(5h) The ECB is interfering with the democratic processes
Finally, the
specialists at the European Central Bank (ECB) had the guts to do what they always wanted to do: QE or Quantitative Easing. Not democratically-elected politicians decided
this; no, unelected economists and bankers decided to introduce QE as they know
everything about bringing a world economy to its knees so they can profit.
Because lowering the interest rates to almost zero over the past years didn't
seem to stimulate the economy, QE means 'printing money' by buying the government bonds of Member States in the hope it will
stimulate the economy and to prevent inflation turns into deflation. Maybe
there are moments QE can be used but only when really necessary and not now when
the economy is relatively OK (although doesn't grow as strong as it did in the
past as can be expected) because even economists admit QE (and thus its consequences) is little
understood. I even claim politicians and economists should have been preparing
the people for decreasing prices as that would be positive when incomes go
down. Now QE may result in increasing prices when inflation remains above zero
while wages for many people may fall except for the very rich, resulting in an
even more unequal society. Indeed, at the same time as QE is introduced, even
less government is demanded to save money so taxes can be reduced even further. As a consequence, more
unemployed teachers, nurses, police but also civil servants and thus even less
control on the (big) industry and even more laws that can be avoided unchecked
(such as happened
at HSBC but not exclusively there) while the people that (fear to) loose
their job are even less likely to buy things and thus to stimulate the economy.
Is QE meant to result in continuously increasing prices until they collapse as happened during the first part of this crisis? €60 billion per
month is allowed to flood the markets and up to a total of €1.1 trillion, money
that no longer belongs to the central banks and governments but to private
banks that should use it to stimulate the economy. But, as it seems the QE took
(many) politicians by surprise, I conclude that politicians couldn't introduce policies that
should force banks to use the money in such a way it would benefit the economy
and not the banks (of which many have their headquarters outside the EU such as
in Switzerland and London where euros may be used to enrich those places by
e.g. improving cities while Eurozone countries may benefit little in comparison to what they gave countries). Europe should
have introduced schemes on which conditions the money can be used instead of
giving a blanco cheque.
But QE is also an
attack on our democracies. For instance, some Belgian politicians told our
finance minister to shut-up because he dared to question whether QE is a good
decision and whether it would not increase the problem. But he was told not to
scare people - political language for saying that people should not be
informed about possible dangers. If even democratically-elected politicians have to keep silent and
can't question certain policies, who can? And it is not only one Belgian
(Flemish) politician who doubt the QE, also in Germany and the UK people warn
for any not yet understood consequences. But, what can be expected from old
political parties that want power? Indeed, they will not accept that people
question the decision of the powerful as those parties want to continue to sit
around the same table as those powerful. But at least the investors saw it was
good as shares went up because they probably see the opportunities for
themselves. I think it is unacceptable that, when politicians decide against
certain policies, bankers still go ahead although of course, that is the
consequence of giving away these powers to the industry that then can use these
powers to benefit themselves.
Will it work? I
don't think so and by the time a new banking crisis hits Europe, the release
now of about 1.1 billion euro may have weakened the currency to such an extend
that the EU will not be able to guarantee people's savings that people may loose when
banks fail. Because independent economists warn us that the QE may result in a
currency that becomes weaker. In addition, banks will decide what happens with
the money (probably without being told how) and thus are likely to invest in
old economies such as the fossil fuel industry as here a return is still
guaranteed, certainly now investments in green energy have decreased while many
countries start to be in favour of fracking; thus that climate change will happen
is even more likely. But, they will probably not invest the money in new school
buildings and hospitals or pay the wages of teachers, nurses and civil servants because here the return is much slower
although they may use some of the money to pay their own bonus. They may also
approve mortgages so people can buy even more expensive homes until that bubble
burst again, together with other bubbles. But it is unlikely there will be many
investments in new industries (such as green energy) that still have huge
potentials to grow although result in less profits because afterwards people don't need to buy as much oil, gas or electricity as before. But as a result, climate
change may be their undoing as scientists warn us the unpredictability
of the weather increased.
