The World's Economy Is Shaking! ECB, Trump, Brexit!
The world's Economy is shaking!
Europe, the US, I think most of the world has been experiencing some crazy turbulence lately! There are so many geopolitical and economic issues at the moment that is hard to even name them all!
First, the interest rate!
All throughout Europe, the interest rates have been set at negative for some time, but it seems that not even this is preventing a recession, Germany, for example, has been having negative growth for some months, Germany is one of the strongest European economies, if Germany went under the rest of Europe would go under.
Seeing this, the European Central Bank (ECB) is pulling out one of their guns, they are cutting interest rates... Again! Down to minus 0.5%. What this means is that any wealthy person or company can now ask for a loan and have a portion of the loan paid! This is intended to stimulate the economy, if big companies ask for loans and use them to expand their businesses this will stimulate the economy.
Second, Quantitative easing
"Make It Rain ECB!
The European Central Bank now wants to pull another gun out... Quantitative easing starting on November 1st! This is probably the biggest and baddest gun the ECB has. Quantitative easing is basically the ECB printing money out of thin air and buying up securities... This is intended to stimulate the economy, by buying up securities maybe the governments and companies can expand and grow faster. Not only this but it improves exports by devaluing the Euro.
Both of these measures, quantitative easing and interest rate cuts, are a huge blow to the normal saver that stores their value in Euros, this is because when both these measures are applied their Euros will lose value day in and day out, amazing right?! Well, if both measures work at least they will have a couple more years with their jobs, until the next explosion... One hundread misses and one hit is still one hit...
I'm not American but I know more or less how things work over there with their Central Bank. The government and the Fed are supposedly separated from one another, the government can scream, cry, shout, the fed does whatever the Fed wants. But is this really true?
Well, at the moment the Fed doesn't know if they are going to cut interest rates or not, but Trump is heavily pushing for it, and is influencing the whole economy to force it! His tweets and twaats influence the SP500 quite a lot, he is either bashing the Fed, making investors lose trust in the Fed, or he is bashing the Chinese and putting tariffs on them, which further shakes the world's economy. This, might not have a direct effect on the Fed, but it has a direct effect on the World's economy, making it so the Fed is almost pushed to do the same things the ECB is doing...
And Trump would love it if the Fed did the same things the ECB is doing... he is a big wealthy guy that likes to take out loans that he can't pay! With interest rate cuts it would just make him take out even more loans that he would end up not paying...
Yup, Brexit isn't helping this at all. They wanted the Eurozone to let them leave with a good deal on the table, better yet, a good deal just for them on the table, what were they thinking? That leaving the Euro wouldn't have any repercussions? That they could just do it and keep all the benefits without any of the disadvantages?! They already had a great deal on the table! They kept their own coin... but they wanted it all.
I feel bad actually, because I've seen the stats, I've talked to people from the UK and they all tell me the same thing, most of the people that voted for Brexit were part of the old generation, a generation that is not able to distinguish between fake information and good information, a pre-internet generation that was influenced by news and by Cambridge Analytica's A.I. And now the young generation, the future generation is going to have to pay for it!
But all of this is good for Cryptocurrencies!
Yup, with currencies devaluing, with interest rate cuts, with turmoil in some countries, with authoritarian regimes in other countries, this is all good for the alternative economy that is cryptocurrencies! But I'm actually afraid at the same time...
I fear the day that the fiat bubble bursts, we are talking about billions of people, millions of households, thousands of companies, hundreds of countries going under! What do you think will happen? What do you think will happen when people lose their jobs, when people lose their savings, when people lose all hope, all dreams, when people get inside the vortex of depression, the vortex of recession?
Further reading material:
- ECB cuts key rate, relaunches QE to shore up eurozone economy
- Quantitative Easing - Investopedia
- ECB Cuts Rates, Revives QE to Lift Growth as Draghi Era Ends - Bloomberg
Question of the day: What do you think will happen when the fiat bubble bursts?