Author : John E. Charalambakis
Date : September 10, 2014
We are approaching the time when the ECB will pull the trigger and will start buying paper “assets” (i.e. someone else’s liabilities) in the ultimate hope of stimulating a paralytic EU economy that is devastated by regulations, high taxes, unsustainable debt and unfunded liabilities. The zero-bound interest rate trap is about one thing: depressing the expected rates of returns to real investments and thus setting up the economy for an era of diminished expectations. This is the epoch where the self-inflicted wounds are coming not from what we hate (putting our economic and financial houses in order), but rather from what we love (easy money).
The expected “asset” purchases by the ECB cannot heal the EU’s problems for several reasons. Here are a few basic ones:
The very unfortunate thing is that by its decision the ECB trivializes the reality of an EU-wide crisis that has been caused by flawed judgment, inadequate leadership, bad decisions, ahistorical policies, incompetent practices, and vested interests. As the ECB embarks on its voyage and as Japan sits in the middle of its ocean of QEs, Asian currencies will feel the developed economies appetite for cheapening their currencies and as they may be embarking on their own voyage, China with its own bubbles and non- performing loans may be tempted to devalue at a time when the US will be raising rates. That would be the time to wonder – as Neil Postman did in his book “Amusing Ourselves to Death” – if Huxley (and his “Brave New World”) was right rather than Orwell (in his 1984 book). Let’s recall that contrast.
|Fearful of those who may ban books||No need for such a fear, since nobody will read serious books|
|Fearful of those who deprive us of information||No need for such a fear since we will be buried with information overload that reduces us to passivity|
|Fearful of those who will conceal the truth from us||No need for such a fear since truth will become irrelevant|
|Fearful of an oppressor who will deprive us of our autonomy||No need for such a fear since people will love their oppressors|
|Fearful that we will become a captive culture||Over-rated fear since we are becoming a trivial culture|
|Fearful of those who will control us by inflicting pain||Fearful of those who will control us by inflicting pleasure|
The times they are a changing and rather than lighting up candles that shine light and make things clear, we extinguish the elements (such as the cathartic possibility of failures) that can truly liberate us from our fears and boneheaded policies and mentalities.