to investors in Greek bonds (mainly banks, pension funds and investment funds).
These 'brilliant moves' by the ECB and the participating Euro countries were a great inspiration for many other countries to also start borrowing more and, under the cover of the ECB, the household books of almost all Southern European countries derailed.
The ECB was, of course, aware that this would eventually lead to interest rate hikes in many Euro countries and then invented a ruse to create money out of thin air to buy bonds from Euro countries and thus lower interest rates to absurdly low levels. to draw unnatural levels.
In fact, this is nothing more than financing government debt through a roundabout route, which is therefore de facto prohibited. Greece, Italy, Spain, Portugal, France and even Belgium are sitting on a mountain of debt that they would never be able to sustain under normal interest rates.
Those budget rules, which prescribe a government debt of no more than 60 percent, have also been suspended due to the corona pandemic to allow for large-scale government support and thus further exacerbate the problems. And now we have another war close by. Again, sufficient reason to flout the rules even further and to further falter the financial system. And then the biggest pointless waste of money, the climate hysteria, has yet to begin.
The ECB's balance sheet has just about exploded and is now approaching the value of European GDP.
(GDP = Gross National Product, say the total turnover of the economy of a country or region)
Greece had the highest government debt in the third quarter of last year. Greece's total debt is more than twice the gross national product, currently over 210 %. Italy is in second place with a public debt of about 160%, followed by Portugal with debt amounting to 135% of GDP.
For the entire Eurozone, government debt is above 100% of GDP, and the debt mountain continues to grow. Then consider again that the policy for the coming years is to make life as miserable as possible for the companies that provide our economy and prosperity and billions of dollars will be spent on completely pointless CO2 measures.
And now we are left with the baked pears.
Because the main task of the ECB should be to stabilize the value of the currency and control inflation.
For years, the ECB has defended their mismanagement of money printing to buy bonds from non-compliant countries, on the nonsense excuse that they were doing this to fuel what they believe to be too low inflation.
Well, he has now woken up and started a marathon sprint.
In the event of inflation, the ECB should raise interest rates above the level of inflation. Can you see it? According to the official figures, inflation is around 7%. We all know that in reality it is much higher, but well, the interest rate should therefore be raised to at least 8%.
Twelve years ago, things went wrong with Greece, which was in danger of sinking due to the mountain of debt. Now an interest rate of 12% would bankrupt about half of Europe. So what does the central bank do?
Nothing! They can do nothing to curb inflation.
They have completely trapped themselves. They can only continue with the same mismanagement that seems to avoid problems in the short term but will only make the problem worse in the longer term. The collapse of the European monetary union cannot be ruled out. In the meantime, we are entering a period of sustained inflation fueled by a wage-price spiral and eventually a period of stagflation (stagnant growth and inflation) followed by a massive economic recession.
All the misery we are currently facing, the corona hoax, the war, inflation, the economic crisis that is coming, it is all caused by those in power who do not care about the people and the companies that pay their salaries and where they really should take good care of it.
Or would this all just be part of the big plan? After all, you won't need to own anything any time soon.