And we can be sure
the ECB (but also other central banks) will continue to use their powers to
force their own policies on society and thus will continue to endanger
democracies. Indeed, the 'wrong' political parties were elected during the
latest Greek election and thus within days after my previous publication about
Greece, the ECB decided
that Greece should be punished by being harsh although it seems the ECB
threw out a lifeline before the recent EU top. Nevertheless, it shall teach
ordinary people a lesson to dare to vote against the elite while it acts as a warning
to people in other countries to behave.
After Greece was
punished last year by forcing it to pay a higher EU membership fee for having
better than expected growth, now the ECB found another way to destroy Greece as
the ECB restricted financing to Greece's banks (thus if I understand it well, less
QE for Greece) and as a result shares felt because the markets know what this
means: it will become even more difficult for Greeks to take money out their
bank accounts to buy food, pay the rent or mortgage or pay employees and thus they will further impoverish what will further reduce
the Greek economy and thus the likelihood debts can ever be repaid as income from taxes will further decrease. Greek banks
can still receive money from the Greek Central Bank but at a higher interest
rate and thus the country that needs most urgently cheap money and thus borrow
at the lowest cost now has to pay more than others ('The poorer you are, the less you get and the more you shall pay'
seems to be an expression of bankers). The ECB may do this in the hope the
Greek government will fall so elections can bring a return of the old powers
who will agree to continue austerity and the sell-out of the country although next time
the wrong parties may be elected. But it is also a warning to people in other
countries to behave or face punishment. And don't
expect much help from the new head of the EU, Mr Juncker, as he loves too
much bankers and other industrials to not give them what they ask as he
demonstrated when he was Luxembourg's PM and helped (big) companies to avoid
paying taxes in their own country although he
promised to tackle tax avoidance (by ordinary people) in his new job. Even some
American politicians understand that the decision of the ECB may undermine
Greece democratically-elected government.
If these measures
will fail (I also predict that central banks in collaboration with private banks
will one day start playing with the interest rates if they may consider that is
needed to prevent banks sinking or 'to stimulate the economy' as that too is central
bank policies) while after TTIP (Transatlantic Trade and Investment Partnership)
comes into power that will give even more powers to banks and multinationals
against small investors, then people but also politicians and judges may have
enough of bankers and economists and dictate via laws what banks are allowed to
do, even how much their employees can earn while any new products will need
approval in parliaments. Then politicians will assure banks are very strictly
controlled by financial and justice departments that will punish misbehaving
bankers while the Fourth Power (specialists and ordinary people in control
organisations) will check whether politicians, civil servants (including
police) and judges do their job to keep the financial and other sectors in
control to prevent again that corruption rises. Then economists may be
ridiculed if it seems non-economists understand the economy better than them or would not use techniques they don't
understand but keep the system as simple as possible.
Of course, maybe the financial sector find ways on how to solve the crisis and good luck to
them because I too prefer a solution instead of a failure. Still, most
scientists agree we can't continue living as we do and thus redistribution of
wealth is needed to ensure more people can work where they live what will
result in a reduced workload so people can enjoy more their free time and
friends, family and travelling while today the markets demand always larger
profits compared with the previous year what result in employees who have to
work harder while the numbers of unemployed continue to grow as well as the
anger from people towards other people.
In conclusion, rules
should be followed so interferences in the markets should be as little as possible except the normal
corrections because the current changes benefit those who know about the changes in advance
while confuse the markets and result only in more chaos. Changes should be
discussed by politicians, together with economists, not enforced by people who work in
the sector because that results in people with advance knowledge and thus
disadvantage for everyone else. In addition, something that is little
understood should not be tested on the economy of about half a billion people,
certainly not when Japan already showed that low interest rates or Quantitative
Easing didn't work to stimulate its economy. I'm sure, to be continued ...
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