14 September 2012

low interest, high inflation

Having an inflation rate of about 3% and an interest rate of about 1.5% is a weird economical situation. On a savings account the net result is that you are loosing money.
To make sure banks are still providing credit, the ECB lends money to banks at almost no cost. Printing money causes inflation.Currently inflation is still reasonable, but you risk confidence in the euro will go below the threshold where inflation will sky rocket.
But because the printed money is stuffed directly in the bankers pockets, these will not give you the high interest that you have in times of inflation.
You would expect that if you lend money from banks, interest are also low, but that's not the case.
Exclusive access to cheap money for banks is just a hidden way of subsidising banks, to avoid protests from the people losing their money.
The service returned to the economy by the banks is very limited: the total credit made available by banks to the industry is in continuous decline.
 All this comes on top of the debt problems of conutries caused by the banking crisis. A debt that's once again being payed by the people through taxes.

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