Tuomas Malinen @mtmalinen PhD econ. Chief Economist of GnS Economics. Adj. Professor of Economics @ Uni Helsinki. Economic growth, economic crises, monetary unions and central banks. Sep. 26, 2019 1 min read

There's again turbulence in the #ECB. The resignation of S. Lautenschläger, a senior German member, was a shock to many.

However, behind her departure is a long list of bad policy decisions. 1/
@CNBCJulianna @oliviabvoz @CNBCJou @Amdalleq @DiMartinoBooth
 https://www.wsj.com/articles/germanys-lautenschlager-resigns-from-ecb-board-11569435363?redirect=amp 

That list starts from the 'Outright Monetary Transactions' (OMT) program, the #ECB launched to bring down the borrowing costs of countries during the 2011/2012 debt crisis.

In this M. Draghi succeeded 👇, but the price was steep. 2/

Many don't know, but the "zombification" of the European economy started from the OMT program.

This recent article documents that the OMT program enacted zombie lending.👇

So, the price of rescuing the #Eurozone was an economic decay. 3/
 https://academic.oup.com/rfs/article/32/9/3366/5298322 

Things got materially worse, when the #ECB enacted negative interest rates in June, 2014.

Slowly but surely they started to erode the European banking sector, which has been in a bad shape since the 2008 crisis.

Recently, banks have hit back 👇. 4/
 https://www.ft.com/content/c1cb8374-b903-11e9-8a88-aa6628ac896c 

To "seal the deal", the #ECB started its asset purchase (QE) program in March 2015.

It pushed sovereign bond yields to unnatural lows:  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2933567 

And further eroded the banking sector by pushing them towards riskier lending.👇5/
 https://gnseconomics.com/en_US/2018/03/15/quantitative-tightening-to-boldly-go-where-no-cb-has-gone-before/ 

Our banks are teetering, capital markets are in a bubble, zombie corporations are abound and #recession looms.

The #ECB has effectively destroyed the economy of the #Eurozone and left no ammo for the impending #recession. 6/

So, is it really a surprise that, as last stand against the destructive policies of the #ECB, one of it senior member resigns?

No, because the ECB has become the biggest risk to economic and financial stability in the #Eurozone. 7/

We just have to hope that someone will stop this money conjuring madness before it also destroys our monetary system.

Our judicial system (ECJ) has become a joke by allowing the ECB to (effectively) break the Article 123 of the TFEU with its QE. 👇 8/
 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E123:EN:HTML 

Our hope now lies with the German Constitutional Court and/or some brave politicians, who would have the courage to rally against the #ECB madness to save what's left of our economy.

In any case, the situation is dire. 👇/end
 https://gnseconomics.com/en_US/2019/09/24/crisis-preparation-ii-the-eurozone/ 


You can follow @mtmalinen.



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