If anyone can suddenly get a loan with a negative interest rate, then it is to be expected that the credit demand will get out of hand. To prevent this from happening, the ECB will have to resort to credit rationing: It determines in advance how many new loans it wishes to hand out, and then allocates this amount of credit. The credit market no longer decides who gets what and when and on what terms and conditions; those decisions are made by the ECB.
According to which criteria should loans be allocated? Should anyone who asks for credit get something? Should employment-intensive economic sectors be favored? Should the new loans only go to ‘the industries of the future’? Should weakening industries be supported with additional credit? Or should Southern Europe get more than Northern Europe? These questions already indicate that the planned economy is established through a policy of negative interest rates.
More than ever it will be the ECB that reigns over credit: It will effectively determine what will be financed and produced and where and when; it will determine who will be in a position to buy and consume on credit. As a central planning authority, the ECB — or the groups that greatly influence its decisions — determines everything: which industries will be promoted or suppressed; which economies are allowed to grow stronger than others; which national commercial banks are allowed to survive and which are not. Welcome to the planned economy in the Eurozone!
“The quiet dispossession of all savers” (in that or similar phrasings) is a line I’ve met in a number of histories of 30s Germany when describing the effects of Nazi economic policy.
How will they keep them quiet today, I wonder, if the OP-linked article proves right about where the ECB will go next? I suppose they won’t, literally, but I’m sure the EU will find deriding and ignoring those ‘greedy’, ‘privileged’ people easy enough. And they can always import more voters if not enough of the ones they have will check their privilege.
What a grand idea.
I don’t know why I got out of bed today. :>(((((
Good posting though.
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MODS:
The previous posting (SQOTD # 1226) lacks the link to the next one, i.e. this one. Gotta go to the home page to see it, or the next one (Kristian Niemietz quote).
I’ve read the article. My doctor prescribes bed-rest in a darkened room, cool compresses, and 2 qts. of Jim Beam at bedside. To be continued (and the bourbon replenished) until somebody sensible un-plans the economy.
.
Question from an ignorant provincial: How far down the rabbit-hole has the Bank of England gone in trying to finagle interest rates and the money supply? They’re not considering this obvious-to-the-layman nonsense, are they?
. . .
And for the Gentleman from Patagonia, WHY do websites persist in presenting their pieces in light grey on a white ground?
Isn’t it obvious that if you can’t distinguish the text from the ground you can’t see what, if anything, it says?
😡
If the interest rate is less than the rate of inflation, is that not (in effect) a negative interest rate?
Not in any meaningful sense as inflation is not like a tide that raises or lowers all boats.
If the ECB will be deciding who gets negative interest loans… wait, they were already deciding who got low interest loans anyways.
Of course – and it is not just the Eurozone.
This is the way the world is going – which answers your question Julie, yes the British establishment would think this was fine.
No real saving (“saving” redefined as government and banker credit expansion – Keynes would love it, see “Where Keynes Went Wrong” by Hunter Lewis, which Perry kindly gave me). And a “planned economy” (run by the “educated” – the witch doctors of academia and Big Business – the sort of “business” enterprises that despise customers and love only the Credit Fountain) – a sure way to eventual societal collapse and mass starvation.
I agree with the whiskey (or, perhaps, rum in my case) – but, being male, I think a pistol in the mouth (my mouth – not yours) deep in and pointed upwards, is the logical response to this world.
Still there may be some hopeful thing that I can not see. And, anyway, God says we must not just “check out” of the world because we do not like it here – and I have to take that seriously.
Paul Marks (October 15, 2019 at 8:53 pm), the brexitref won and so did Trump. Our cup may be half empty but so is theirs – as their screams of anger betray. So Niall ever-the-optimist Kilmartin says, be of good cheer. There are dangers ahead and battles yet to fight – battles we cannot yet begin to fight because of our focus on securing today’s victories – but we may yet live to see both disaster averted and their defeated rage. Things are better than in the days when Obama ruled there and Blair/Brown/Cameron/May ruled here.
🙂