Biggest Debt Collector in Europe Says Crisis Rates Not Helping

From the article: “A rate that is too low, or a rate that many of us have never experienced, is so extraordinary that it doesn’t create any stability or faith in the future at all,” he said. “Rather the opposite: one feels insecure and waits with expansion plans and to hire more people.”

This is complete BS. If they raise interest rates a couple percent to "normal" values it will completely crater the stock markets and scare industry so that they will reduce their spending even further. You can see this easily by noting how the market responds to the Fed mentioning that there's a chance that maybe they'll raise rates by 0.25% sometime in the next year. The only thing keeping these economies going at all is massive printing. The fact that it hasn't caused a boom is not proof that it "didn't work". This is not a mild recession that can be compared to the mild recessions that have happened regularly over the last 80 years. This is a depression; the last one began around 1929. That depression involved riots, the collapse of elected governments in Europe, civil wars and eventually a world war that killed 50 million people.

Over the centuries, economists have seen before the effect of refusing to massively print money and those depressions were far worse than the present one. There is no magic button that can be pressed to end this. It ends when wealthy people decide that things aren't getting any worse and that it's time to start investing again. That could be 10 years from now. (Look at how long interest rates were low in the 1940s and 1950s.) Until then, the central banks are going to pump enough money into the major world economies to keep them from imploding.
 
Banjo said:
The head of Europe’s biggest debt collector says the historic wave of stimulus spilling out of central banks has failed to fuel investment growth.

http://www.bloomberg.com/news/artic...ector-in-europe-says-crisis-rates-not-helping
More...
I'll add something to the response above. QE's role is to provide funding for stimulus spending by governments without putting upward pressure on interest rates. Central banks watch price inflation very closely. To the extent that expansion of the money supply via QE is responsible for price inflation above the target inflation rate, QE results, effectively, in monetizing debt. The reason for this is that when prices rise above the target inflation rate debts are paid off with currency worth less in buying power than the lender anticipated. The CBs' target rate is already taken into account when money is loaned, so it is only the amount of price inflation above the target that is important when considering how much of debt servicing is due to monetizing.

So far, because of the depth of the recessions in the U.S. and Europe, QE has not resulted in untoward inflation. If that should occur you will see Central Banks respond accordingly.
Remember that QE money is not created out of thin air, as it seems to be and as it is often characterized, but rather out of debt. Central banks can both expand and contract the money supply. It is a two way operation, but it may take a long time for Central Bank operations to affect macroeconomics. It is rather ridiculous, therefore, for anyone to be remarking on the effect of QE in Europe at this point, since QE there has only just begun.
 
piezoe said:
I'll add something to the response above. QE's role is to provide funding for stimulus spending by governments without putting upward pressure on interest rates. Central banks watch price inflation very closely. To the extent that expansion of the money supply via QE is responsible for price inflation above the target inflation rate, QE results, effectively, in monetizing debt. The reason for this is that when prices rise above the target inflation rate debts are paid off with currency worth less in buying power than the lender anticipated. The CBs' target rate is already taken into account when money is loaned, so it is only the amount of price inflation above the target that is important when considering how much of debt servicing is due to monetizing.

So far, because of the depth of the recessions in the U.S. and Europe, QE has not resulted in untoward inflation. If that should occur you will see Central Banks respond accordingly.
Remember that QE money is not created out of thin air, as it seems to be and as it is often characterized, but rather out of debt. Central banks can both expand and contract the money supply. It is a two way operation, but it may take a long time for Central Bank operations to affect macroeconomics. It is rather ridiculous, therefore, for anyone to be remarking on the effect of QE in Europe at this point, since QE there has only just begun.
More...


Debt is monetized when central banks buy gov't debt to fund the gov't. The inflation rate has nothing to do with it. I have no idea where you came up with that stuff.
 
TooOldForThis said:
From the article: “A rate that is too low, or a rate that many of us have never experienced, is so extraordinary that it doesn’t create any stability or faith in the future at all,” he said. “Rather the opposite: one feels insecure and waits with expansion plans and to hire more people.”

