05/03/2016 - Kroll Bond Rating Agency: “ECB Doubles Down on Financial Repression”
The Kroll Bond Rating Agency just released a report Achieving Stability & Growth in Europe.
They preface the report with this interesting comment:
We just posted a comment on the situation in the EU, where financial repression is still increasing. Big concern from my perspective is that negative rates and central bank market intervention seem to be frightening investors and convincing savers to abandon the financial system. Look at the earnings reports from UBS and the other large EU banks. Banks are 80% of the EU balance sheet and virtually all are shrinking. It is hard to envision how this situation does not end in tears for the nations of Europe given the policy mix. Or to put it another way, should we worry about Brexit or Gexit?
The economic policy debate seems comprised of a binary choice. On the one hand, we are offered radical action by global central banks including the forced transfer of value from savers to debtors, and on the other, increased fiscal spending funded via either more debt or higher taxes. We believe that there is a third choice, namely to make public policy pro-growth as well as pro-consumer, with a balanced approach that is constructive rather than punitive. Good luck getting the current cast of characters in the global central banking community to start talking about growth. But if we don’t see a change in policy by the ECB, there could be a German-led political crisis in Europe before end of the year.
READ FULL REPORT
