Today on The Janssen Report: Mario Draghi, president of the European Central Bank, announced more “stimulus” measures. 80 billion euros will be created out of thin air EVERY MONTH and handed to the banks. And soon a chunk will probably also go to buying corporate debt. The deposit rate is further lowered from -0.3 to -0.4%. Can this ECB stimulus ever lead to economic recovery?

In this report I argue that this cannot work. In fact, these monetary policies are aimed to bail out the banks and keep the financial system afloat. The stated goal is to attain economic recovery through inflation. And more spending is required, therefore a boost in demand is needed. But the only way this can be attained through this mechanism is when banks start lending at attractive interest rates so that economic actors (consumers and businesses) will be seduced to pile on more debt to spend into the economy. This in itself is sheer insanity considering how debt-laden the economy already is.

Now even the Bank for International Settlements (BIS), also often referred to as the central bank of central banks, admitted in their Quarterly Review of March 2016 that:…unconventional monetary policies might have had the most significant effects on the dynamics of wealth inequality through changes in equity returns and house prices.The evidence suggests that unconventional policies had a relatively strong and immediate effect on equity prices (see eg Rogers etal (2014).

Although the paper has been drafted in very careful wording and does not seem to want to be very conclusive, this is a remarkable statement to come out of this institution.

The only way turning up the printing presses could possibly work (and only for a short time), is to distribute that freshly printed cash to the people themselves. In this way financial burdens can be lowered and more money will be available to spend. Actually, there are more and more advocates of this policy: QE for the People. Let’s see how this pans out.

Obviously this will never be a long-term solution either for as long as usury (interest on money) is firmly kept in place.

Watch this episode of The Janssen Report here where I discuss these ECB stimulus measures:

Sources:

• Germans react to Draghi’s monetary tidal wave (ZeroHedge): http://www.zerohedge.com/news/2016-03-10/germans-react-draghis-monetary-tidal-wave
• Interview with Mario Draghi in which several worries are expressed on the current developments in the economy (The Guardian): https://www.ecb.europa.eu/press/inter/date/2016/html/sp160311.en.html
• Draghi Warns About Rising Inequality Hours After Boosting QE, As BIS Warns QE Leads To Inequality (ZeroHedge): http://www.zerohedge.com/news/2016-03-11/draghi-warns-about-rising-inequality-hours-after-boosting-qe-bis-warns-qe-raises-ine
• Bank for International Settlements: “monetary policy, i.e. more QE, is unambiguously responsible for the recent surge in inequality” (BIS): http://www.bis.org/publ/qtrpdf/r_qt1603f.pdf

Cheers,

Marco Janssen
The Janssen Report