Europe Slipping into Recession?

That's the general consensus... Strangely ECB and many national banks still keeps interest rates low..

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From what I gather, they're being extremely cautious. If they raise borrowing costs, how will this stimulate the eurozone economies? Won't it have the opposite effect?

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5 hours ago, Marina Schwarz said:

From what I gather, they're being extremely cautious. If they raise borrowing costs, how will this stimulate the eurozone economies? Won't it have the opposite effect?

I need to stop trying to multitask. I meant that ECB and other national banks should have started raising interest rates a few years ago so as to have some dry powder...

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5 hours ago, Marina Schwarz said:

From what I gather, they're being extremely cautious. If they raise borrowing costs, how will this stimulate the eurozone economies? Won't it have the opposite effect?

I would like to remind you that just because it's cheap to borrow money, does not mean the business idea needing investment got any better, it doesn't mean that someone will buy your product or service. It just means that IF you want to invest in a good idea that has legs, the seed money is cheaper.   Cheaper money doesn't bring good ideas, just helps bring them to fruition.    

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@Marina Schwarz,, sorry I didn't actually answer you.   Interest rates in Europe up or down will have no effect unless they are incredible large moves, like whole number moves

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Yeah, a 0.5-pp difference up or down probably won't make much difference for anyone. And it certainly won't fix a slowing economy. Oh, well, can't fight nature, I suppose.

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The European union will always struggle as a whole in its current form due to its flawed currency union that lacks a system of redistribution.

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My thinking,

Investment Bank Capital / Brexit Crash,  My in-house model has BNP Paripas as the winner of this impending Hard Brexit crash,  EU will not have the ability to mange this disruption, as Investment banks pull capital from markets and go to the sidelines.

Free spending Eurocentric proclivity, is hold back, keep a few euros for a rainy day, 

long term EU looks healthy, with some short term woes 

 

 

 

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(edited)

On 1/19/2019 at 12:26 PM, Cowpoke said:

The European union will always struggle as a whole in its current form due to its flawed currency union that lacks a system of redistribution.

Exactly with no central fiscal authority the euro is like using a foreign currency with a peg which always ends up disastrous. Add in the fact that Germany is breaking ECB rules by running an 8% surplus and sucking all the available Euro's out of other European countries particularly in the South and you have a fundamental structural issue that was warned by many economists that the currency design is unsustainable.  You only need to look at Greece with an economy worse and much longer than the great depression with an economy 25% smaller than prior to the GFC to see what's going on. I can't find the article right now explaining it so will update when I find it, my phones being repaired for next couple of hours.

Edited by Jason Ericsson
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The European Central Bank was heavily influenced, not for the first time, by the Germans and their view that during the last crash that inflation was the biggest worry, this stems for German economic policy being based on the Weimar Republic days, and duly raised interest rates when the rest of the world was dropping them and then introducing quantitative easing. The EU/Germans eventually moved forward a bit in their thinking to closer to the modern day when they realised the pain they were causing and started reducing rates and introducing quantitative easing trouble is because they were so late in doing that they had no time to increase rates so as the world slows down as other countries try to rebalance the books by increasing rates having already stopped QE the EU is still behind and will suffer again. Moral of this story don't listen to Germans on economic policy, problem is the ECB always does.

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