Chart on left:
For the last 7 years, in good times and in bad, the European Central Bank (ECB) bought (on average) the entire government bond issuance. – ALL OF IT.
That is materially no different than saying “For the past seven years, in good times and in bad, anytime Euro governments ran a deficit the ECB simply printed-up the money to cover it. Not a single net bond was sold to the public.”
When a bank prints-up money and buys bonds it “expands its balance sheet.”
That is going to inflate the economy. But that is not all the ECB did. The ECB did not stop there.
++++
Chart on the right:
Above and beyond “expanding the balance sheet” the ECB inflated the economy another way. Separately, in 2012 the ECB began keeping its overnight interest rate (the equivalent of our “Fed Funds Rate”) at and below ZERO.
The charts below have different start dates, but they are each intended to show just how unusual and extreme either of these actions are. In my opinion they are insane!! they are Weimar Republik stuff, they are Zimbabwe stuff.
Since 2012 or so, nearly all economic expansion in Europe has been a mirage. It has been fake. God help Europe if they suddenly snap back and lose it all at once (and something like that might now be happening.)
When I consider the information above,
I find it hard to believe that “supply shocks”
(Russian energy, COVID shut downs, supply chain traffic jams etc.) are truly the cause of inflation.
More likely those are the darts that got thrown at an inflated balloon.
IOW the euro economy was already dead, we just did not notice because the ECB was
Printing money (chart on left), and
Punishing banks for every dollar they, in a free market, would have kept in reserves, (chart on right.)
A ship of fools making the people poorer. I’m not sure how long we/they can just print money and people will keep their faith in it. In the kingdom of the blind the one eyed man is King. For some reason people keep voting for these policies, but then again who knows if the elections are real these days with ballot harvesting being legal and the same voting machine they use in Venezuela.
When a fancy Williamsburg restaurant attempts to charge $4.00 for a glass of tapwater, tapwater becomes $4.00 a glass. If McDonald’s tries to raise the price of tapwater to $4.00 the price of tapwater remains free because NOBODY pays $4.00 for tapwater at McDonalds.
At least part of inflation consists on what the customers have, and therefore what they are willing to pay. (demand)
The other side, the supply side is whatever caused the supplier to raise his asking price. war, greed, bad eco-legislation, whatever. (supply)
Big picture, it turns out that the supply side of it does not matter. (EX: Corporations were always greedy, they did not start becoming greedy when Joe Biden took office.)
Since that side is constant (or at least inevitable) inflation results only from things such as money-printing and not from things that are like rain. “Inflation is always and everywhere a monetary phenomenon’
People will vote in favor of being slapped in the face with a large fish so long as you tell them “Rich people are oppressing you. You must use this fish to stop them.”
I think that’s the jealousy gene. It’s amazing how many people hate people who are doing better than they have been. I guess they need to blame others. I know I could make lots more money If I could hang out in meeting most of the day, but I can’t so… But I don’t blame others for my restless feet and boredom…
