ECB cuts Base Rate. So what?

I won’t bore you with the minutiae just a couple of details:

BBC website

The ECB has cut the Base Rate by the staggering amount of, er, 0.1% to 0.15%.

Also, banks depositing funds at their Central Bank (the ECB) will be charged 0.1% for the privilege.

There were other announcements, including an extra €160Bns of QE.  They’ll buy doubtful debts off banks.  Think about that.  The banks loaned to any wally with a business idea.  That the loan will go sour is of no issue because the Central Bank will buy from the bank at 100c on the €.  The bank loses nothing. yet it recklessly loaned.  The banksters got their fees and bonuses.  No-one loses, right?  Wrong.  Those who hold the Central Bank’s liabilities will pay.  Who?  The next generation.  Sickening.

 

Back to the interest rates.  Firstly, let me point out that I lave been saying for ages that rates will more likely fall than rise – to much merriment and laughing of 49 out of 50 commentators.  See, for example, here, from April.

So, what will these cuts do for us?

One word – nothing.

If you have a mortgage or a business loan and you are told the cost will fall by 0.1% p.a. will that improve your position?  Will it Hell.  Will you invest more, spend more etc etc?  Of course not.

It’s not about you.  It’s about the bankers – the paymasters to the politicians.  You see the banks have, collectively, hundreds of trillions !!! of $ of interest rate derivatives.  These are so finely priced that they need cuts in interest rates.  Otherwise the banks will go belly up.

And yes, it’s going to happen anyway.

What happens when we get to 0.01% Base Rate and the ECB can’t go any lower?

That’s when banking will be in the state of collapse it should have endured in 2009.  That would have been Capitalism.  But oh no.  The bankers persuaded the corrupt politicians to bail them out.

Base rates were slashed. In the case of the UK from 5.0% to 0.5% within 6 months.

And Marxism/Fascism took over.

To simplify Mussolini: Fascism is the merger of Corporation and State.  This is obviously what is increasing.  And no, there is no practical difference to you and me between Marxism and Fascism.

 

 

So, the cuts in rates will not help the real economy.  Only the one directly or indirectly related to the banksters.  So, what happens next?  As I’ve long said, the next time there is a global economic shock Base Rates will fall to effectively 0.0%, there will likely be Bail Ins (deposit confiscations*) and massive borrowing again – from our grandchildren this time – and handing over to banksters again.

*   There’s your negative rates that some of you were wondering about.

So the banking economy will again be bailed out.  But this time they will not bail out the real economy which is dependent on ever lower and lower borrowing rates.  They’re already near rock bottom.

#30YearDepression is coming.

#turningjapanese

The evidence continues to build that we are experiencing long term deflation and asset price collapse and massive reductions in those you call Middle Class.  See here. That’s probably you.

No-one will bail you out.  Your responsibility is to protect yourself.  We might be able to help there…

Nothing in these articles can be taken as financial advice.   Neither Jonathan Davis nor Jonathan Davis Wealth Management will be held responsible for action taken or not taken from reading these articles.

We recommend investors seek bespoke advice before acting.

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14 Responses to ECB cuts Base Rate. So what?

  1. Anonymous says:

    Hello

    Do you see the Bank of England going negative in due course or just to zero?

    I see you don’t like the debt jubilee idea (neither do I)… but do you think it is likely in the UK or not? It just seems the real economy is so weak that we can get away with some money-printing / debt-cancelling without causing too much inflation. I know that doesn’t make it right!

    I never predicted 0.5% base rate for five years, massive QE, funding for lending, support for mortgage interest, help to buy… so now I’m inclined to think anything is possible going forward

  2. Anonymous says:

    “Those who hold the Central Bank’s liabilities will pay. Who? The next generation. Sickening.”

    write off the debt like iceland did. why should future generations pay for bankster malfeasence?

    corporate bailouts are nothing new, by the way. the dutch, french and british east india companies were all bailed out, as were slave owners for their “private property” losses upon abolition.

    • I don’t like debt jubilee idea. moral hazard again. Those who borrowed and loaned should pay.

      • Anonymous says:

        but the alternative is generational debt serfdom. the idea that “debts must be paid” must be balanced by the need to write off odious debts incurred without public consent (like 3rd world dictator debts and vulture funders like paul singer pursuing dubious sovereign debt claims)

        iceland have written off vast amounts of unpayable debt with no ill effects. also, the bank bailouts were not voted for by any electorate, so they were incurred under duress.

        and i thought that in capitalism (if such a thing ever existed) that bankruptcy should be an option for those unable to pay? why, in the case of countries (as happened in india, africa, haiti, etc as well as now in the west) should theybe forced to pay in many cases (bondholders) the very banksters that were bailed out???

      • fine let bondholders and non financial borrowers go bankrupt. Clear out the system. That is capitalism.

        But why should the prudent lender and borrower pay for the others’ crap? That is Marxism/Fascism.

      • Anonymous says:

        debts that can’t be paid, won’t be paid – it’s just a matter of HOW they won’t be paid. why do future generations have to suffer so we can bail out private banks?

      • stop bailing our banks. or Bail Ins.

      • Anonymous says:

        this is what marx said about bank debt –

        “Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.”

        Karl Marx, Das Kapital, 1867

        what we have now is not marxism, but imperialism “the highest stage of capitalism” according to lenin – with the exporting of finance capital to sustain colonialism, the rise of private monopolies supplanting small businesses and worldwide geopolitical jostling. i disagree with marx and lenin about communism emerging from imperialism, though. more like some blade-runner-esque dystopian, tyrell corporation fascism where the state is supplanted by corporations and self styled “strong leaders”.

  3. Anonymous says:

    how come the “libertarian” “freedom association” accepted funding from fascist, apartheid south africa? the only thing they went on about in the 80s was the “freedom” of cricketers to play in a fascist, racist, murderous dictatorship.

  4. Anonymous says:

    another good article made silly by throwing around the word “marxism”. you really should read some marx if you are going to criticise marxism.

    as for fascism, how come the austrian school has always worked so closely with fascists like dolfuss and pinochet? and how come all of the robber baron industrialists “heros” who funded the birchers and the liberty league attempted to foment a fascist coup only to be foiled by general smedley butler?

    http://en.wikipedia.org/wiki/Business_Plot

    “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.”

    ludwig “von” mises

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