This is complete BS. If they raise interest rates a couple percent to "normal" values it will completely crater the stock markets and scare industry so that they will reduce their spending even further. You can see this easily by noting how the market responds to the Fed mentioning that there's a chance that maybe they'll raise rates by 0.25% sometime in the next year. The only thing keeping these economies going at all is massive printing. The fact that it hasn't caused a boom is not proof that it "didn't work". This is not a mild recession that can be compared to the mild recessions that have happened regularly over the last 80 years. This is a depression; the last one began around 1929. That depression involved riots, the collapse of elected governments in Europe, civil wars and eventually a world war that killed 50 million people.

Over the centuries, economists have seen before the effect of refusing to massively print money and those depressions were far worse than the present one. There is no magic button that can be pressed to end this. It ends when wealthy people decide that things aren't getting any worse and that it's time to start investing again. That could be 10 years from now. (Look at how long interest rates were low in the 1940s and 1950s.) Until then, the central banks are going to pump enough money into the major world economies to keep them from imploding.
More...


You seem to have left out the part of history where gov'ts issue massive amounts of debt and what subsequently happens. Maybe you could expound upon what happened to those gov'ts. It wasn't pretty. Germany suffered from hyperinflation. Remember that? Is that the country you are talking about that contributed to a world war?

The wealthy are already investing. They're getting rich from the central bank market levitation. What is not happening is money being invested in long term enterprises by corporations. And it won't. All the gov'ts and central banks are doing is propping up inefficient businesses with all their stimulus. The aggregate demand nonsense. For a real recovery to take place, there needs to be deflation and a transfer of investment to better and more efficient enterprises.

All that's happening right now is 'old money' is being propped up to the detriment of everyone else's future. We are consigned to a much lower rate of future growth than would have been had the money been unlocked, bad businesses liquidated, and new investment made where it would be more productive.

On top of that there are untold trillions of newly created debt that will be weighing world economies down and have to somehow be dealt with.

You say we haven't had time to see the results yet. I'm with ya there. Let's wait until we see what happens with all this debt and how it's dealt with until we decide if taking our medicine in 08 would have been a mistake. I'm pretty sure that a debt crisis in the future is going to worse than the one in 08, seeing as how we've now been loaded down with mountains more debt.
 
The great depression of the thirties was not, as it has been accused, a case of misery of market forces. The depression of 1920 was a case of letting market forces work. That depression, by the way, was over in a couple of years.

The depression of the thirties was a case of gov't interference refusing to let the market work its magic. FDR's attempt to save the economy from the market resulted in dragging the thing out for a decade. But that was a case of mainly fiscal policy being used to try to fix things. We saw how that worked. As is always the case when gov't tries to fix things and only makes them worse, we're told that it was because they didn't do enough of it. So this time they want to get the central banks in on the action and monetize trillions of gov't debts. It kept some people out of the unemployment lines, but the cost of it is slow growth, slow future growth, and the inevitable consequences of trillions of dollars of debt that will have to be serviced in the future. Good luck.
 
fhl said:
You seem to have left out the part of history where gov'ts issue massive amounts of debt and what subsequently happens. Maybe you could expound upon what happened to those gov'ts. It wasn't pretty. Germany suffered from hyperinflation. Remember that? Is that the country you are talking about that contributed to a world war?
More...

(1) Germany hyperinflated as a protest against the treaty of Versailles. (2) The US dollar is the world reserve currency. The same was never true of the Mark. (3) Hyperinflation is not the same as inflation, LOL. In fact, US inflation right now is quite low; you're arguing for a policy that does not have a purpose. And as I said above, if the US didn't inflate, the value of the dollar would now be sky high and we'd be unable to export anything. Our farmers would be out of work and Boeing would have to move off-shore.

fhl said:
The wealthy are already investing. They're getting rich from the central bank market levitation. What is not happening is money being invested in long term enterprises by corporations. And it won't. All the gov'ts and central banks are doing is propping up inefficient businesses with all their stimulus. The aggregate demand nonsense. For a real recovery to take place, there needs to be deflation and a transfer of investment to better and more efficient enterprises.
More...

