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Thread: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

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    Default A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Interesting reading.

    A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"



    12/18/2019 Claudio Grass
    Economists, conservative investors, and market observers have been issuing stern warnings for years regarding the severe impact of the current monetary policy direction.
    The ECB's Poblems

    In a recent statement, European Central Bank (ECB) Vice President Luis de Guindos warned of potential side effects and risks to the economy resulting directly from the central bank’s policies.
    He outlined how a decade of extremely aggressive monetary interventions have resulted in an erosion of financial stability and now pose a threat to the eurozone’s economic outlook. While he defended the bank’s negative interest rate strategy as “supportive” of the overall economy, he did admit that, because of it, “we also note an increase in risk-taking which could, in the medium term, create financial-stability challenges”
    .

    This is a point that was also highlighted in the ECB’s latest financial stability review, which found that the ultra-low interest rates have triggered excessive risk-taking, mainly by investment funds, insurers, and in certain real estate markets, thereby creating considerable stability concerns going forward.
    The report identified four main threats to financial stability for the block: asset mispricing, which sets the stage for a correction, corporate overindebtedness, which raises debt sustainability concerns, dangerously weak banking sector profitability, leading to increased risk-taking, and excessive risks taken in the non-bank financial sector, which could be facing “profitability and solvency challenges.

    Although none of this is news to the responsible investor and to the reader who understands monetary history and the inevitable consequences of trying to forcibly twist basic economic laws, it still remains surprising that the ECB would publicly acknowledge it. The timing is even more striking, as the report, outlining the risks associated with the current monetary policy direction, came out very soon after the bank announced its decision to double down on it, cutting rates even lower and launching a new round of quantitative easing (QE).

    Lagarde's “Solution”


    As the ECB appears to be finally acknowledging the limitations and terrible side effects of its own monetary “cures,” and as the eurozone economy continues to struggle, the central planners’ focus seems to be shifting to other measures and tools in hopes of a growth revival. Their “solution” is for governments to deploy fiscal measures and to try to stimulate the sluggish euro area economy through spending.
    A great example of this “refocusing” was given by Christine Lagarde in late November. In her first major speech since becoming ECB president, she made no substantive comments on or references to the role of the central bank itself, or to an actual policy revision to help support the ailing eurozone economy. Instead, she concentrated on what member states can do and on the part that increased public investment should play going forward. She highlighted that that monetary policy “cannot and should not be the only game in town,” and she urged European governments to boost spending. She also argued what the EU needs in order to increase productivity is more integration in various areas including capital markets and the banking sector.

    It can be argued that the only saving grace of the eurozone’s deeply problematic economic and monetary structure is the fact that at least some of the member states, through the budgetary leeway the system affords, did manage their finances in a comparatively responsible way. Now, it is those states that are in the crosshairs of the ECB, as President Lagarde demonstrated when she singled out “countries with chronic budget surpluses like the Netherlands and Germany” and criticized them for not spending enough. There’s a lot of support for this position, as many are eyeing those surpluses as a way out of the economic glut that the bloc is currently in. As French Minister of the Economy and Finance Bruno Le Maire clearly put it in September, “What’s the point of having public accounts perfectly in order … if your European neighbors can’t benefit from your growth and economic dynamism?”

    Of course, the sound investor can immediately see the many dangers that lie in this direction. On top of monetary excesses, the road is now being paved for fiscal ones too. Absurd as it might sound, the central bankers’ solution for their concerns of overindebtedness and financial instability — which they've admitted their own policies gave rise to — is to encourage the very few member states with stable budgets to destabilize themselves. At a time like this, when the next recession is around the corner and when the ECB has little to no ammunition left to fight it, it seems clear that the individual states that “kept their powder dry” fiscally would be better positioned to take action against the effects of the slowdown. Criticizing budget discipline and surpluses and promoting spending and further integration is a strategy that is bound to seriously backfire, and one that will only serve to exacerbate the impact of the economic slowdown.
    This approach also highlights the institutional myopia at the very top of the eurozone. Having learned nothing from the mistakes of the last recession, the “cures” that are being prescribed for the next one are very likely to come with even worse side effects. It is thus clear that it is up to the individual investor and saver to prepare and to protect their wealth from the risks that lie ahead.
    Originally published at Pro Aurum. Republished from ClaudioGrass.ch.

    Author:
    Contact Claudio Grass

    Claudio Grass is a Mises Ambassador and an independent precious metals advisor based out of Switzerland. His Austrian approach helps his clients find tailor-made solutions to store their physical precious metals under Swiss law. ClaudioGrass.ch
    https://mises.org/wire/desperate-ecb...qWhhLz710QZL84
    Last edited by Rum_Pirate; 12-20-2019 at 02:54 PM.

