Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

ECB Application Of MMT And The Effects On Precious Metalsb

By Bart BrandsCommoditiesJul 30, 2019 09:44AM ET
www.investing.com/analysis/ecb-application-of-mmt-and-the-effects-on-precious-metalsb-200446998
ECB Application Of MMT And The Effects On Precious Metalsb
By Bart Brands   |  Jul 30, 2019 09:44AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The application of parts of Modern Monetary Theory by not only the Federal Reserve in the US but even more so by the European Central Bank seem to be the new norm. This week why delay in rate cuts is not the end of rate cuts and what this can mean for your savings and the price of precious metals.

ECB Decision

Wednesday was an important day for the markets. Analysts assumed that ECB President Mario Draghi might us some of the “big guns" just before his departure to give the economy a new boost. Lower interest rates and perhaps a new stimulusprogram to fuel inflation. However, it was decided to leave interest rates unchanged and that decision was received as disappointing by the market. Stock prices fell and also show a mixed picture a day later as a result of the decision.

September

Investors are now hoping for September. The chance of not only reducing interest rates even deeper in negative territory (now -0.4%), but also "stimulating" the economy by starting a new buy-back program has been identified by the market as possibilities for the month of September.

The False Reason And Disastrous Consequences

Time and time again, a decision to lower interest rates and implement QE, a the lack of inflation is mentioned as argument. That inflation is determined on the basis of a basket of products and measured monthly. However, this way of measuring inflation can be influenced. An example is on the ECB's website and concerns cars.

“Example: Car prices may have gone up but new models often include, as standard, features that were previously sold as optional extras (for example, satellite navigation systems, air conditioning and airbags). In such cases, the price increase is due partly to an increase in quality and not only to inflation. If car prices went up, say, 5% on average but 1% of this were due to quality increases, then the HICP would reflect a 4% increase for this product.”

This example shows that inflation can be kept artificially low. In addition, some products are not included and therefore do not show a clear view of actual purchasing power. And that purchasing power is dropping if you ask people in the streets about their perceived reality.

So the population experiences the reality overy differently from the central bank. Price increases of, for example, living space, energy and basic necessities do not seem to be noticed or taken into account and the hunt for inflation continues.

Precious Metal Protects

In recent weeks and months, gold, but also silver and platinum have shown a sharp rise in terms of euros and dollars. We see that even more in the more than 70 currencies in which gold recently hit record prices. These currencies may be a bellwether of what is to come. That which is to come seems to be a collective response to, among other things, interest rate decisions by central banks that continue to hunt for inflation on the basis of pseudoscientific evidence and which are in fact, in reality are being felt by many for years.

In that case, the postponement of rate cuts, but the announcement of measures in the near future is also postponement but not a end of a further increase in the value of precious metals that have been protecting against the most extreme policy making for centuries.

ECB Application Of MMT And The Effects On Precious Metalsb
 

Related Articles

Monica Kingsley
Bulls Getting Caught In Whirlwind By Monica Kingsley - May 11, 2021 9

A seemingly uneventful and tight range day on the S&P 500 gave way to extraordinary selling once the 4,220 intraday support broke. The bulls obviously have quite some damage to...

ECB Application Of MMT And The Effects On Precious Metalsb

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email