Wednesday March 9, 2016 - 23:37:51 GMT
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ECB Continues on the Wrong Failed Monetary Policy Path
Now that NIRP (Negative Interest Rate Policy) has replaced ZIRP (Zero Interest Rate Policy), the actions by central banks such as the Bank of Japan and ECB are being called into question. The following suggests the ECB is similarly drifting into an alarming policy error as witnessed by the failed Bank of Japan monetary policy for more than two decades.
Posted by a highly valued member of the Global-View Forex Forum
Japan effectively has had ZIRP for almost a quarter of century but in its fear of creative destruction this embrace of ongoing palliative care of zombie businesses and banking system have resulted in an unwavering deflationary miasma rather than a shorter sharper repricing of Assets and Credit that would allow the historical economic permaculture to flourish.
ECB are similarly drifting into an alarming policy error IMHO. After all the efforts to repair and reassure European banking system these negative rates are undercutting profitability, cratering confidence and discourage lending into already weak demand.
After 12 months of pretty much 1.11 +/- 3% Euro may have become immune to these desperate rate experiments of penalising savers, buying of corrupted debt and repackaging of putrid credit but for how long? ECB has come a long way from its history of inaction under Trichet but this blind belief that monetary policy can fix a fiscal policy vacuum is a huge leap of faith and what happens when these results in underwhelming outcomes?
To narrowly target equity prices and government debt while hollowing out multi generational savings and destroying the dogma of wealth grown through compound interest is a massive miscalculation which will especially penalise the demographically vulnerable of Europe. I can't see this short term artificial benefit to disengage the natural instincts as having a good outcome.
At some point the US (and USD) is a beacon of stability even with two narcissists likely to run off to become President.
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