Thursday, 08.12.2016, 15:30 · von FOCUS-Online-guest author Thorsten Polleit
The ECB moves, the bond back purchases slowly. Nevertheless, the volume remains substantial. And the Central Bank gives the opportunities to buy bonds that go on your substance.
the Council of The ECB decided on Thursday to leave key interest rates unchanged: The main refinancing rate remains at zero percent, the Deposit rate at minus 0.4 percent. The bond-buying program, however, there were important Changes:
(1) The monthly bond be extended for purchases through March 2017 to December 2017.
(2) as of March 2017 reduced the purchases of 80 billion euros to 60 billion euros.
(3) The ECB reserves, the purchases re-expand, it should be as a monetary policy necessary.
but Above all, the ECB will also, if it deems it appropriate to buy bonds, whose interest rate below in the Deposit interest rate (of -0.4%). This means that you can now purchase the bonds at a price that is higher than the sum of the interest and principal payments on the bonds. The ECB is ready to reduce your equity, the capital, pays the tax of citizens in the ECB, would be paid to the seller of the Euro-denominated sovereign bonds.
Dr. Thorsten Polleit chief economist Degussa and economic Advisor to the P&R REAL VALUE Fund.
The cosmetic reduction of bond purchases after the end of the first quarter of 2017 should not obscure the fact, on what course the ECB is actually: you continue with your policy of monetary expansion and interest rate manipulation. Because that is what is behind the bond purchases By the ECB buys debt securities, it drives the prices of the height, thus pushing the yields on the papers in depth; and the ECB paid for the Whole thing with new, out of Nothing created the Euro.
The goal of the ECB: No state is allowed to go bankrupt
The objective pursued by the ECB is clear: No state – and by the way, any Bank that is classified as relevant to the system – to become insolvent. The ECB is pumping, if need be, any required quantity of money in the coffers of the ailing debtor. In addition, the low interest rates to ignite the economy: Cheap credit to spur investments and Consuming on credit revive. Above all, States should, to the fault of be able to the best conditions (new).
What operates the ECB, is a large-scale restructuring of debt: De facto, it allows private investors to offload their Euro area government debt securities at high prices in the case of the ECB, and the newly created Euro. This not only enriches the fault of the seller. Thus, the taxpayer, be taken increasingly into the commitment. You are liable if a debtor whose securities the ECB will start buying, can’t afford to pay its debt service. And it runs well.
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The ECB has already 1.2 trillion in government debt bought
The scenario probably looks like this: The ECB is buying up government debt, and to adopt, at some point the States of your interest rate and repayment obligations. As a result, the liabilities disappear from the image surface, and the debt problem in the Euro area is seemingly solved. The total credit market debt of all Euro countries were in the middle of 2016 on well-9,6 trillion Euro. About 91.7 percent of the gross domestic product in the Euro area. The ECB has previously purchased securities in the amount of 1.2 trillion euros. But this is not enough. The debt ratio will press on, for example, 60 percent of the economic output in the Euro area, would have to buy the ECB, in addition to debt securities in the amount of more than two trillion euros and the Euro(base-)money supply in the same extent extend.
Want to record from the ECB for the entire Euro area government debt, it must buy the Bank’s 8.4 trillion euros of securities. Regardless of what was decided today, so will probably go the destructive monetary policy of the ECB is probably still long.
Under the policy of the ECB, unfortunately, the internal and external purchasing power of the Euro. The consequences will sooner or later be visible in the Form of rising prices for the living and for the stock of goods, such as houses, land and shares, but also in a fall in the external value of the currency. Investors from the Euro area should, therefore, reduce your the “Euro-lump of risk”. With a view to the cash you can hold, for example, US Dollar, Swiss franc and of course Gold as a currency.
Many investment advisers recommend to their clients currently share. Because with them – differently than in the case of fixed-income investments – returns are after deduction of Inflation is positive. While this is true. The crucial question is: HOW should one invest in equities? You should think of Investing in a broad stock market index – for example, through the purchase of Index-ETFs – to- protect against the depreciation of Money. In the past, it was observed that in times of economic and monetary turmoil, the Inflation was higher than the price gains in most stocks. Stock no inflation were per se protection.
The Alternative is to Invest in a broad stock market is to be very picky to only invest in the shares of companies with high long-term returns on the invested capital, which can in the long term, increase your profits per share and that, even in economically difficult phases. Those who think so, should work together with good “Value investors”. Because work intensively with the rating of the company and therefore have the best conditions to be able to long-term positive real returns, even in periods in which the destructive monetary policies of Central banks are gaining momentum.