  2. #2
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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Austrian school economics, 'Mises ambassador' and 'precious metals advisor'. Hoo boy.
    "For a successful technology, reality must take precedence over public relations,
    for nature cannot be fooled."

    Richard Feynman

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    ^your not suposed to check the sources
    Ragnar B.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Keith Wilson View Post
    Austrian school economics, 'Mises ambassador' and 'precious metals advisor'. Hoo boy.
    Old Dryfoot
    That Richard Guy

    Re: This could be an interesting turn
    12-19-2019, 05:31 PM
    . . . . The fact that it was brought to light by a painting is immaterial. .. .

    http://forum.woodenboat.com/showthre...08#post6049708
    The fact that it was brought to light byAustrian school economics, 'Mises ambassador' and 'precious metals advisor' is immaterial.


    Hoo boy.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    "Mises Ambassador," that just sounds like bull S. No idea whether it is.
    If Russia wins, there will be no Ukraine; if Ukraine wins, there will be a new Russia.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    It’s immaterial my shill is a shill.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    .
    The Austrian School of Enonomics? Do they worship the Ayn Randian rugged individualist/Superman?

    Asking for a friend.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    RP, you may recall I also disagreed with the conclusion of the article you linked in #4.

    But really? Ludwig von Mises and Austrian school bullsh!t? You might as well quote Chairman Mao's Little Red Book.
    "For a successful technology, reality must take precedence over public relations,
    for nature cannot be fooled."

    Richard Feynman

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Osborne Russell View Post
    "Mises Ambassador," that just sounds like bull S. No idea whether it is.
    Shooting from the hip again?

    I know you could have Googled it, but thought I'd help . . https://mises.org/library/austrian-s...institutions-0

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    The deflection and total avoidance of discussing the matter in question, namely the severe impact of the current monetary policy direction, is incredible.

    Way to go guys. Stay on your bandwagon.

    You have finally driven me to drink, LOL I am now off for a sun down 'bucket of beers' at Shipwreck.

    I'll raise a couple of them your direction.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Meh.

    Admit it. You c&ped the op from either an email or Facebook.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    .
    Oh what the heck... I'll play along.

    Tell us Rummy... do you believe wealth and income disparity in 21st century USA to be a problem or not? Do you believe the USA federal debt is a problem or not? Do you believe infrastructure issues across the USA are a problem or not? I could go on... but a reply to these three questions will be sufficient for the moment.

    And we truly are living in a second Gilded Age. Deny that? Go ahead and debate the point.

    "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." -- FDR, Inaugural Address, January 20, 1937.

    "From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded" (Luke 12:48).

    .
    Last edited by Tom Montgomery; 12-20-2019 at 04:01 PM.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Tom Montgomery View Post
    Meh.

    Admit it. You c&ped the op from either an email or Facebook.
    The source is at the bottom of the OP.

    The topic of discussion remains, but it is observed that since it does not concern the negativity of your President, or of 'bigging up' of the Democratic party, the bandwagon riders on this forum continue to cast scorn and derision. LOL

    Way to go guys. Stay on your parochial bandwagon.

    I am however, as it is still 80F, now off for a sun down 'bucket of beers' at Shipwreck.

    I'll raise a couple of them your direction. Have great weekend.

    Cheers.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    The topic of discussion remains, but it is observed that since it does not concern the negativity of your President, or of 'bigging up' of the Democratic party, the bandwagon riders on this forum continue to cast scorn and derision. LOL
    Hogwash. Austrian-school economics and the excretions of the von Mises Institute are not worthy of serious discussion. Again, you might as well post from Mao's Little Red Book, and if you did, we'd respond in pretty much the same way.

    Ah well. Enjoy the beer, anyway!
    "For a successful technology, reality must take precedence over public relations,
    for nature cannot be fooled."

    Richard Feynman

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    It is to avoid screeds like that in the op that I avoid Facebook and delete unread most of my email.

    The internet is chock full of misinformation, propaganda, conspiracy theories, and flat-out-crazy-bullpucky that draws in gullible and uncritical minds as well as political partisans looking for material to support their settled ideology.
    Last edited by Tom Montgomery; 12-20-2019 at 04:13 PM.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Keith Wilson View Post
    Hogwash. Austrian-school economics and the excretions of the von Mises Institute are not worthy of serious discussion. Again, you might as well post from Mao's Little Red Book, and if you did, we'd respond in pretty much the same way.

    Ah well. Enjoy the beer, anyway!
    Ah you didn't read the OP and the bits I highlighted.