So your theory is that the "better and more efficient enterprises" can't get money now, when money is easy, but somehow they're going to get money after a deflation, when the rich people are broke and no one has any money. LOL!!! Profitable corporations are building up huge cash hordes. Some of that they're returning as dividends or stock buybacks and as a result rich people are building up huge cash hordes. And yet you think that "better and more efficient enterprises" are somehow going to be funded if all that cash gets absorbed. I'd like you to explain that theory a little better. Just exactly how does destroying money cause money to be easier to obtain?

fhl said:
All that's happening right now is 'old money' is being propped up to the detriment of everyone else's future. We are consigned to a much lower rate of future growth than would have been had the money been unlocked, bad businesses liquidated, and new investment made where it would be more productive
More...

Having interest rates extremely low is devastating to rich people because it reduces the amount of money they can collect by loaning their money out. Low interest rates are beneficial to those who are borrowing money. These are very obvious facts. And yet you think that letting interest rates rise is going to hurt "old money"?

No! Having severe deflation is extremely damaging to people who have borrowed money. That includes the middle class many of whom are in binds over real estate borrowing. And the concept of "bad business" deeply depends on the business environment. In a low interest rate environment, some businesses are able to survive where they would be closed in a high interest rate environment. This is true but there is no real reason to claim that the businesses that need low interest rates are "bad". In fact, this country has had decades where interest rates were consistently low and the economy grew nicely. You're acting like it's necessary to bankrupt General Motors in order to allow Tesla to grow. This is silly.

Bankrupting the old and established companies puts vast numbers of people out of work. It reduces the taxes that government collects and increases the expenses of government. That causes government deficits to rise and the result is that the government has to borrow even more money. And in a tight money environment, the higher interest rates causes the closure of yet more "bad" businesses.

The deflationary spiral of the 19th and early 20th century was already bad enough. The modern advent of welfare state makes the spiral far worse. Look at Greece. Look at Greece. Do you want the former employees of those "bad" businesses to be marching through the streets setting fire to the surviving businesses and demanding expensive handouts?

fhl said:
On top of that there are untold trillions of newly created debt that will be weighing world economies down and have to somehow be dealt with
More...

This is not a new situation. The US has been printing huge amounts of money for DECADES. And yet the world economy has been growing very nicely. According to the CIA, the world's GDP has been increasing at the following rates recently:

GDP - real growth rate:
3.3% (2014 est.)
3.2% (2013 est.)
3.1% (2012 est.)

The above numbers are good enough that the average citizen of the planet is becoming steadily wealthier:

GDP - per capita (PPP):
$16,100 (2014 est.)
$15,800 (2013 est.)
$15,500 (2012 est.)
note: data are in 2013 US dollars

Source for the above are the CIA website:
https://www.cia.gov/library/publications/resources/the-world-factbook/geos/xx.html

Here are some graphs with older data:

World_GDP.png

Since 1950, the only major part of the world that hasn't grown well is the USSR:

1600_Growth.png


http://ourworldindata.org/data/grow...rosperity/gdp-growth-over-the-last-centuries/

fhl said:
You say we haven't had time to see the results yet. I'm with ya there. Let's wait until we see what happens with all this debt and how it's dealt with until we decide if taking our medicine in 08 would have been a mistake. I'm pretty sure that a debt crisis in the future is going to worse than the one in 08, seeing as how we've now been loaded down with mountains more debt.
More...

The central bankers (and I) know a lot more about economics than you do.
 
collection agencies are considered to be legal, however most of them use threats, abuse and harassment in order to have all debts back, meanwhile these methods mustn't be used with the debtors, it's illegal
 
probably you're right about great depression and that what happens nowadays is much easier to overcome. Speaking of debt collection agencies, nowadays they're actually feeling too strong, don't you think? I've noticed that even if I have the only small debt, which I'm planning to pay, it's the high time debt collectors immediately appear and start their abusing, pretty offensive monologues. Penn Credit Corp is one of my favorites in this offensive circle... Thanks God, they're pretty easy to stop because of services of the consumer law firms. The thing is that you need to know your rights as a consumer and a debtor. No one can offend and threaten you, just be aware of it. Getting to know my rights was the best decision ever!
 
Last edited:
You must log in or register to reply here.
Back
Top