The ECB’s money machine

By 17/06/2021News

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When we keep talking about accelerating inflation due to the Fed printing money, that is only part of the problem. The second part is that the other major central banks in the world are also printing money. And, of course, the ECB is clearly one of them.



The European Central Bank’s printing press is unstoppable and is causing collisions that any normal investor cannot imagine. For example, the yield on five-year Greek government bonds has dropped below zero. It turns out that one has to pay a premium to lend money to a country that is effectively bankrupt. Recall that the level of Greek public debt is above 180% of the country’s gross domestic product.
In many European countries a cash deposit in a bank can only be placed at 0% per annum in EUR. In Swiss francs the yield is negative. It is obvious to everyone why the value of the Swiss franc or German government bonds is so high. In the event of a collapse of the Eurozone, both assets will at least save investors money. At the most, they would also offer investors an opportunity to make good profits.
However, in the case of Greek government bonds this is definitely not the case. Even without a collapse of the Eurozone, Greece may simply not pay its debts after 5 years. We all remember that a few years ago this country was on the verge of default. And the whole Eurozone (its political part), was saving the Greeks from bankruptcy.
A question may arise. Why then is the EURO not falling? What is the point of buying the same Greek bonds with negative yields? After all, you can invest in U.S. securities and get a yield of 1-2% per annum. The problem is that the American monetary unit can devalue even faster than the European one. The situation is reminiscent of two trees at risk of falling, each resting on the other. And thus prevents the first one from falling.

03.30 Australian unemployment rate for May
09.30 Swiss National Bank interest rate decision

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