The European Central Bank Bails Out the Fed

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The European Central Bank Bails Out the Fed

European Central Bank Opts for Negative Interest Rates Helping the Fed Exit QE

The impact of the decision will weaken the Euro and strengthen the dollar. The ECB wants a lower Euro to improve its export situation and is concerned about deflation. By instituting negative interest rates, the ECB not only prods the European banks to lend their reserves, but also pushes them to find an alternative place to keep their excess reserves*- U.S. Treasuries that still pay interest.

This helps the Fed exit from QE as it supplies replacement buyers for the Fed. A nice coordinated ploy between the ECB and the Fed. The result of central bank meddling is consumer price inflation for the middle class and asset price inflation for the wealthy.

Edited by admin on 11/08/2014 - 06:01


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