The disastrous labor market figures from the UK this morning and sentiment indicators from Germany, which have just collapsed and point to a deep economic recession, bode ill for monetary policy on the old continent (both the ECB and the BoE).
So-called economists expect the European Central Bank to cut interest rates in six orderly steps over the coming quarters. These so-called economists are still assuming that the European economy is merely in a consolidation phase and not already stuck in a recession. These Keynesians do not understand that artificial demand programs by the state do not generate growth, but merely crowd out the private sector further and ultimately cost productivity growth, which can be quickly demonstrated by the data situation in the eurozone.
No, the ECB will soon be lowering interest rates in large steps in a panic in order to save what can no longer be saved. The eurozone is a dysfunctional currency area, which we have already discussed several times here, and cannot grow sufficiently on its own to keep the growing national debt under control, for example. With the expected easing of monetary policy in the eurozone, the common currency is facing a massive devaluation spiral, as Europe is dependent on energy imports, which will soon continue to rise in price relatively due to the rising pricing power of the BRICS countries. Dark clouds are gathering for consumers and households in the eurozone.
(graphic by Bloomberg)
Rates are expected to be at 2% by the end of 2025, I guess 0% rates are a thing of the past.
reply
16 sats \ 1 reply \ @TomK OP 13 Aug
They'll go negative again. I am quite sure
reply
Yes, but I think it's going to be a while until we see them like this again, maybe when everything is already a total mess.
reply
we must also understand that the state of economic growth is crucial. In periods of weak economic growth or recession, the ECB might be inclined to cut rates to encourage borrowing and investment.
reply
Yeah, they might do it. But that's not how real economies grow obviously
reply
How dark is dark? Will brics affect them in any way?
reply
20 sats \ 1 reply \ @TomK OP 13 Aug
the central european economy is dependent on cheap russian gas. industry in germany, for example, cannot continue to operate in this way and is moving away massively. if the BRICS now continue to gain pricing power through further mergers and mergers and monopolization of markets, things will certainly not get any easier for the europeans
reply
Will they be able to monopolize their energy? Russia is the one with oil, what does china have? Lithium ions?
reply
I agree. You're right about panic state in EU. I can view it coming earlier than everyone expects. Let the winters come!
reply
stackers have outlawed this. turn on wild west mode in your /settings to see outlawed content.