In my reading this morning I came across a rather revealing story on the Dow Jones wires concerning that surprise interest rate cut over it the Eurozone last week. Do you remember? That was when we learned that the ECB had cut its main interest rate down to paltry 0.25%, which by the way is a record low.
Now come some comments from one of their council members, a Luc Coene by name who tells us why the bank acted with no advance warning.
The actual story was reported in a Belgian newspaper, L'Echo. In it, Coene states that recent low inflation figures had greatly concerned the members of that council.
here is a quotation: "Once the first signs of deflation are showing, it's already too late to do something. So we've avoided playing with fire".
This confirms my suspicion that the bond buying programs of the Central Banks are losing efficacy.
Here is the problem - what happens when or if the economy no longer responds to ultra low interest rates, Quantitative easing/bond buying programs, government stimulus measures etc? Then what?????
I have said it before and will say it again - the problem is excessive levels of debt combined with deep-rooted, systemic structural issues that MUST be dealt with. Monetary policy cannot in and of itself CURE ANYTHING. All it does is to create huge imbalances and distortions in certain asset classes. We are witnessing this first hand in the ever-inflating bubble in the equity markets.
The Yellen-led Fed will do absolutely nothing to slow this process.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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