COMMENT ■ Alfonso Tuor
Coins in a dream world
We are living in a dream world. In the story has never been so far
found that more than thirty countries were simultaneously
printing money and pushing interest rates to zero, which means
say that in some cases the real rates (ie deflated by)
are even negative. Experience shows that this kind of
monetary policy did not lead to good results. Indeed often
even questioned the credibility of the coins.
So far there have been no serious problems. The continuous printing
currency and low interest rates have on the contrary allowed
spread the belief that the problems of the banking system and more
general than financial were overcome and also reported
optimism in the markets. This "financial repression" implemented by
central banks is in fact able to reduce risk aversion,
by channeling capital into investment also at greater risk
and driving up stock prices, which in many cases are not
far from the highs reached in 2007, ie before the great crisis
financial. While it is true that the trend of bags is not often
correlated with the performance of the economy, it is also indisputable that sooner or
then the data (and problems) of the real economy tend to bring to
Actually the equity markets. Everything seems to be working again as
before. The tools of the new financial engineering are experiencing a
new period of splendor, they are also shooting securitisations (ie
the packaging of loans of various types of securities that are then
sold on the market), have also been forced down yields
bonds at higher risk and so on. But beyond this veil of
optimism that emanates from the financial markets what they are producing
these monetary policies ultraespansive? In the first place, these choices
are not neutral: promote the economic and debt
financial speculation, taking advantage of low interest rates, to the detriment of
small investors and pension funds. Then cause a
significant transfer of wealth from small investors to
persons indebted to the financial sector. Secondly, favoring
the formation of new bubbles. Thirdly, at least so far not
are creating the basis for a sound and sustainable growth. The confirmation
comes from the central banks themselves. If the U.S. Federal Reserve
satisfied with the results achieved would not have decided to increase
85 billion dollars a month to print new currency and to
depend on the purpose of this policy by the reduction to 6.5% of rate
unemployment in the United States. Fourth, likely to trigger
a perverse process of competitive devaluations. It's the way it seems
to have taken Japan that aims through a monetary policy
more accommodating to encourage the depreciation of the yen. This
phenomenon has already begun: in fact, the Japanese currency has lost about
10% against the dollar. This move has already been criticized Tokyo
the countries most affected by the depreciation of the yen, as Korea
South America, China and European countries. In the Eurozone this ste and monetary policies
especially the promise of Mario Draghi that the ECB is willing to do anything to
save the euro have brought calm to the markets, but they have not
slowed the downward spiral in which many countries have fallen
Mediterranean.
These monetary policies are likely therefore to lead to currency wars,
that would accelerate the process of de-globalization already triggered by
financial crisis of 2008. Not, however, managed to revive growth
solid and lasting, because the banking system does not work as a mechanism
transmission of monetary policy impulses and they contribute
to increase the income inequality that are the root cause of
crisis. Therefore, as has been written, will produce only the result of
slow times of crisis.
Re: Currency Wars - U.S. is "Tomb Maker": (China Economist) - Fed Issues 600 billion dollars
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Originally Posted by MPB
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