Simone Wapler – La Chronique Agora (France) –
Markets expect Mario Draghi to end its bond buybacks. Side effects may be severe.
Jackson Hole is the end-of-summer appointment of central bankers, these exceptional beings who decide the price of credit, the level of monetary creation and know which currency will have to be weak or strong in relation to another.
These exceptional beings who had not anticipated the crisis of 2008 claim to have the power to counter the effects thanks to their monetary policies.
Should be present this year Janet Yellen, Haruhiko Kuroda and Mario Draghi. The most anticipated communication should come from the President of the ECB. Mario Draghi is expected to announce the end of the bond redemption program (€ 60 billion per month currently).
The total balance sheet of the ECB thus reaches 4,265 billion euros.
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It is because of these redemptions that:
- The return on your savings and life insurance has become shabby
- Real estate, stocks increase without any real justification
- Financial and real estate bubbles have swelled all over the world
When the ECB redeems bonds, it reduces the yield by creating an artificial demand. This distortion is spread to all rates: return on government bonds, loans to large companies …
To give you an idea of the grotesque to which we have arrived thanks to the ECB, the most badly rated and riskiest bonds of European companies yield almost the same as a 10-year US Treasury bond.
Professional investorsexpectThat Mario Draghi will announce a schedule of slowdown and end of these measures.
This explains why the euro has recently appreciated very much against the dollar.
But the end of the monetary drug is likely to have violent side effects. Bond yields will rise again. Weak borrowers will go bankrupt. Financial markets are likely to be shaken. Money will become more expensive.[Editor’s note: How to help young companies grow? Join the “new millionaires” who invest outside the financial markets and banks … and multiply their investment by 10 and more, get a returnFour times that of life insurance. To know and apply their method,it’s here.]
The level of non-performing loans that plunge banks’ balance sheets will increase …
Banks will be weakened.
Is this why the European authorities envisage, as Reuters revealed in August,Freeze depositors’ bank accounts in the event of a new crisis?
But back to Jackson Hole.
To give a less technocratic turn to this summit, omniscient participants are expected to respond to the topic “Promoting a dynamic global economy”.
Here is what you will never read in their presentations on the subject:
- A central banker can not substitute for billions of individual decisions from the field.
- The economy is the result of what people do, at their level, with their wealth of information and knowledge.
- A central banker does not have to “promote” anything and does not have to “influence” anything.
- Interest rates must be established freely between the contractors, the lender and the borrower.
- A central banker – like a central bank – has no reason to exist in an honest monetary and banking system.
- A currency does not necessarily have to be controlled by a state or a central bank.
- An honest currency is backed by something tangible.
- Currencies must be able to compete.
- Banks should not lend money that does not exist.
- The state does not have to create money from scratch.
The application of these principles would allow a return to a healthier economy than today. This economy would go through crises, which is normal because people are mistaken.Errare humanum est. These crises would be overcome because these same people, bearing the effects of their bad decisions, would find the remedies themselves. Or they would be eliminated by bankruptcy.
In reality, the central bankers are diabolical. On the contrary, they want to let mistakes continue. They multiply the zombies, those financially dead creatures to which they restore the appearance of life by covering them with counterfeit money or free and infinite credit.
Errare humanum estPerseverare diabolicum
Delete the zombies and you will have a dynamic economy. Multiply the zombies and you will have a moribund economy under their weight.