While the band of anti-Brexiteers continue to shout loudly about what they claim are the inevitable horrors of leaving the European Union. the EU itself is continuing to suffer economic woes. For some reason, the hysterical rantings of the likes of Carney, Grieve, Major, McDonnell, Corbyn, Swinson and the rest have received huge media coverage while the problems of the Eurozone have been largely ignored.
Recent reports tell us, very quietly, that the Eurozone is close to recession, despite the European Central Bank having taken extraordinary measures in its efforts to stimulate growth. Yesterday, I read that they now plan still more draconian measures although this news was not exactly top of the headlines.
Already, savers have to pay the bank, I'll repeat that' "pay the bank" for the privilege of depositing money with it. In other words, savers do not get interest on their deposits, it costs them money to save and now the ECB is going to increase this negative interest rate from -0.4% to -0.5%; at the same time, it's going to resurrect its program of so-called quantitative easing by creating more money out of thin air and buying up previously issued government bonds. The rationale is that the plan will put more free cash into the European economies that people will then go out and spend, thus stimulating economic activity.
The ECB has previously undertaken this money making activity though, it seems, to little effect; it may have staved off full scale economic collapse but it hasn't solved the real deep seated and intrinsic problems of the Eurozone. A further round of creating money out of nothing will simply delay the inevitable by pushing the problems further into the future. Creating money that has no assets to back it up, such as gold as used to be the asset of choice, creates unsecured debt and, as most will know, unsecured debt carries inherent risks. The ECB would no doubt say that the debt is secured against future economic growth but, as any half competent accountant knows, while you count expected costs, you never anticipate income for that is the route to bankruptcy.
The Eurozone, which makes up the vast bulk of the European Union, not only is failing it has failed. Countries such as Greece and Italy are virtual basket cases, their room for independent economic action completely gone and replaced by rules imposed from Brussels, Paris and Berlin. The EU may be a large economic area, but in real terms it is an economic disaster.
Why would anyone want to tie themselves to this failing edifice ? Why would anyone want to prevent Brexit ?
No comments:
Post a Comment