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 most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
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

Fed Set to Buy Risky Small Business Loans from Banks

The Federal Reserve keeps coming up with new and creative ways to get more people deeper into debt while simultaneously shielding banks from any risk.

READ MORE →

The Great Government Gold Heist of 1933

Yesterday marked the anniversary of the great government gold heist of 1933 ordered by President Franklin D. Roosevelt. On April 5, 1933, the president signed Executive Order 6102. It was touted as a measure to stop gold hoarding, but it was in reality, a massive gold confiscation scheme. The order required private citizens, partnerships, associations […]

READ MORE →

What About Silver?

There’s been a lot of focus on gold with the crashing stock market and economic chaos set off by the coronavirus economic lockdown. But what about silver? There were reasons to be bullish on silver even before the bottom fell out of the stock market. In its 2020 Market Forecast, the Silver Institute projected that […]

READ MORE →

Fed Launches International Repo Facility

In yet another unprecedented attempt to keep the air in the financial bubbles, the Federal Reserve announced the establishment of an international repo facility. The repo facility will allow foreign central banks and other international monetary authorities to enter into repurchase agreements with the Federal Reserve. According to the Fed announcement, FIMA account holders can […]

READ MORE →

Stimulus Bill Throws Veil of Secrecy Over the Federal Reserve

Last week, Congress passed a $2 trillion stimulus bill in an effort to offset the economic impacts of the coronavirus. Most people have focused on the $1,200 checks to Americans and bailouts for industries hard-hit by the economic shutdown. But the 883-page bill does a lot more than that, including empowering the Federal Reserve to […]

READ MORE →

Comments are closed.

Call Now