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.
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!
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.
Paranoid?!
The financial crisis of 2007-2009, caused by the huge fraud in the US mortgage market, is not even cold and the financial world is already confronted with the even more impressive Euro-crisis.
Bonga Bonga Investment Opportunities
On October 26th the leaders of the 17 countries of the Euro-zone reached, after a 10 hour meeting, an agreement that should contain the Euro-crisis. The decision was made that the debt of Greece is diminished with 50%; the banks holding Greek bonds have to write off 100 billion Euro.
Italy, the third economy in the Euro-zone, agreed to take measures to reverse soaring long term interest rates which threatens Italy's possibilities to finance redemption and further budget deficits. Rising interest rates are the result of increasing fears on the financial markets that Italy is not able to control its finance. When you realize that the financial crisis of Greece, a small economy, almost lead to the fall of the Euro, then Italy will be disastrous.
Blessings of the Euro
In the Netherlands some political parties say we should not whine about the financial burden of the Euro-crisis because each of us earns 2,000 every year on the Euro. Like always that is hardly the truth. Yes we earn approximately that amount on trade within the European Union (EU) but that is not due to the introduction of the Euro. We benefit from our involvement since 1958 when six countries: Belgium, France, West Germany, Italy, Luxembourg and Netherlands founded the ECSC; the predecessor of the EU.
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.
Is there a EURO-crisis?
The answer is a simple: NO. So why do politicians constantly say they have to save the Euro? There are two possible answers: denial of the real problem or ignorance. If the reason is ignorance the Euro-crisis is solved instantly the moment politicians picture their misconception. Would there be a $-crisis when Greece had lent too much in US-dollars? Of course not!
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