For Times of Crisis or No Crisis: What Strategy?
Are we in crisis? Yes or no?
Central banks appear to have the same strategy, whether we are in crisis or in economic growth: creating more money.
Are we in crisis?
So let’s create more money, accelerate economic expansion and create bubbles that lead to new crises entering a vicious circle.
Are we in crisis?
So let’s print more money to solve the problem. It worked? No. Then you print more money, entering a vicious cycle of which nobody knows how to get out.
This dialectic of the Eurozone, like Japan, has been a special challenge for everyone – from political, economic and social decision-makers to all actors, citizens and organizations in general.
In the US, after the release of the minutes of the September meeting of the Fed last year, the dollar prolonged the losses against the euro, devaluing. The same minutes reinforce the scenario of an increase in the interest rate at the next December meeting. Thus, the implied market probability for the rate hike increased to 76.7%.
The main North American stock markets remain at maximum levels (S&P 500, Dow Jones and NASDAQ).
In fact, Quantitative Easing (QE) only had repercussions on the rise of the capital, stock and bond market, when one of the objectives was to bring liquidity to the “real economy”.
In sum, central banks always have the same strategy whether we are in crisis or in economic growth: create more money, more central currency. There is still a strong link between central banks – although they are independent – and the states.
The ceding and absorption of money is carried out with public debt securities as collateral. States, instead of borrowing, should cut back on public spending – as the ECB has already pointed out – and households should have more income proportionate to the gains in productivity and competitiveness of tradable goods that their economies export.