FIRE Economy | timiacono.com - Part 4

Germans in Zero Interest Rate Hell

If the photo below from this Handelsblatt story is any indication, the Germans don’t think much of ECB Chief Mario Draghi’s latest policy move where interest rates were pushed further into negative territory (from -0.3% to -0.4%) and the monthly money printing effort was increased by a third (from 60 billion euros to 80 billion euros).

To wit:

An emotionless Mario Draghi, the president of the European Central Bank, uttered nearly the same words residents of the 19-nation euro zone have been hearing for years.

The ECB’s cheap-money rescue has kept alive the euro, but the cure has been toxic for a nation of savers trapped in zero-interest hell.

Being half German and half Italian (an unusual pairing for the late-1940s/early-1950s) and being well versed in the differences between the two cultures (extreme), it’s clear to me that the only thing Germans liked about the excerpt above was the word “emotionless”.

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Whatever it Takes?

It looks like the folks over at Bloomberg will soon have to update the chart below (from this NIRP Primer the other day) after European Central Bank Chief Mario Draghi & Company pushed short term interest rates even lower – from -0.3 percent to -0.4 percent – while upping their monthly money printing effort from 60 billion euros to 80 billion euros.

The most unsettling aspect about this is that, like the Bank of Japan’s foray into unconventional monetary policy, the ECB’s moves are becoming routine, that is, routine in the same way that rising home prices were routine for a few years during the mid-aughts.

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Global Growth in the 21st Century

Global growth is a-changin’, at least according to this WSJ article and the chart below where readers are urged to ignore the right-most area of the dataset since the future is notoriously hard to predict (almost always too positive and too benign), though that doesn’t discourage economists from doing so.

The other notations relate to Europe’s big post-1990s stumble that, perhaps not coincidentally, began at the same time as the common currency. China really has been remarkably consistent, this trait likely being inversely correlated with the accuracy of the economic data that is produced in the Middle Kingdom.

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Much ado in the financial media this morning about yet another warning from the Bank for International Settlements about the current state of affairs in the global financial system as it relates to debt levels that now exceed the 2007 highs, negative interest rates, and faltering confidence in central banks who seem increasingly befuddled and desperate.

The tone appears to have been lost on whoever penned the outlier headline below.

The Bloomberg article is about as positive as the headline, so this can’t be blamed on whoever’s responsible for ensuring that headlines are click-worthy to readers.

Maybe it’s not such a bad thing to look on the bright side of things now and then, though this may not be a particularly good opportunity to do so…

For someone who will turn 90 this Sunday, he seems pretty sharp…

The Fed Chairman they once called Maestro thinks that negative interest rates “warp” investor behavior (something that you just don’t say when you’re sitting at the head of the big table at the Eccles Building) and that he hasn’t been optimistic in “quite a while”.

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