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.
Printing Money or Better Not?
Germany's Angela Merkel doesn't want to allow the ECB to print money to finance budget deficits and battle the upcoming recession. The opposition, France by Nicolas Zarkozy, would prefer an ECB that prints money and therefore avoids a recession.
Who is right and who is wrong?
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.
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.
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”.
The End of the Financial System?
In the decades after World War II the Western economies grew to the present production levels. The growth was technological driven with help of the financial system. Financial profits allowed new investments which generated more profit that could be invested and so on. As long as there are real investment opportunities the cycle of economic growth can continue.
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