{"id":35206,"date":"2018-06-18T08:14:02","date_gmt":"2018-06-18T13:14:02","guid":{"rendered":"http:\/\/olduvai.ca\/?p=35206"},"modified":"2018-06-18T08:14:02","modified_gmt":"2018-06-18T13:14:02","slug":"is-draghi-really-ending-qe","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=35206","title":{"rendered":"Is Draghi Really Ending QE?"},"content":{"rendered":"
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Is Draghi Really Ending QE?<\/a><\/h3>\n<\/div>\n
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Mario Draghi said the euro-area economy is strong enough to overcome increased risk,\u00a0 and therefore this justifies the European Central Bank\u2019s decision to end bond purchases bringing to an end a decade-long\u00a0failed experiment. The truth behind this statement is starkly different than being portrayed in the press. Draghi also pledged to keep interest rates unchanged at current record lows until his personal term is finished next year. There is the contradiction for\u00a0if the ECB stops buying debt, who will do so\u00a0at artificially low\u00a0rates of interest?<\/p>\n

Draghi knows full well that he has utterly destroyed the bond\u00a0markets in Europe. The ECB has also made it clear that they will REINVEST<\/strong> when the bonds previously purchased\u00a0mature. The\u00a0Federal Reserves\u00a0has taken the opposite position and will\u00a0NOT<\/strong> reinvest allowing their balance sheet to shrink.<\/p>\n

If the economy is that strong, then why not end the\u00a0QE right now? The\u00a0fallacy here is that this has nothing to do with the economy. The ECB has simply had\u00a0the member states on life-support. Interest rates will\u00a0soar in Europe\u00a0on long-term debt\u00a0or there will be no buyers. Pension funds cannot buy 10-year bonds at even 3% when they need 8% to\u00a0cover\u00a0liabilities.<\/p>\n

The statement by Draghi is creating a total paradox. You cannot\u00a0keep\u00a0short-term interest rates where they are and\u00a0charge\u00a0negative rates for deposits\u00a0and simultaneously end\u00a0QE and expect to sell bonds to the public at insanely low levels.<\/p>\n

The press interprets this as the ECB with ending QE because they are \u201cbetting that the euro-area economy is robust enough to ride out an apparent slowdown amid risks including U.S. trade tariffs and nervousness that Italy\u2019s populist government will spark another financial crisis\u201d reported Bloomberg.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Is Draghi Really Ending QE? Mario Draghi said the euro-area economy is strong enough to overcome increased risk,\u00a0 and therefore this justifies the European Central Bank\u2019s decision to end bond purchases bringing to an end a decade-long\u00a0failed experiment. The truth behind this statement is starkly different than being portrayed in the press. Draghi also pledged […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5496,233,282,303,1044,5479,661,662,3650],"class_list":["post-35206","post","type-post","status-publish","format-standard","hentry","category-economics","tag-armstrong-economics","tag-ecb","tag-european-central-bank","tag-fed","tag-mario-draghi","tag-martin-armstrong","tag-qe","tag-quantitative-easing","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35206","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=35206"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35206\/revisions"}],"predecessor-version":[{"id":35207,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35206\/revisions\/35207"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=35206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=35206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=35206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}