Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

After a Decade of Monetary Stimulus, Germany on Cusp of Recession

  by    0   0

Germany appears to be on the cusp of a technical recession.

Production in Germany fell by 1.9% in November. Analysts had expected a 0.3% gain. The German statistical agency Destatis also revised October to a 0.8% decline. It was the third straight month of declines.

As WolfStreet put it, “This is embarrassing in the land of super-stimulus via the ECB’s negative-interest-rate policy and years of QE that were supposed to perform miracles.”

The German production index dropped an ugly 4.7% year-on-year in November when adjusted for inflation and calendar differences.

Germans also saw negative GDP growth in the third quarter of 2018. The precipitous drop in production in November signals Germany could be heading toward a second straight quarter of negative economic growth – the technical definition of a recession.

And it doesn’t look like things are going to get better anytime soon.  Destatis also reported that new orders in manufacturing – a harbinger for future production – dropped 4.3% in November year-on-year.

So, what’s going on in the German economy? Well, basically the same thing that’s going on in the United States, but on hyperdrive. America is likely heading in the same direction. Just last week, Peter Schiff said the stock market bubble has popped and the US economy is next.

I think this bear market has a long way to go. We’re still much closer to the top than the bottom. And the worst part is not really the bear market, but the economy, which is headed for a worse recession than the one that we now call the Great Recession that we had in ’08 and ’09.”

What popped the bubble?

The Federal Reserve took away the easy money punch bowl. And the European Central Bank is in the process of doing the same thing in the eurozone.

When it comes to stimulative monetary policy, the Federal Reserve has nothing on the European Central Bank. The ECB recently announced the end of its QE program. The central bank’s QE purchases totaled somewhere in the neighborhood of  2.6 trillion euros. The bank also pushed interest rates below zero. So, what did the EU get for all this stimulus? Not a whole lot. We recently highlighted the “successes” of ECB QE. And now that the European Central Bank is winding down the stimulus, it already looks like Germany – and a lot of other EU countries – is slipping toward an economic downturn.

WolfStreet summed it up nicely.

And this economic slowdown is occurring despite, or perhaps because of, the mother of all stimuli engineered by a major central bank – negative interest rates and massive QE – that has benefited a few hedge funds who were able to front run the ECB’s bond buys and make a quick buck, and bond traders for a while, as bond prices were rising due to falling yields. And it has allowed even junk-rated companies to borrow money for a song from beaten-down investors, savers, and pension funds. But this stopped a year ago. Since then corporate bond prices have fallen as yields have risen, particularly at the riskiest end of it. Stocks are down sharply across the EU too, with the German Dax down 20.5% from its 52-week high a year ago … It’s just a bitch when the massive central-bank stimulus that messed up so much produced so few if any lasting economic benefits. And all these economic activities described above were taking place even when the ECB was still pursuing its QE, including buying corporate bonds, to repress returns for investors and the cost of borrowing for even the riskiest companies. “

 

Gold IRA Rollover to 401k

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Why Don’t Millennials Care About Gold? Actually, They Do

Gold Flows into ETFs for Second Straight MonthDo millennials get gold? If you embrace the stereotypes, you may think not. After all, millennials have both feet firmly planted in the digital world. Gold is pretty “old-fashioned.” You might assume they would be far more interested in cryptocurrencies. Or perhaps you just figure millennials aren’t investing at all. But as it turns out, […]

READ MORE →

The Fed Isn’t the Only Game in Town: The ECB Takes a Decidedly Dovish Turn

All eyes will focus on the Federal Reserve as it wraps up its June meeting. But it’s important to remember the Fed isn’t the only game in town. Moves by the European Central Bank also have a significant impact on the global economy (and the gold market) and it has taken a decidedly dovish turn. […]

READ MORE →

China Dumps More US Treasurys

China dumped more US Treasurys in April, selling off another $7.5 billion in US debt, according to the latest US Treasury Department data.  This follows on the heels of the biggest US Treasury selloff by the Chinese in nearly 2 1/2 years in March. Over the last two months alone, the Chinese have dumped some […]

READ MORE →

China Urges International Community to Find Alternatives to ‘Weaponized’ US Dollar

In an opinion piece published yesterday, a Chinese government newspaper called for the international community to find alternatives to the global dollar system and warned “capricious actions” by the United States government could “ruin the future of the dollar itself.” This is yet another sign that the world is getting tired of the US weaponizing […]

READ MORE →

How High Can Consumer Debt Go Before the Bubble Pops?

Consumer debt climbed to a new record once again in April. The question is how much money can American consumers borrow before the bubble pops? Americans borrowed money at the fastest pace in five months in April, according to the latest Federal Reserve Consumer Credit Report. Total consumer credit increased by $17.5 billion. That’s an […]

READ MORE →

Comments are closed.

Call Now