Boockvar: They’re kidding themselves

My pal Peter Boockvar on the absurdity of ECB’s continued slash and burn march into negative interest rate territory, with no signs of efficacy in sight…


If Mario Draghi was a private sector CEO who kept relying on strategies that failed to achieve ones objective, he would have been fired years ago but because he’s a central banker he can continue to press policies that don’t work and without accountability because he’s being seen as doing something even though he’s just digging a deeper hole. So in their analysis, another 10 bps below zero in their deposit rate with the aspirin of a two tier bank mitigation system which was speculated along with another 20b euros of monthly QE and forward guidance will somehow result in a different outcome. If they are worried about the impact on banks now, why go further negative? Doing QE with rates so deeply negative is spitting in the wind. And lastly, forward guidance, aka telling us that rates will stay low for a long period of time, is a depressant on growth because it only encourages businesses and households to wait. The whole point of stimulus is to stimulate behavior today instead of waiting until tomorrow. By saying rates will stay low for a long time just encourages everyone to sit on their hands. While I’m not Joe Namath, I’ll guarantee that all of this does nothing to encourage faster growth and instead does the opposite.

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