YOU CANNOT STIMULATE DEMAND!!!!
This simple sentence dispels all facets of Keynesian Economics. Unfortunately for the world, this was completely ignored by central banks all over the world. They believed that they could manage the economy by easing and tightening. The problem with this is, to do so, one would have to believe that demand can be stimulated.
History shows the exact opposite.
In fact, we only need to look at present day Europe to see how true this is. The EU is falling apart and the ECB is totally behind the proverbial 8-ball. They went negative with their interest rates in 2014 in an effort to stimulate the economy. It did not work.
If the failure of negative interest rates does not prove to them that they cannot stimulate demand, nothing will.
Italy is now offering its government buildings as collateral in an effort to secure billions in needed loans. The Italians realize they are screwed and nobody is buying debt.
Here is the reality of the situation: investors do not want government bonds, regardless of the interest rate, when credit risk is rising significantly. Low interest rates will not stimulate buying when confidence is shot.
Of course, governments decided to hop onto this bandwagon. Politicians everyone get very friendly with the idea of spending money to "buy votes". This is par for the course right now. Ultimately, the person who wins often is the one who promises to give more away.
This causes other problems which ends up in people engaging in class warfare. The rich are pitted against the poor. A challenge with this is the poor are given handouts, the rich can simply move, and it is the middle class that is left holding the bag.
Thus we see many in the middle class heading down instead of up. Upward mobility does not exist in most countries.
Saving becomes taboo in the quest to keep people spending. Yet, as was shown, is demand is not dependent upon the central bank moves but those who are holding money are. Thus we see retirees, a growing segment, paying the price. Lenders are also screwed meaning hedge and pension funds are caught in the crosshairs.
Of the major markets, my guess is Western Europe is going to be hit the hardest. Before the shutdown of the global economy, it was not on firm ground. This is just going to destroy what was standing.
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