The ECB Takes Keynesianism to the Limits via Negative Deposit rates

I find it quite ridiculous for the mainstream to claim that the Eurozone has been experiencing a ‘recovery’ when the financial-banking industry continues to push the European Central Bank (ECB) to further ease.

Apparently, as previously noted, recent record setting stock markets in developed economies has largely been in anticipation of the ECB and Mario Draghi’s accommodation to such pressures.

Today the ECB obliged.

From Bloomberg:

The European Central Bank cut its deposit rate below zero and said it would announce further measures later today as policy makers try to counter the prospect of deflation in the world’s second-largest economy.

ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate.

Notice that central banks have all been pushing monetary policies—from intensifying use of QE, ZIRP and now Negative Interest Rates—to the limits.

They have waged an all out war against savings via the abolishment of interest rates as advocated by the high priest of inflationism, John Maynard Keynes (bold mine)

Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run, except in the event of the individual propensity to consume proving to be of such a character that net saving in conditions of full employment comes to an end before capital has become sufficiently abundant. But even so, it will still be possible for communal saving through the agency of the State to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce.

In short, the euthanasia of the rentier lowers interest rate with the aim that no one will find savings profitable such that everyone will simply spend. Mario Draghi and the ECB would make JM Keynes proud.

Yet this is really a camouflage for perpetual debt accumulation.

Aside from Negative Deposit Rates, the ECB has placed in the pipeline more on easing measures. From the Zero Hedge (bold original)

The much anticipated additional measures have been revealed:

-DRAGHI UNVEILS PACKAGE OF TARGETED LTROS, WORK TO PREPARE QE

-DRAGHI SAYS INITIAL SIZE OF TARGETED LTRO PLAN IS 400BLN EUROS

-ECB EXTENDS FIXED RATE FULL ALLOTMENT, SUSPENDS SMP STERILIZING

-DRAGHI SAYS PACKAGE INCLUDES PREPARATIONS FOR ABS PURCHASES

In other words, even more actions along what was expected: keep in mind the last time the ECB did €1 trillion in LTROs it did exactly nothing to boost inflation or the "real economy." Furthermore, the ABS purchases aren't activated: just being "prepared." However, what was not revealed was the biggest wildcard: European QE, which as we said repeatedly, won't happen until Europe's deflation is far worse, if ever.

All these represent no more than subsidies, as I previously commented: 

governments around the world have been forcing a 'reverse Robin Hood' redistribution of plundering the Main Street in favor of the Wall Streets of the world through a variety of financial repression policies such as blowing bubbles, bank deposit haircut, negative deposit rates and more…  

Yet there is no such thing as a free lunch. Every action has a consequence. Unproductive spending and malinvestments will backfire. As the great Austrian economist Ludwig von Mises presciently warned (bold mine)

The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy. As has been mentioned already, the British Government has asserted that credit expansion has performed "the miracle...of turning a stone into bread." A Chairman of the Federal Reserve Bank of New York has declared that "final freedom from the domestic money market exists for every sovereign national state where there exists an institution which functions in the manner of a modern central bank, and whose currency is not convertible into gold or into some other commodity." Many governments, universities, and institutes of economic research lavishly subsidize publications whose main purpose is to praise the blessings of unbridled credit expansion and to slander all opponents as illintentioned advocates of the selfish interests of usurers.

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

It is sad to see that that the average citizens of the world have been treated like guinea pigs by monetary authorities, for an age old experiment that not only transfers resources from society to the the political class and their cronies but importantly has been DESTINED for failure: quasi booms morph into horrific busts.

When real savings have been substantially diminished relative to misallocated capital, then expect and prepare for a global economic depression in a not so distant future.