Categories: Bitcoin Business

European Central Bank Runs Out of Ammo to Stop Eurozone Recession

Click here to view original web page at
The ECB is slashing rates but the recession train may have left the station. | Source: Shutterstock

“Whatever it takes.”

That’s the mantra of Mario Draghi and the European Central Bank (ECB) as they slashed interest rates yet further into negative territory on Thursday. The ECB cut the base rate to -0.5% and unleashed another aggressive bond-buying program (€20 billion) in a bid to stimulate the eurozone economy.

But as the eurozone teeters towards recession, it’s time to admit that the ECB has run out of ammo. Draghi has gone down shooting and there’s nothing left in the barrel.

The dominos line up to fall

The threats to the eurozone are numerous. The bloc’s largest economy, Germany, is on the brink of recession, partly driven by a monster slump in the nation’s illustrious auto industry. The Macroeconomic Policy Institute (IMK) puts Germany’s risk at 60% right now.

Germany’s economy went negative in the second quarter of 2019 and edges close to recession. Source: BBC
Germany’s economy hit by declining manufacturing and industrial output. Source: Bloomberg

Brexit uncertainty continues to wreak havoc on the economies of Britain and the wider EU itself. Manufacturing and investment demand has weakened and the country only narrowly avoided a technical recession this month.

Italy, the eurozone’s third-largest economy, has seen zero growth for twenty years. It carries an insurmountable deficit, its banks are at crisis point, and the political tension remains on a knife edge.

A recent study by Singapore Management University predicts the entire eurozone will fall into recession by 2022. Meanwhile, the euro is at the heart of a global currency crisis.

ECB negative interest rates aren’t working

The ECB has an aggressive mandate to keep inflation at 2% and stimulate growth. To that end they’ve plunged into negative interest rate territory. Banks across the eurozone will now pay the ECB 0.5% to park their funds.

The effect of this is European banks struggling to maintain their bottom line. Deutsche Bank stock is at an all-time-low. Macro trader Raoul Pal, who famously predicted the 2008 recession, said low rates are the fastest way to “f*ck the banking system.” In his words, EU banks are “RIGHT on the CLIFF OF DEATH.”

And that is how you totally FUCK the banking system. The EU Banks are RIGHT on the CLIFF OF DEATH.

— Raoul Pal (@RaoulGMI) August 7, 2019

The ECB has no ammo left

Central banks have a variety of “weapons” at their disposal to stimulate growth (specifically interest rates and QE).

They work really well when used sparingly in the aftermath of a crisis. In the wake of the 2008 recession, central banks were able to slash interest rates and trigger QE to restart the economy again.

Central banks around the world slashed rates to almost zero after the 2008 recession. Only the US has since tried to raise rates again. Source: Bloomberg

But when the rates are already at zero or below, there’s nowhere left to go. Those tools are no longer effective, because they’ve become the “new normal.” If a recession hits, those weapons won’t work.

“Central bankers around the world are trying to justify the efficacy of negative interest rates. So far, it’s been a failed experiment” – Mike Collins, PGIM

Negative interest rates will spur bitcoin

Until now, banks have passed the negative rates to their corporate clients, but not retail clients. If the ECB pulls the trigger again, banks will be forced to pass the negative rates onto its customers. It’s already happened in Denmark where wealthier depositors pay 0.6% to park their money.

As negative rates sweep Europe, people will increasingly look for better ways to store value. There’s a good chance they’ll find bitcoin; a digital store of value that can’t be manipulated. Better yet, an asset that appreciates in value over the long term.

Bitcoin’s beauty isn’t just the global peer-to-peer transfer system. It’s an alternative monetary policy that can’t be manipulated or devalued. In stark contrast to the euro, it has a fixed supply and deflationary nature.

And every time the ECB cuts rates and floods the market with euros, it pushes someone else to the hard money of bitcoin.

Last modified (UTC): September 12, 2019 12:18 PM

That’s the mantra of Mario Draghi and the European Central […]


Illuminati, Mason, Anonymous I'll never tell. I can tell you this, global power is shifting and those who have the new intelligence are working to acquire this new force. You matter naught except to yourself, therefore prepare for the least expected and make your place in the new world order.

Disqus Comments Loading...
Published by

Recent Posts

Watford FC to brand Bitcoin logo on the jersey

The initiative is being carried out as a part of a brand partnership with sports betting site's marketing… Read More

5 hours ago

Latest Bitcoin price and analysis (BTC to USD)

At the time of writing, Bitcoin (BTC) is trading at just above $10,300 after gaining about 1% since last week.BTC… Read More

5 hours ago

Johnstone: How To Defeat The Empire

Authored by Caitlin Johnstone via, One of the biggest and most consistent challenges of my young career so far… Read More

5 hours ago

Today’s Bitcoin Drop Driven by Massive Volume Influx

Bitcoin has been facing a bout of sideways trading for the past several days, but today’s drop to below $10,200… Read More

5 hours ago

L.A. to Choose Blockchain Pilot Project at CIS Conference

With a growing interest in blockchain solutions for government, the city of Los Angeles has partnered with organizers of a… Read More

5 hours ago

Bitcoin’s heading to a new all-time high along with the S&P 500, says Fundstrat’s Tom Lee

watch nowTalk about a bitcoin bull case.The digital currency is headed to new record highs, says Tom Lee, co-founder, managing… Read More

5 hours ago

This website uses cookies. We use these cookies to collect data about your interaction with our website for the purpose of continuously improving your experience with our site. For more information we encourage you to read our privacy policy.

Read More