2 Comments

1. 

   Stéphane on January 19, 2018 at 6:01 pm

   It’s an interesting article made by Challenges (french site). Where did the billions of euros spent by the ECB go?

   ”
   Since 2011, the European Central Bank has injected more than 4,000 billion euros into the euro zone economy, without, however, restarting inflation. Where has this money been dumped and what has it been used for? Decryption of our partner Xerfi Canal.

   Where did the billions of euros spent by the European Central Bank go? Between the public and private buyback program and long-term refinancing operations, nearly 4,000 billion euros have been injected into the euro zone since 2011. This represents more than a third of The area ! The ECB hoped to reach the goal of inflation of 2% … to no avail. In fact, the ECB’s billions have gone astray on the way.
   It should be remembered that in 2011, the ECB is forced to intervene because we fear a collapse of credit. Indeed, with the crisis of the debt of the euro area, the US money funds are withdrawing and the banks of the zone – the French in the lead – are in short supply screaming cash. From this point of view, the intervention of the ECB started in 2011 was beneficial: in relation to GDP, the level of indebtedness of non-financial companies in the euro zone has been broadly maintained since. On the other hand, there is no increase in debt – even recent – of companies. It must be said that without the support of fiscal policy, corseted by the austerity plans of the States, the monetary policy revealed its limits in Europe, unlike the United States which activated all the levers to revive their economy.

   In addition, the ECB was not helped by the banks that did not follow suit: a large part of their liquidity gleaned from the ECB was spared from … the same ECB! So it’s back to the sender! Deposits of euro-zone banks at the ECB thus went from a little over 300 billion euros in early 2011 to nearly 2,000 billion euros today! But then why did they prefer to sterilize their cash rather than lend it to the productive economy, as it is theoretically their role? To respect their liquidity ratio: the famous LCR. This ratio requires banks to hold enough deposits to withstand a significant liquidity crisis for 30 days.
   Finally, it should be noted that, in parallel, part of the liquidity injected by the ECB is found in Germany and Luxembourg … and not in the southern euro-zone countries, which need it more. Germany’s credit balance in the Target 2 system – the balance of payments between Eurosystem central banks – continues to grow. It reached a record level of 878 billion euros in September 2017, just like that of Luxembourg, which reached 190 billion euros. On the other hand, Italy has a debit balance of more than 430 billion euros and Spain more than 370 billion. Why that ? And firstly because non-euro area residents, who have sold their Spanish or Italian securities to the ECB, often have their bank accounts in Germany or Luxembourg. But above all, as noted by the economist Eric Dor: the Italian and Spanish sellers of securities in their countries then prefer to invest their money in the financial products of German or Luxembourg banks. And this, rather than in their own productive economy that inspires them less trust!”

   Google traduction 😉

   • 

     Ryan Littlestone on January 19, 2018 at 7:37 pm

     And there’s the billion euro/dollar/pound/yen question, what good has QE done?