> The credit-based global financial system..is like a game of musical chairs that we have to keep adding people and chairs to in order for it to never stop.
The problem for EU countries is that for too long they've neglected military spending in favor of social programs, but now the chickens are coming home to roost. US superpower status is waning, meaning EU states will need to ramp up military spending, and Russia is more aggressive than it's ever been. In the face of this EU countries will have to somehow cut social spending or raise taxes even higher. Neither is politically tenable.
There is a third option. Increase military spending in the short term, but also be intentional about supporting immigration of younger, skilled workers from China and Russia (both whose fertility rates are below replacement rate and continuing to fall rapidly). Short term, military spending contains these countries with the threat of physical force, long term, you’re “stealing” (for lack of a better term) their productive future workers for someplace with (arguably) more stable, better governments and living situations (it’s not a secret those with means have been fleeing these regimes). This further handicaps the countries I mentioned on a go forward basis, allowing for (potentially) a decline in military spending over time.
Huh? We've been essentially doing this for the past 30 years. Chinese often go back to China with their US/European education and put it to good use there. It doesn't work as a brain drain when China has such a strong domestic market and there's so much money to be made there. There are also cultural and ideological ties that don't seem to be easily broken.
Southern Europe is a beautiful set of places. Probably more desirable to live in then even california. A 1% annual property tax with a homestead exemption below 0.5 million euros might be sufficient.
Ofc and I left France the day I realized it was impossible. Not because of the high roller bankers but because the people literally cannot accept a balanced budget to live within our means.
Now Im in Hong Kong, where as you know the people have little say and slogans like "5 demands not one less" is not met with fear like in France, but with police aggression. But, we have a balanced budget. We had a record tax revenue this year if you can believe it. All problems are simpler when you have a surplus, even at the individual level.
So I'm happy but people here envy France where the street can clawback what's hers even at credit...
"Ofc and I left France the day I realized it was impossible. Not because of the high roller bankers but because the people literally cannot accept a balanced budget to live within our means."
It is impossible. Austerity results in a reduction of the interest rate, even if the interest rate is already at or below zero. If you want to increase the capacity of your economy to absorb austerity, you also need to increase the capacity of reducing interest rates below zero.
Balanced budgets require negative interest rates as the private sector is accumulating savings that actually must be spent off.
A net increase in savings in the private sector is incompatible with a balanced budget of the public sector. Remember, balanced budget means you spend everything you earn for both the government and the private sector.
> However, the European Central Bank arguably has the hardest job of all.
This was very apparent in the head of the ECB Christine Lagarde’s recent interview.
She was asked, “how will you get the balance sheet down?” while being shown the ECB balance sheet on a screen.
She answered, “It will come. It will come. In due course, it will come.”
The interviewer paused, confused, and then asked, “…how?”
And she answered, “In due course, it will come.” And then smiled.
She offered no answer, no description, no clarification, and had rather awkward expressions throughout the exchange.
This is because, like most central banks, there is no plan. It won’t come. Sovereign debt will be monetized to whatever extent it needs to be, or it’ll collapse.
Chance the Gardner: As long as the roots are not severed, all is well. And all will be well in the garden.
President “Bobby”: In the garden.
Chance the Gardner: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.
Agreed, I would also agree it is trapped but not for these reasons. They all want to control inflation, and are all considering or trying the same methods of doing so.
The EU and Eurozone's lack of "fiscal union" is unique, but not really that relevant. The Central Bank there is going to crater the credit market, just like the Central Bank in the US is going to do.
They are the biggest financial whales and they
1) stopped buying
2) now have trillions to sell, and are going to sell at a massive scale that's unheard of, to whom? good question, can the market absorb this much? At what price if the market literally isn't big enough for this amount of selling pressure? and its still too small of a scale for what they are actually trying to do
3) are going to let some bonds mature, and not let the paid back money get into circulation again, so there is just less of it for everyone else
(note: sometimes they say they are only going to do 3) and not 2), very confusing)
It doesn't matter that the EU one has a bunch of member-state debt, while the US Central Bank largely ignores municipal bonds and while having a bunch of national govt bonds (treasuries) on its balance sheet. They both hold corporate bonds now, and mortgage backed securities. Neither own stocks (although the US one bought some bond ETFs, which are stocks of funds that only own some bonds).
