Greece and Draghi
Draghi surprised the world with his first performance as President of the ECB, on November 3 2011 just two days after he started his new job, with lowering the key ECB interest rates which his predecessor just had increased. Shortly after that he amazed everyone again with supplying the European banks with the huge amount of 489 billion on cheap 3 year loans.
With these monetary actions the ECB followed the central banks of the US and UK with supplying the market with cheap and abundant money. The purpose of the ECB is however not only to furnish the market with abundant and cheap money to stimulate economic growth, but also to prevent a possible financial collapse of the financial system after a violent Greek default.
Golden Standard and the House Market
What have both to do with each other? Actually nothing but irrational economics and the failing financial-economic system connects them.
The economic system falters and some consider that the US might reinstall a Golden Standard and even might confiscate foreign gold. Whether true or not, it is obvious that when Goldman Sachs, Christine Lagarde and many others consider that a severe collapse of the financial economic system is possible, probable or even imminent there must be something seriously wrong.
Black Hole
Banks and other investors have abundance capital to invest. The interest rates are historical at a low level and the money supply is abundant. Despite the low return on and the abundance of capital the Western economies have not recovered from the recession that started in 2007 as a consequence of the huge mortgage fraud in the US. One should expect that with these low interest rates investments and economy would pick up; but that is not the case at all!
Can You Manage an Economy?
Considering economic policies in the developed democratic countries it appears there is hardly an economic strategy; central banks juggle with the base interest-rates trying to keep the inflation in control and economy running and not doing a good job. That's it!
Euro-bonds? Certainly Not a Good Idea Yet!
At the moment, the discussion whether the Euro-countries should emit Euro-bonds to finance the governments debts and redemption in the Euro-zone, is highly actual. Germany strongly opposes while France is an advocate.
Financial Crisis Part III: The Aftermath
In “Is saving for your pension actually possible?” we argued that the economy is now and only now. Later in the economy doesn't exist. All production for consumption and investment concern the present economy; nothing is produced for over 10, 20 or 30 years when you retire.
Financial Crisis Part II: The Present
In the economy money is for consumption or investment. The amortization of companies is sufficient to replace capital goods to continue production. Profits allow companies to expand, diversify or pay dividends.
The high standard of life in Western economies has created a situation where a substantial part of the population will not consume more when income increases while on the other hand citizens with a lower income would like to spend more; those who did are now in trouble.
Financial Crisis Part I: The Origin
For all politicians full employment should be the primary (political) goal; it maximizes the wealth of a nation and gives politicians therefore the best chance to achieve specific aspirations. The employment goal for all politicians is therefore the same; structural full employment. This makes employment policies non-political; a pure economic problem.
Is saving for your pension actually possible?
Because of the financial crisis and the “Euro-crisis” people all over the world see their retirement savings diminish rapidly. Do people realize that all savings; bonds, shares, gold or whatever are intrinsic insecure?
Too Big To Fail
Is the answer when you ask: “Why do governments not let merchant banks take responsibility for bad business and investments and go bankrupt like any other company?”. I tried to deduce a valid argument out of the statement “Too Big to Fail”.
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