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When the drugs don’t work

Published Tuesday, February 9th, 2016

When the drugs don’t work it is time to put the priest on notice that he may be called at any minute to perform the last rights. Yesterday the stock markets had another day of panic, this time over bank shares particularly those in Europe. QE and low interest rates are not working but they remain the favoured and only tool available to the Bank of Japan and ECB to keep their patients alive.

As it becomes ever clearer that the drugs are losing their potency the gloom deepens on the prospects for economic growth. Banks do not make money in a negative interest rate environment nor one in which the risk of corporate and sovereign default rises. This is the background to yesterday’s bank share tantrum that saw the Eurostoxx 600 index of leading bank shares fall by 5.6% with Deutsche Bank the biggest faller at -11.8%. By the end of the day France’s CAC 40 had lost 3.2%, Germany’s Dax 3.3%, the FTSE 100 2.7% and the S&P 1.4%.

We are told that there will not be a repeat of 2008 but the doubts are growing. Such concerns however are nothing to Google who awarded their CEO $199 million in shares making him the highest paid executive in the US. One can only assume that Google are supporters of Bernie Saunders in handing him such a PR gift. Capitalism and free markets are under enough threat from their traditional enemies without “friends” like Google giving them a helping hand.

to read the rest of the report, please click here

Posted by David Hufton