They both stopped buying, are letting things mature, and also directly selling.
Its going to be bad for everyone partially because its only an attempt to control inflation. Case in point being that energy costs will remain high either way. They're aiming to destroy optimism and re-range asset prices, where the yield of those assets are a higher ratio to their price. (aka stock prices more closely matching their profit or revenue growth or dividend payouts, bonds yielding higher)
In other words, claims for dollars (debt) grows far more quickly than the economy’s ability to generate dollars, and is far larger than the amount of dollars in existence. When this becomes too much of a problem, the amount of base money is simply increased by the central bank.
Um, yes? That’s how the fractional reserve system works to solve the problem. And then the problem is solved.
Debts are simply leverage on top of the base money supply. Banks are the source and sink of this credit money. When banks don’t think a business or person can repay a loan, they don’t extend credit.
Also, when people or businesses default, the bank makes less loans to avoid becoming overleveraged.
Gradual inflation isn’t nearly as much of an issue as a recession or a depression. It only hurts lenders who have locked in an interest rate, or “savers” who simply put money in a bank (which is the racket… helping the banking system create the money supply).
The REAL issue is that bank underwriters have to GUESS whether a business will do well over 10-15 years. The banks are the source and sink of the vast majority of our money (the M2 credit money that the author talks about, vastly exceeding the M1 fiat currency).
Now, if each community had its own currency and paid a UBI in it (monetary policy) and charged tolls and taxes in it (fiscal policy) then the community itself would be the source and sink of the money. Instead of bank underwriters guesising, PEOPLE would simply exercise their own choices as to which business to buy goods from. This is a far better way to pick winners and losers AND helps those who need the money the most. Banks don’t lend you when you NEED the money, only do it on predatory terms that get you further into debt.
The real problem is not having an alternative to the banking system. Crypto COULD power such an alternative but this is what would need to happen: https://intercoin.org/proposal.pdf
Gradual inflation isn’t bad, but heavy inflation is. People’s savings get wiped out. High inflation can undo a lifetimes worth of work in a few short months / years.
I have a hard time following what you've written, but none of it seems to have to do with liquidity - short term investments - so why bring up reserves?
I don't know, all the hand-wringing articles I see seem to ignore what seems interesting and notable to me.
That is, the dollar has been strengthening for an extended amount of time versus other industrialized nations' currencies, and it continues to. Just look up some multi-year currency charts.
So it seems to me that tells us that at least the Fed is being more aggressive at countering inflation than almost any other central bank.
It seems to me to put US government policy beyond most reasonable criticism, even if imperfect, it must be better than everyone else's.
But the pundits seem split between moaning about how especially terrible the Fed is and about how terrible all central banks are.
I don't think people realize how good the US has it, and what we have to lose.
The greatest nation on earth: No security threats, large, extremely profitable, critical resources locally source-able, least-worst demographics, treasuries used as bank collateral around the globe.
When people start complaining about criticism, especially "compared to others", is when I start to worry. Its apples and oranges. Yes, the US has it good. But there are so many things shockingly bad and there is no momentum to improve things.
When the rioting starts I sincerely hope people who don't like criticism start fixing things instead of electing a non-idiot fascist to tell them they are better than the rest.
Ahhhh...people shouldn't complain about criticism that compares the US to others, but it's "apples and oranges". That phrase, apples and oranges, is a rebuke to an attempt to compare things. You sound like you're on the fence about this.
But we know, it's not necessary to make sense, only to feel bad about the US. Just in case this thing, this time, will be its ultimate downfall.
How bad would it be, not to feel bad enough about the US, in its last days? Think of what we would lose!
It conveniently omits the debt held by the US on the federal level, which is 133 % of GDP, or more than any of the countries listed except Italy at 151 %. And there is no debt on the EU level.
If I read it correctly this is mentioned with the caveat that the federal reserve can adjust monetary policy to address that whereas the individual European countries mentioned are unable to.
> They could wipe it out with the stroke of a pen.
In MMT fantasy land they surely can. But in the real world it ain't that easy...
