How the ECB plunders Pension Funds and Deposits

Are you one of the few chosen ones with euro savings at the bank? Are you shocked every time you go get your “profit” from the interest rates to see a handful of coins landing in your purse?  You complain to the bank and get the standard answer “There is nothing we can do, it’s decision by the ECB.”

That is the well-known European Central Bank that is holding interest rates at record lows and it is using the euro deposits, – 60 billion euro every month – to buy bonds of weak economies of the eurozone and to boost inflation. Mario Draghi calls it Quantitative Easing (QE).

You are not alone with your frustration. It was he himself personal, the Euro master, German Finance Minister Wolfgang Schaeuble who officially complained about the low interest rates policy of the European Central Bank.

End of March, Wolfgang Schaeuble has expressed concern about the impact on Germany of the European Central Bank’s interest rate policy and warned about the possibility of bubbles forming.

“We have an interest-rate environment that of course is causing huge problems for us in Germany, this is out of the question. The interest rate level is of course too low for Germany” Schaeuble said as the representative of a nation that is notorious for its saving traditions: bank deposits, pension funds, seniors’ care, real estate… you name it.

“ECB must defend its objective of price stability, but current monetary policy could lead to “mis-allocations of resources” and bubbles, Schaeuble added describing the ECB’s monetary policy as “a structural problem.”

Slowly but gradually we read more and more articles criticizing the ECB’s low interest rates policy, however it is worth noting that these articles comes from  German-speaking authors.

“Unintended consequences of the ECB

The ECB plunders the Pension Funds of the euro zone and other savings in a less obvious and more subtle way by the combination of interest rates of zero percent and creating inflation.

The money which has been robbed from savers in the euro zone […] is used to buy sovereign debt of countries in difficulties . As a result, the purchasing power of pensioners is reduced.

The ECB’s program of Quantitative Easing together with the zero interest rate policy has other unintended and negative consequences. Lots of cheap money leads to less risk aversion in investment and creates bubbles. The current stock market rally is  a sign for this. The real estate markets give also a big cause for concern. (Geopolitical Information Service)

As the author is a Prince from Lichtenstein he is a polite man and he sees no bad intention in the ECB low interest rates policy.

But Mario Draghi is satisfied with this development.

“The program is proceeding smoothly, the eurozone is benefiting […] from the bank’s newest stimulus bond-buying program.” Mario Draghi said at the ECB press conference on Wednesday, before he was confetti-showered by an anti-ECB activist.

Of course, Draghi is satisfied. it’s not his money, after all, therefore he can be as arrogant as he likes.

PS things could be even worse, like “negative interest rates” as the case in Switzerland and Denmark.