Scotiabank skriver i en forskrap til den kommende uge på de finansielle markeder, at ECB næppe vil skyde mere med likviditets kanonen for at stimulere væksten, fordi mere likviditet synes effektløs.
The problem is that monetary stimulus in the Eurozone is of diminishing effectiveness. Witness the softer-than-expected take-up of the Targeted Long-Term Refinancing Operation loans on September 18th in the first offering. They came in on the lower side of expectations with only €82.6 billion in loans offered at the practically free 0.15% rate for four years. The next offering in December will be more closely watched when QE bets might hang on the results. What’s that about how you can lead a horse to water but can’t make it drink? This is the ECB dilemma here when operating in the liquidity trap. Inelastic demand for money won’t borrow sufficient funds at any rate. What they do with such funds is another matter. Perhaps sit on the free loans and substitute away from higher-cost funding? I’m just surmising here as, like most economists, I’ve never actually made a loan in my life. Nevertheless lenders need borrowers and they’re not in a terribly upbeat mood within a system that is already flush with liquidity while lenders are getting no term premium to take risk given how remarkably flat the base yield curves are. Your reward for lending to the German government for 10 years instead of one is that at least you won’t lose money on negative front-end yields but at sub-1% for 10s you also won’t recoup long-term inflation risk. Who’d lend in that environment?