> "the currency and Japanese financial markets are in the process of losing any sort of fundamental-based valuation anchor." - Deutsche Bank's George Saravelos in yesterday's report..
Japan is on verge of systemic collapse. Just watch USDJPY and JGB recently...
As i said before, i disagree with at least half of MMT, but people saying "MMT fantasy land" and then quoting Friedman-loving economists is quite ironic.
Macro economists models aren't predictive, and as such, they are scientifically as useful as the book of Râ.
Why the heck would you ever expect to pay back that debt? The central bank is nothing like an individual where debt is bad. The central banker is more like the bank in monopoly -- the less money there is in the bank, the better off the players are. Money is created through fractional banking, quantitative easing and government spending. Paying back debt destroys money, the money that is used in the economy.
The only reason to pay back debt is to prevent inflation from destroying the money through a different mechanism. But when inflation is under control, which it has been for 39 of the past 40 years, debt should not be paid back.
Expecting to pay off government and central bank debt is like expecting all the money to be returned to the bank by the end of a game of monopoly.
Italy's debt is almost 160 pct. of GDP and Italy's GDP stagnated over last 20 years. And budget deficit is very substantial (and will grow in comming recession)...
It means that Italy could afford to roll-over its debt only due to European Central Bank suppressing for years yields on Italian bonds. But now market yields go up as ECB is set to raise rates and withdraw QT.
If Italy were to pay market rate on its debt it would bankrupt its budget. Most of Italy's revenues would go toward coupon payments of debt leaving very little for pensions, infrastructure, healthcare etc.
So it is not about not repaying debt but about Italy's inability to roll it over in the markets.
Single currency and single central bank in eurozone implies policy fragmentation - ECB has to address different issues at the same time. High inflation in the North and stalled growth with high yields in the South.
If Italy were to pay market rate on its debt it would be negative as the implementation of negative intereset rates on cash reenables the market mechanism of allowing a debtor choose how much he wants to be in debt. The 60% debt to GDP mandate of the eurozone could become obligatory and would result in all EU countries refusing to take on more debt, forcing the interest rate into deep negative territory.
The only problem with debt and CB debt monetisation is what the debt is used for. If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me (and most Europeans, I'd wager.) It should continue and increase, as necessary, especially if sovereign debt markets fail. The one policy that counts (and it affects north and south EU) is climate change. Debt, as a license to run dirty industry (public and private) and maintain fossil fuels, will need to be heavily reined back in those sectors as part of the quid pro quo for sovereign debt monetisation largesse. More europeans working shorter weeks, travelling less, but still enjoying social mobility and all the social needs from high spending countries (supported by ECB) is absolutely OK, just build a low carbon future - no more debt for dirty industries, or dirty imports. Smart, healthy people, backed by possibly heavily indebted countries supported by ECB in perpetuity, is frankly no problem.
> If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me
So as long as its unsustainable it's "absolutely fine" by you? As long as its someone else paying for you, i guess its fine to fuck them over huh?
Who is paying for or fucking whom over? The only true unsustainable conditions are ones in the real world - broken environmental conditions, broken supportive social institutions; money is virtual and is just a tool (for measurement, standard for deferred payment blah) - money supply should be the servant, not the master of economic & social health. Anyway, arguably inflation will decrease debt value relative to inflated GDP, making it easier to pay down, as long as CBs step into sovereign debt markets to prevent runaway interest rates on existing debt.
Future generations are the ones getting fucked over, because they are the ones who will have to pay for the subsidies you're wanting for your pet project.
It's clear you haven't got a clue of the actual long term effects of your proposed policies. I recommend you read Basic Economics by Thomas Sowell, if only to understand that the policies you propose will have consequences.
So, a couple of trillion upfront for Europe's part of a decarbonised economic future, whose states have splurged on massive green economic infrastructure and managed to sustain social wellbeing in the interim, so the children of tomorrow breathe clean air, live in solar/wind powered clean houses, cheap and plentiful subsidised education and work in clean industries, at the cost of some temporary price increases and a higher tax rate down the line (maybe), is somehow worse than continuing toward environmental destruction, circling the wagons around private wealth (and lower tax)? Read some Marx, at least understand what alienation is.
