Must-Read: Frances Coppola: Eurodespair
Must-Read: : Eurodespair: “I warned about ‘siren voices’ calling for tighter monetary policy…
…while the Eurozone economy is stuck in a toxic equilibrium of low growth, zero inflation and intractably high unemployment…
…the so-called “German Council of Economic Experts (GCEE)”…. There appears to be no justification for monetary tightening [even] in Germany. So why are a group of German “economic experts” calling not only for the ending of QE, but for its reversal? The clue is….
Low interest rates pose risks for financial stability and erode the business models of banks and insurers over the medium term. Relying only on macroprudential regulation cannot solve these problems.
Yes, as usual it is all about banks…. It is true that persistently low interest rates do reduce banks’ net interest margins. So do the flat yield curves created by QE. But against that should be set the benefit for businesses who can obtain credit both from banks and from markets at much lower interest rates…. The German establishment seems hellbent on steering the Eurozone ship on to the rocks. I despair, I really do.