Many economists point to the “abnormal” rise in savings as a bullish signal that will drive a stronger recovery and a consumption boom.
The figures look impressive. In the United States, JP Morgan estimates $2 trillion in deposits, up from $1 trillion before the pandemic. In the Eurozone, Bloomberg Economics estimates an excess of currency and deposit holdings of 300 billion euro, also double the level seen prior to the Covid-19 crisis. However, the devil is in the details.
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Monetary policy has gone from being a tool to help states make structural reforms to become an excuse not to carry them out.
The constant financing of deficits in countries that perpetuate structural imbalances has not only not helped to strengthen growth, since the Eurozone and the United States already suffered downgrades of estimates before the Covid-19 crisis, but is also driving inflation higher.
Negative rates are the destruction of money, an economic aberration based on the mistakes of many central banks and some of their economists who start from a wrong diagnosis: the idea that economic agents do not take more credit or invest more because they choose to save too much and therefore saving must be penalized to stimulate the economy. Excuse the bluntness, but it is a ludicrous idea.
Continue reading Negative Rates Are Coming to the UK and US. Protect Your Savings