I don't think anyone does expect the debt to be paid back. However it is expected and required, that at the very least, interest payments on the debt are paid so there isn't a default, which would kill the bond market and end government deficit spending.
Interests rates do not need to increase very much at all at this point, so that 100% of tax revenues would be needed just to cover the interest owed by governments. At this point (actually before) the currency is effectively dead and hyperinflation is inevitable, unless:
1) there is a draconian cut to government spending to match tax revenue, or
2) the current system is abandoned to one that is backed by hard assets (which would include a severe cut in spending but could also include a taper)
1. is politically infeasible, so we will default to 2. after a significant amount of economic pain. The US Dollar and most western fiat currencies are dead and are already long in the tooth by historic standards.
If the ECB buys the debt (it has an infinite supply of money after all), what is the problem? That should keep interest rates on sovereign debt down. Inflation right now is systemic, mainly the result of oil price surges - I'd argue that its OK, we want high oil prices because we want disincentives on activities that produce more CO2 and incentives for efficiency - hell, hike the price now. Of course the downside could be social, and that falls on governments to mitigate, which is why I argue strongly that they continue to heavily deficit spend and they get the support of the ECB to do so.
>Of course the downside could be social, and that falls on governments to mitigate, which is why I argue strongly that they continue to heavily deficit spend and they get the support of the ECB to do so.
Which will then build up more pressure until something finally goes wrong and your economy implodes. The consequences aren't just social that the government can deal with. Look at the 1930s. There's a real chance that a poor economy for an extended period is going to change your democracy, if you remain a democracy at all.
The ECB can only buy the debt by creating more money and increasing inflation. It might be hidden for a while, but just because we don't know how to measure it doesn't mean it won't eventually show up in an unexpected place (or managing it will depress the economy long-term).
> However it is expected and required, that at the very least, interest payments on the debt are paid so there isn't a default, which would kill the bond market and end government deficit spending.
Russia defaulted in the late 1990s and a few years later people were lending again (at higher rates). Greece had many well-publicized problems in the earl 2010s, and yet in 2019 their bonds had negative yields:
The article doesn't talk about trying to pay off the debts at all. You have invented a straw man out of thin air to attack instead of engaging with the article at all.
Also, your "banks aren't households" argument, while deeply flawed, is useful to explain some very introductory concepts to people who don't understand rhe basics of how a central bank operates but has absolutely nothing useful to say about the very real dilemma central banks are facing.
a) We need to stop using the word debt for central banks. Consumers in their daily lives learn that debt is bad. For central banks is the way they work. (And companies try to have always some form of debt for liquidity and reducing risk.)
b) go on with our lives. The ECB has other issues that it should be criticized about -- mainly it is unsurprisingly a political tool and not having the economic growth, wealth, and stability of the EU members as its priority.
A new word makes sense. In my native Swedish the word for debt is also the word for guilt. Tells you something about our view of debt and why the national debt is so low.
You've missed his point. He isn't misunderstanding the term "debt", he's just saying there should be a different word for "good debt" that doesn't have the negative connotations that it does with personal debt.
I guess kind of like how mortgages aren't seen as bad even though they're debt. Fairly safe debt, sure. But still debt.
I don't know if a new word would help but you've misunderstood anyway.
As usual the answer is that profits cannot exist in aggregate, but somehow they do, distorting the market and forcing the government to borrow money to cover the reduction in the money that is still circulating. Since debts must be paid on time but savings do not have to be spent on time you have an inherent disconnect between how quickly you can borrow and get into trouble and how fast debt can be paid off. Well, the obvious answer to solve this problem is to force urgency upon savers to restore the balance. By introducing a negative interest rate on cash, borrowers can now refuse additional debt as savers cannot threaten the rest of the economy by pulling money out as cash and therefore it is no longer possible to extort a 0% interest rate out of people that don't want to be in debt in the first place. Since the artificial zero lower bound no longer exists, savers must now compensate borrowers for their tardiness instead of being allowed to exploit them. Have you never wondered why so many people refuse to spend off their savings, resulting in an endless growth in the money supply? Saving is deferred spending and at some point that spending must actually happen, yet in practice it has never happened. We get angry and blame the government for trying to keep the economy alive yet we never get angry at those trying to sabotage it which forces the government to act stupid in response.
