Friday, July 29, 2016

Central Banks Are In A Lose-Lose Situation
Claudio Grass Interviews Ronald Stoeferle:
Incrementum's Ronald Stoeferle gives his thoughts on central banks & their artificial stimulus & negative interest rate policies .. "I have always considered it impossible to create a 'self-sustaining' economic expansion by means of the printing press. By so doing, central bankers only succeeded in suppressing symptoms, but the underlying structural problems that created the 2008 financial crisis in the first place, have only gotten worse. The primary goal, namely to stimulate the economy, has not been achieved. Low interest rates have provided artificial life support for unproductive and highly indebted companies, as well as for states .. The alarming fact is that asset prices will likely collapse if central banks cut the artificial support. High asset prices have become vital to maintaining confidence in the economy, while the majority of stock and real estate investments have been financed by cheap credit. Thus, abandoning the low interest rate policy would likely trigger a severe recession. On the other hand, continuing this policy would distort and corrode the economic structure even more, which would jeopardize the business model of pension funds, insurers and banks, and further inflate the real estate and stock market bubbles. The low interest rate policy has rendered the system profoundly fragile, with central banks virtually in a lose-lose situation."
LINK HERE to the interview transcript

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