Monday, December 14, 2015

QE, A Path To Nowhere

Nothing like sticking with failed theory until the bitter end. QE assumes that lowering interest rates will encourage people to borrow and spend, thus, spurring economic growth. While this theory failed to reignite the Japanese economy since 1989, don't worry, it will work for Europe. Nothing like sticking with a failed theory to the bitter end.

Europeans, like the Japanese, won't borrow until they believe they can make money doing so. Borrowing to spend to save socialism can't be the motivator. The next (ill)logical move will be a tax on money in savings or negative interest on savings; The spend it or lose it theory. Again, people won't spend and investment in the future if they believe there's no profit in doing so. Negative interest will only encourage depositors to withdrawal their money from the financial system and buy private sector assets.

Headline: Draghi: We're ready and able to intensify QE

Aggressive monetary policy in the euro zone could be ramped even higher if inflation rates do not return to desired targets, says Mario Draghi, the president of the European Central Bank (ECB). Related Stories

Speaking in Bologna, Italy, Monday, the central bank chief reiterated his call that the bank stood ready to act and once again added that governments of the 18 countries that use the euro should also be playing their part.



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