Normal sovereign economies have 2 levers. Fiscal and Monetary Policy.
The Eurozone doesn't have this setup as monetary policy is bloc-wide whereas fiscal policy is national.
With these levers working at different scopes this problem will always exist. And it's not the first time either. Remember Grexit? Same thing then.
We either need a United States of Europe with fiscal transfer between countries or the euro should be scrapped so we can go back to lira, marks and drachma.
That's not how the EU works. EU is driven by compromises between states. When a compromise is hard politically (like common debt was during Grexit) it gets shelved until a crisis rebalances things and a new compromise can be reached (as it was with common debt during Covid).
So basically, if fiscal transfers are needed at some point to rebalance debt, we will get to that point and the EU will compromise again. Is there risk in this approach? absolutely, but it's pragmatic and based on a democratic process (the public opinions of all member states) rather than dogmatic based on some red/blue ideology/political split where compromise is unreachable, as in the US.
In other words, even if the article is right, I don't necessarily see the trap; it's a trap now, based on current compromises. Those are (thankfully) elastic, as it's been demonstrated many times in recent history.
Firstly my comment was about the Eurozone, not the EU.
Secondly, Central banking is NOT democratic.
When last did you vote for your country's central banking head?
When were members of that bank's monetary policy committee subjected to public scrutiny? Most people have no clue who they are, what their background is, and whether they are to be trusted tinkering with our money or assets.
Who influences the dovish/hawkish make up of that group and, as a result, the bank's policy response?
This is true, but it isn't uncommon. Almost all countries have different levels of government - national, regional, subregional and municipal - all of which have some degree of autonomy with regards to executing their own fiscal policy, whereas monetary policy is always country-wide.
Terrible article as usual from this author. She has no formal training in economics and as a result gets everything wrong. Why does she keep writing articles about economics if she doesn't know anything about this subject? I don't understand.
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[ 0.24 ms ] story [ 159 ms ] threadAlso we are not doing enough to support ukraine, after 100 days of hand wrangling we decided to supply missile systems
Southern europe isn't california. The mediterranean isn't the pacific ocean.
Now Im in Hong Kong, where as you know the people have little say and slogans like "5 demands not one less" is not met with fear like in France, but with police aggression. But, we have a balanced budget. We had a record tax revenue this year if you can believe it. All problems are simpler when you have a surplus, even at the individual level.
So I'm happy but people here envy France where the street can clawback what's hers even at credit...
ECB is more like this than Hong Kong’s budget https://en.m.wikipedia.org/wiki/Linked_exchange_rate_system_...
https://tradingeconomics.com/hong-kong/households-debt-to-gd....
vs.
https://tradingeconomics.com/france/households-debt-to-gdp#:....
Willingly chose tyrany?
Uncle Rukus, is thar you?
Citation or example ? You can have a balanced budget and positive interest rates.
A net increase in savings in the private sector is incompatible with a balanced budget of the public sector. Remember, balanced budget means you spend everything you earn for both the government and the private sector.
No they don't.
President “Bobby”: In the garden.
Chance the Gardner: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.
2) Confusing yearly numbers like GDP to long-term Debt. Debt/GDP are just a ratio, we don't know what the upper limit it or does it even matter.
3) An inflationary era also means higher tax receipts. https://rollcall.com/2022/05/09/tax-revenue-boom-fuels-steep... which can easily cover any extra interest you may have to pay
The EU and Eurozone's lack of "fiscal union" is unique, but not really that relevant. The Central Bank there is going to crater the credit market, just like the Central Bank in the US is going to do.
They are the biggest financial whales and they
1) stopped buying
2) now have trillions to sell, and are going to sell at a massive scale that's unheard of, to whom? good question, can the market absorb this much? At what price if the market literally isn't big enough for this amount of selling pressure? and its still too small of a scale for what they are actually trying to do
3) are going to let some bonds mature, and not let the paid back money get into circulation again, so there is just less of it for everyone else
(note: sometimes they say they are only going to do 3) and not 2), very confusing)
It doesn't matter that the EU one has a bunch of member-state debt, while the US Central Bank largely ignores municipal bonds and while having a bunch of national govt bonds (treasuries) on its balance sheet. They both hold corporate bonds now, and mortgage backed securities. Neither own stocks (although the US one bought some bond ETFs, which are stocks of funds that only own some bonds).
