Posts Tagged ‘Claudio Borio’

Notes From Underground: Some Areas Of Concern and Importance

October 16, 2017

As the tinder of prairie fires builds, these areas of concern are important because of the potential impact they can have on the market:

1. Sunday’s election results in Austria give rise to concerns about the rise of euroskeptic groups in several European nations. Yes, the anti-immigration sentiment appears to be the dominant variable in bringing a right-wing government to Vienna, but the sparks from xenophobia can manifest into an anti-ECB issue as domestic citizens are asked to foot the bill for bail-outs of Italian banks. Many citizens of various European states have borne the costs of bailing out Italy, Spain, Ireland, Greece and Cyprus through negative interest rates, the ultimate tool of financial repression. German two-year notes are currently -73 basis points, even though German inflation is approaching 1.7%, resulting in a real yield of NEGATIVE 2.5% for the savers in German-based banks. Regardless of what the ECB does in terms of quantitative tightening President Draghi has maintained that negative rates will remain lower for longer. Financial repression will be the next theme for the European right.

(more…)