    In a recent statement, European Central Bank (ECB) Vice President Luis de Guindos warned of potential side effects and risks to the economy resulting directly from the central bank’s policies.
    He outlined how a decade of extremely aggressive monetary interventions have resulted in an erosion of financial stability and now pose a threat to the eurozone’s economic outlook. While he defended the bank’s negative interest rate strategy as “supportive” of the overall economy, he did admit that, because of it, “we also note an increase in risk-taking which could, in the medium term, create financial-stability challenges”
    .

    This is a point that was also highlighted in the ECB’s latest financial stability review, which found that the ultra-low interest rates have triggered excessive risk-taking, mainly by investment funds, insurers, and in certain real estate markets, thereby creating considerable stability concerns going forward.
    The report identified four main threats to financial stability for the block: asset mispricing, which sets the stage for a correction, corporate overindebtedness, which raises debt sustainability concerns, dangerously weak banking sector profitability, leading to increased risk-taking, and excessive risks taken in the non-bank financial sector, which could be facing “profitability and solvency challenges.
    Still it's no problem, I'll leave you all to move on to the next topic - probably likely to be parochial and on concerning the negativity of your President, or of 'bigging up' of the Democratic party and how well it is doing. LOL

    Have a great
    evening.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    .
    Buh bye.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Keith Wilson View Post
    Austrian school economics, 'Mises ambassador' and 'precious metals advisor'. Hoo boy.
    What did you expect on opening the thread?

    Were you surprised, disappointed or amused?



    I figgered (copyright somebody else)
    I'd much rather lay in my bunk all freakin day lookin at Youtube videos .

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Rum_Pirate View Post
    Shooting from the hip again?
    No, it really sounds like bull S.
    If Russia wins, there will be no Ukraine; if Ukraine wins, there will be a new Russia.

    -- Dmytro Kuleba, Foreign Minister of Ukraine

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Pretty far right, "factual reporting, mixed"

    In my mind the greatest accomplishment of the EU has been peace in most of Europe for over 70 years...

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Chris Smith porter maine View Post
    Pretty far right, "factual reporting, mixed"

    In my mind the greatest accomplishment of the EU has been peace in most of Europe for over 70 years...
    https://www.google.com/amp/s/mediabi...s-daily/%3famp

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Chris Smith porter maine View Post
    Pretty far right, "factual reporting, mixed"

    In my mind the greatest accomplishment of the EU has been peace in most of Europe for over 70 years...
    Psst.

    RE "factual reporting"

    European Union

    Founded
    :
    November 1, 1993,


    November 1, 1993, Maastricht, Netherlands
    Just over 26 years, not 70.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Quote Originally Posted by Rum_Pirate View Post
    Psst.

    RE "factual reporting"



    Just over 26 years, not 70.
    It all came out of the treaty of Paris 1951 and from there it was a logical procession.

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    Default

    What has RP got against the EU?
    Did it bite him when he was a kid or something.

    I can see him now with his bucket of beers, willing the EU to fail.

    But why?



    Sent from my iPhone using Tapatalk
    It's all fun and games until Darth Vader comes.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    .
    I don't get it either. Evidently he is bored in paradise.
    "I'll tell you why [religion's] not a scam. In my opinion, all right? Tide goes in, tide goes out. Never a miscommunication. You can't explain that."Bill O'Reilly

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    Default

    Quote Originally Posted by Keith Wilson View Post
    Austrian school economics, 'Mises ambassador' and 'precious metals advisor'. Hoo boy.


    Quote Originally Posted by mizzenman View Post
    ^your not suposed to check the sources


    😆👍 tee-hee!
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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    Not one response concerning the OP. What a bunch you are. But then having Lagarde who is convicted of fraud, has no back ground in monetary matters heading the ECB raises no alarm bells with you lot, and why would it, you do not live here. For whatever reason you seem to attack the poster ( the usual suspects), with no discussion on the topic, why?

    ECB is in the same position as other central banks, too much printed money, no room left to manouvre with interest rates and very little growth, but with rising living costs. Swedens Riksbank is for the first time since starting negative interest rate policy, is going to end it. It doesnt work.

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    Default Re: A Desperate ECB Wants to Eliminate the Eurozone's "Only Saving Grace"

    It appears the implication is that the EU's only saving grace is that Germany and Holland haven't been spending money.

    I would disagree that this is the EU's only saving grace. It has a LOT more going for it than just that.

    Monetary verses Fiscal policy is a de rigeur presently. It's not unique to Europe.
    it's clear the Northern European countries have enormous advantages over the extreme edges of Europe. Nothing like being in the very center in one one of the worlds great markets, replete with amazing infrastructure and an outrageously skilled population. I agree, those countries should be lifting harder to support their fellow members but expecting them to do it is not to 'Eliminate the only saving grace'.
    It's all fun and games until Darth Vader comes.

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