They both stopped buying, are letting things mature, and also directly selling.
Its going to be bad for everyone partially because its only an attempt to control inflation. Case in point being that energy costs will remain high either way. They're aiming to destroy optimism and re-range asset prices, where the yield of those assets are a higher ratio to their price. (aka stock prices more closely matching their profit or revenue growth or dividend payouts, bonds yielding higher)
Um, yes? That’s how the fractional reserve system works to solve the problem. And then the problem is solved.
Debts are simply leverage on top of the base money supply. Banks are the source and sink of this credit money. When banks don’t think a business or person can repay a loan, they don’t extend credit.
Also, when people or businesses default, the bank makes less loans to avoid becoming overleveraged.
Gradual inflation isn’t nearly as much of an issue as a recession or a depression. It only hurts lenders who have locked in an interest rate, or “savers” who simply put money in a bank (which is the racket… helping the banking system create the money supply).
The REAL issue is that bank underwriters have to GUESS whether a business will do well over 10-15 years. The banks are the source and sink of the vast majority of our money (the M2 credit money that the author talks about, vastly exceeding the M1 fiat currency).
Now, if each community had its own currency and paid a UBI in it (monetary policy) and charged tolls and taxes in it (fiscal policy) then the community itself would be the source and sink of the money. Instead of bank underwriters guesising, PEOPLE would simply exercise their own choices as to which business to buy goods from. This is a far better way to pick winners and losers AND helps those who need the money the most. Banks don’t lend you when you NEED the money, only do it on predatory terms that get you further into debt.
The real problem is not having an alternative to the banking system. Crypto COULD power such an alternative but this is what would need to happen: https://intercoin.org/proposal.pdf
That is, the dollar has been strengthening for an extended amount of time versus other industrialized nations' currencies, and it continues to. Just look up some multi-year currency charts.
So it seems to me that tells us that at least the Fed is being more aggressive at countering inflation than almost any other central bank.
It seems to me to put US government policy beyond most reasonable criticism, even if imperfect, it must be better than everyone else's.
But the pundits seem split between moaning about how especially terrible the Fed is and about how terrible all central banks are.
I don't think people realize how good the US has it, and what we have to lose.
When people start complaining about criticism, especially "compared to others", is when I start to worry. Its apples and oranges. Yes, the US has it good. But there are so many things shockingly bad and there is no momentum to improve things.
When the rioting starts I sincerely hope people who don't like criticism start fixing things instead of electing a non-idiot fascist to tell them they are better than the rest.
But we know, it's not necessary to make sense, only to feel bad about the US. Just in case this thing, this time, will be its ultimate downfall.
How bad would it be, not to feel bad enough about the US, in its last days? Think of what we would lose!
...
Something like a SIMS game for economics.
https://www.federalreserve.gov/econres/us-models-about.htm
Doesn't appear to simulate an economy very well, but its a nice idea.
In MMT fantasy land they surely can. But in the real world it ain't that easy...
> "the currency and Japanese financial markets are in the process of losing any sort of fundamental-based valuation anchor." - Deutsche Bank's George Saravelos in yesterday's report..
Japan is on verge of systemic collapse. Just watch USDJPY and JGB recently...
Macro economists models aren't predictive, and as such, they are scientifically as useful as the book of Râ.
The only reason to pay back debt is to prevent inflation from destroying the money through a different mechanism. But when inflation is under control, which it has been for 39 of the past 40 years, debt should not be paid back.
Expecting to pay off government and central bank debt is like expecting all the money to be returned to the bank by the end of a game of monopoly.
It means that Italy could afford to roll-over its debt only due to European Central Bank suppressing for years yields on Italian bonds. But now market yields go up as ECB is set to raise rates and withdraw QT.
If Italy were to pay market rate on its debt it would bankrupt its budget. Most of Italy's revenues would go toward coupon payments of debt leaving very little for pensions, infrastructure, healthcare etc.
