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unhappycamper

(60,364 posts)
Sun Jun 8, 2014, 07:09 AM Jun 2014

The Draghi Drag: European Central Bank Goes Sub Zero

http://smirkingchimp.com/thread/mike-whitney/56275/the-draghi-drag-european-central-bank-goes-sub-zero

The Draghi Drag: European Central Bank Goes Sub Zero
by Mike Whitney | June 7, 2014 - 8:49am

On Thursday, European Central Bank chief Mario Draghi dropped rates on overnight deposits to minus 0.1% thereby charging commercial banks to keep their money at the ECB. The move, which was applauded by the media as a “historic measure to fight deflation”, is nothing of the kind. Negative rates have been used in both Sweden and Denmark in recent years, but to little effect. The policy will not “get the banks lending again” as the ECB suggests, nor will it ease the high unemployment and slow growth that have plagued the Eurozone for the last six years. In truth, the rate change will have no impact at all. It’s merely public relations stunt designed to create the impression that the ECB is aggressively addressing the crisis for which it is largely responsible. Here’s how the World Socialist Web Site summed it up:

“The move is an expression of the fact that, nearly six years since the collapse of Lehman Brothers, the world economy remains mired in deep crisis, for which the world’s central banks have no solution outside of pumping trillions into banks and financial firms. While trillions are handed out to the banks, workers throughout the continent are told that there is “no money” to pay for pensions, social programs, and healthcare benefits.” (European Central Bank cuts interest rate below zero, World Socialist Web Site)


Stock traders loved the news that the ECB was going “sub zero”. As we’ve seen before, any indication that the easy money regime is here-to-stay is enough to send equities skyrocketing, which it did. All the main indices notched substantial gains on the day while the SandP 500 surged to a new record of 1,940.

The idea that charging the banks a small fee on overnight deposits will induce them to lend more freely, demonstrates a laughable misunderstanding of how the system really works. Banks don’t need piles of reserves to issue loans. What they need is creditworthy customers and strong demand. But, of course, demand is weak because the ECB has taken steps to keep the EU in a permanent state of Depression through its austerity policies. What this shows, is that the objectives of the class war precede the requirements for a healthy economy. Draghi and his cohorts would rather decimate the welfare state and reduce EU working people to abject poverty, then implement the policies that would generate a strong economic recovery.
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The Draghi Drag: European Central Bank Goes Sub Zero (Original Post) unhappycamper Jun 2014 OP
These mendacious marketeers chervilant Jun 2014 #1

chervilant

(8,267 posts)
1. These mendacious marketeers
Sun Jun 8, 2014, 09:53 AM
Jun 2014

count on the Hoi Polloi being to "stoopid" to understand matters economic...

(Of course, they are incorrect.)

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