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In theory the increase in asset prices should then stimulate the building industry and other development processes which create those assets. But in Ireland, at any rate, the banks have been reluctant to pass on those low ECB rates to their customers as they seek to re-build their balance sheets post crash. Low interest rates are also bad for bank profitability, and as Krugman has observed, Central bankers talk a lot to commercial and retail bankers and are thus heavily influenced by their "needs" for high salaries and profitability.
Restrictions on mortgage availability (requiring a first time buyer to provide 20% of the capital) have meant that the main buyers of property have been cash rich wealthy private buyers and international hedge funds who see a killing to be made as the economy recovers. However those same high asset prices for land and buildings also make it very difficult to justify new productive investments and thus the real economy is slowed down if not stalled altogether.
The German led export growth model of economic growth cannot work for everyone as not everyone can be a net exporter especially now that the "emerging" economies are suffering from a crash in commodity prices. The only rational alternative is for Governments to increase domestic demand through fiscal expansion, and that is precisely what they will not do - witness Osborne's latest announcement of cuts in UK government expenditure.
So the bottom line is that the ECB can't do very much, and much of what they can do has counter-productive consequences. However the only reason we are even having this conversation is that the ECB appears to be the only EU institution which is even trying to take some responsibility for ensuring economic recovery. The Commission is doing nothing of note, while national governments are persuing beggar thy neighbour policies.
So the economic crisis is also a political crisis of EU political authority, democratic legitamacy, and institutional capabilities - all of which the UK government and some semi-facistic allies in eastern Europe are trying to undermine further with its Brexit debate. It is an open question whether Brexit would not be in the interests of a better functioning EU in the longer term even if it has severe consequences for the UK's main trading partners like Ireland in the short term. Without a functioning EU demos, EU institutions cannot develop in response to the crisis as the UK leads the way on nationalistic disintegration. Index of Frank's Diaries
However the only reason we are even having this conversation is that the ECB appears to be the only EU institution which is even trying to take some responsibility for ensuring economic recovery.
With monetary stimulus, while actively preventing fiscal stimulus in the perifery of the EU.
However there is some limited good news. As Krugman never tires of pointing out, the deflationary impact of Government cuts is proportional to the rate of change of Government expenditure. EU Governments may not be spending much, but most aren't further cutting their expenditure, and thus the economic impact of their parsimony is petering out. As Ireland (and to a lesser extent) other peripheral EU states have shown, economic growth can recover quite quickly (off a much lower base) once the rate of change of cutbacks in Government spending declines.
And while QE and zero interest rates has the unwanted effecting of boosting asset price inflation in growing EU economies, it does at least have the effect of improving the sustainability of Peripheral sovereign and private debts and reducing asset price deflation in those economies.. You might say, just balm for a basically unsustainable and unjust situation, but central banks don't do morality. Index of Frank's Diaries
The ECB can thus play some beneficial role in helping an economy like Greece whilst similtaneously pissing off net creditor countries like Germany - "the ECB is playing around with OUR savers' money..."
Well...
Mario's dangerous game with the German savers' money.
Draghi's spreading enormous gobs of peanut butter fresh from the fiat grinder onto one tiny corner of the bread slice, and wow - amazing - the poor get poorer and the rich richer. Who'd a thunk it?
Of course he's just the kinder, gentler mouthpiece for the others he speaks for!
The only way out is citizen's income and they will conjure every trick in their voluminous book before they even do more than 'think' about it!
Every other option must be laboriously taken before finally yielding, so avoid admitting There Was An Alternative all along, the last 50 years have been a socioeconomic clusterfuck and they will all wail "If only we could have seen it sooner", like Greenspan's rueful nopology.
Their Ponzi scam is running on fumes, bad faith, and the flogging of a dead dinosaur trying to get it to 'grow' again like back in the day before Asia ate our industrial lunch, abetted by our own plutocrats.
Draghi dreams of renewed economic euro-vigor by trickle-down theory, when after killing economies there are no more competitive businesses for banks to loan to and realistically expect more than a few % return if lucky to get anything at all.
So it's impasse, stalemate, and oh yes, the right people are continuing to profit while we patiently explore any and all regressive, recessionary measures to continue to pretend that tinkle-down solutions will eventually work.
Sure, Marco... keep QE-ing. (GS trained you well.) 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
That confidence fairy has to keep spinning to stay vertical.
The real numbers would scare the people into mass panic, the Charybdis to the CD swaps' Scylla. So Draghi's can kicking gives time for Godot to show up (and his buddies to get their cash out of Dodge).
OT, but is Trump against TTIP? 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
AFAIK Trump has made anti-free trade noises - "exporting our jobs" - because its a populist thing to say. Not sure that is any guide to what he would do. Index of Frank's Diaries
The main reason Ireland's budgetary position has improved so much is that its interest costs are way below budgetary expectations which has in turn helped Ireland to reduce its debt/GDP ratio from 121% to 95% in just 3 years. Index of Frank's Diaries
I was hoping that someone would come up with ideas as to how the ECB could actually deliver money to actual people, presumably over the heads of their government. It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
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