So it is not about not repaying debt but about Italy's inability to roll it over in the markets.
Single currency and single central bank in eurozone implies policy fragmentation - ECB has to address different issues at the same time. High inflation in the North and stalled growth with high yields in the South.
So as long as its unsustainable it's "absolutely fine" by you? As long as its someone else paying for you, i guess its fine to fuck them over huh?
Future generations are the ones getting fucked over, because they are the ones who will have to pay for the subsidies you're wanting for your pet project.
It's clear you haven't got a clue of the actual long term effects of your proposed policies. I recommend you read Basic Economics by Thomas Sowell, if only to understand that the policies you propose will have consequences.
I have, that's when i realized he had nothing useful to say.
Interests rates do not need to increase very much at all at this point, so that 100% of tax revenues would be needed just to cover the interest owed by governments. At this point (actually before) the currency is effectively dead and hyperinflation is inevitable, unless:
1) there is a draconian cut to government spending to match tax revenue, or 2) the current system is abandoned to one that is backed by hard assets (which would include a severe cut in spending but could also include a taper)
1. is politically infeasible, so we will default to 2. after a significant amount of economic pain. The US Dollar and most western fiat currencies are dead and are already long in the tooth by historic standards.
Which will then build up more pressure until something finally goes wrong and your economy implodes. The consequences aren't just social that the government can deal with. Look at the 1930s. There's a real chance that a poor economy for an extended period is going to change your democracy, if you remain a democracy at all.
The ECB can only buy the debt by creating more money and increasing inflation. It might be hidden for a while, but just because we don't know how to measure it doesn't mean it won't eventually show up in an unexpected place (or managing it will depress the economy long-term).
Russia defaulted in the late 1990s and a few years later people were lending again (at higher rates). Greece had many well-publicized problems in the earl 2010s, and yet in 2019 their bonds had negative yields:
* https://apnews.com/article/067eda5047d740f9a15692dea5944326
Also, your "banks aren't households" argument, while deeply flawed, is useful to explain some very introductory concepts to people who don't understand rhe basics of how a central bank operates but has absolutely nothing useful to say about the very real dilemma central banks are facing.
b) go on with our lives. The ECB has other issues that it should be criticized about -- mainly it is unsurprisingly a political tool and not having the economic growth, wealth, and stability of the EU members as its priority.
They are issuing fixed coupon, fixed term credit obligations. What do you want to call it? A bicycle?
There happens to be a word for this particular scenario where someone lends you money and you create a contract to pay it back. It's called debt.
The entire finance world isn't reworking itself around your misunderstanding of the issue.
I guess kind of like how mortgages aren't seen as bad even though they're debt. Fairly safe debt, sure. But still debt.
I don't know if a new word would help but you've misunderstood anyway.
Not sabotaging. People need to save a lot to be able to retire properly afterwards. State pensions are often not remotely enough on their own.
The behaviour on the savers' side is perfectly rational in that scenario.
The Eurozone doesn't have this setup as monetary policy is bloc-wide whereas fiscal policy is national.
With these levers working at different scopes this problem will always exist. And it's not the first time either. Remember Grexit? Same thing then.
We either need a United States of Europe with fiscal transfer between countries or the euro should be scrapped so we can go back to lira, marks and drachma.
So basically, if fiscal transfers are needed at some point to rebalance debt, we will get to that point and the EU will compromise again. Is there risk in this approach? absolutely, but it's pragmatic and based on a democratic process (the public opinions of all member states) rather than dogmatic based on some red/blue ideology/political split where compromise is unreachable, as in the US.
In other words, even if the article is right, I don't necessarily see the trap; it's a trap now, based on current compromises. Those are (thankfully) elastic, as it's been demonstrated many times in recent history.
Secondly, Central banking is NOT democratic.
When last did you vote for your country's central banking head?
When were members of that bank's monetary policy committee subjected to public scrutiny? Most people have no clue who they are, what their background is, and whether they are to be trusted tinkering with our money or assets.
Who influences the dovish/hawkish make up of that group and, as a result, the bank's policy response?
You? I don't think so.