We must be getting closer to the global asset bubble bursting or the end of central bank intervention, or both since the latter is likely to cause the former. How do I know? Central banks and the international agencies that support their policies have already begun the blame game, in order to deflect criticism from themselves when the bubble does burst.
European Central Bank President Mario Draghi started the process two weeks ago. With the troubles at Deutsche Bank, Germany’s largest bank, perhaps as his reference point, Draghi struck back at European bankers’ criticism of the ECB’s negative interest rate policies, which the banks blame for their difficulty in turning a profit. While accepting some of the responsibility for that, he instead said a good part of the blame belongs to the commercial banks themselves.
“Low-interest rates tend to squeeze net interest margins owing to downward rigidity in banks’ deposit rates,” Draghi admitted. “But over-banking is also a factor in the current low level of bank profitability. Overcapacity in some national banking sectors and the ensuing intensity of competition exacerbates this squeeze on margins.”
He was quickly seconded by other members of the European establishment, who make the rules that others have to live by the best they can. Continue reading "Central Bank Chutzpah"