August 20, 2014
Sometimes I am convinced it was completely by design, and not a weird little coincidence, that one of Germany's most sprawling red light districts is just steps away from the European Central Bank.
This fact becomes comically obvious right around happy hour... as self-congratulatory ECB economists and their bureaucratic bank underlings crowd the bars and cafes after work which are simultaneously frequented by pimps, thugs, and other assorted low-lifes.
One would be forgiven for legitimately asking the question: which of these professions has done more damage to humanity?
My [fiat] money's on the bankers.
These are the same financial luminaries who, recently, crowded aboard the good idea bus and decided to take interest rates NEGATIVE.
Their logic was that prices aren't rising enough. This was actually the headline this morning that ran across the Rai (Italian news) ticker while I was consuming some egg-like substance at the hotel breakfast buffet this morning in Rome.
The newsman said something to the effect of "Low inflation makes economic problems worse in Europe."
Ah, yes. Precisely. The problem isn't an absurd level of over-regulation, massive unsustainable debt, insolvent banking systems, idiotic politicians, etc.
THE problem plaguing the entire continent... the problem behind sluggish growth for all these years... is that consumers aren't getting screwed fast enough.
It's hard to even know where to begin with such an epic level of stupidity. First of all, it's not even true.
Having just spent the last few months traveling across most of the continent, I was astounded to see the speed with which prices had risen in many places.
I just capped off a week-long vacation with my fellow teammates at Sovereign Man in Italy... same place as last year... and I was charged a whopping 50% increase over last year's rates.
But this sort of truth doesn't matter to an economist who actually believes in his 'science'. It is this 'science' of economics which tells us that outsized government debts are irrelevant. That awarding the power to conjure paper money out of thin air is a sound, credible system.
Yet it's not working. Much of Europe (like Italy) has fallen back into recession.
Even here in Germany, which is supposed to be some sort of econo-mythical superhero carrying the rest of Europe around on its shoulders, the government just announced that the economy contracted last quarter.
Whatever these economic policymakers are doing, it's obviously not working. So naturally the solution is to try more of the same. Much more.
They've already taken certain interest rates into negative territory. The expectation now is that they'll ratchet rates even further into negative territory.
In doing so, they are effectively screwing hundreds of millions of people. Every single person on the continent who is a responsible saver. Every pensioner. Every retired schoolteacher. Every student. Everyone who works hard for a living and can already barely make ends meet.
Their lives are all about to get a lot more difficult.
Even for the well-heeled, life has become quite stressful. Think about it-- there's almost no place left anymore to hold your savings.
Putting cash in a bank practically GUARANTEES that you will lose money on an inflation-adjusted basis. Stocks are at precarious all-time highs. Bonds are at all-time highs. Many real estate markets are back in bubble territory.
These people have destabilized nearly every major asset class in existence.
On the balance, I'd rather deal with the seedier characters in this neighborhood rather than the suitpanted PhDs pretending to do honorable work.
I want to share more with you about this... not only my thoughts, but those of my colleague Tim Price.
Tim is a regular contributor to this column and one of the few people in professional finance for whom I have tremendous respect.
Tim joined us earlier this week on our group vacation in Italy, and I fortunately had the presence of mind to record our conversation; his insights are absolutely not to be missed.
I encourage you to give a listen here: