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Honest Information, Profitable Trading

Durudarshan - Investment Analysis

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The E.C.B.'s additional Stimulus....hooray!

Posted on March 12, 2016 at 10:39 AM Comments comments ()
It is certainly good news for the Euro Area nations, who have the Euro as their Mother Currency, all of them will surely benefit from the additional facility of 20 Billion Euros per month just announced by the Bank's President, Mario Draghi.  This is in addition to the 60 Billion Euros per month Stimulus already in place, feeding into the economy through Mortgage-backed Securities; it is envisaged that the additional Stimulus may be used for purchasing Corporate Bonds, helping in some measure to stimulate the economies further.  Hopefully, this will enable the corporations to upgrade their machineries and facilities, in tune with the new economy and the technological advances made in the last decade, hopefully creating many new jobs and training in the new technologies for apprenticeships. 

But regarding the main Stimulus (totalling some One Trillion and Eighty Billion Euros to the end of September 2016, being fed at about 60 billions per month), a lot of that money is said to be logjammed in the banks....lending it to the public and local businesses, be it even for mortgage-backed securities, will certainly help put it to use and translate into wealth....creating jobs, sustaining livelihoods, doing good to the community.  Money from its inert form of banknotes (or electronic transfers of same) can only translate into capital and wealth by being employed, in circulation.   That way, it will magnify, as it serves each one through whose hands it passes, for goods, products and services.  It is absolutely essential that the money be loaned out to the people.  Once a few people are given the courage to borrow, more people will wish to copycat and borrow, and once this virtuous circle starts, capital will acquire value, and interest rate may start to rise.....and with all the activity, perhaps inflation may start to rise as well.....inflation is surely created when there is demand for more than is available, and the price of goods can justifiably be increased, and people would be happy to purchase at a higher price.

I have earlier suggested that some of the capital can be donated to the cause of the beleaguered people of Syria, now camped in Turkey, Jordan, Lebanon, Greece, as refugees and migrants in constant transit.  I am suggesting that these people be given some kind of identity card, and given some cash sums in their names, and banked into bank accounts, so it is safe for them to use when they need.  This may create a worthwhile activity for the banks as well.  I pray some good can come out of this sad situation.  (The European nations I pray will aid Syria and all the people in the conflict there to agree to some continued cease-fires, so ultimately a larger peace can evolve.....the poor beleaguered people surely deserve a big period of peace for the foreseeable future to rehabilitate themselves, tend their wounds, and heal their hearts.   I pray the Peace Talks currently under way in Geneva under the capable guidance of the UN Peace Envoy Stephan de Mistura bears fruit, to the glory of God and all mankind.  Blessed are the peacemakers, for they shall be known as the progeny of God.  It is indeed so.  All the different sides are at war, believing they are sanctioned so to do with authority from Allah.  I pray therefore that all these honourable men and women shall know themselves too to be the sons and daughters of God (Allah, as we all also know Him) and agree to declare peace over their innocent neighbours.  The loss of 370,000 persons in this conflict is a dizzying figure - how has the conflict gone on, did it not occur to anyone that it is totally unjust?

When the refugees and migrants first turned up in Europe, some leaders and heads of corporations expressed the view that in the past inflows of immigrants had helped the economic wheel and raised the GDP figures.  Perhaps that would be a positive way of looking at this huge Exodus, this huge humanitarian crisis.  All the nations who are keeping these poor people and looking after their welfare, the best way they can, are worthy of humanity's thanks, and some compensation, towards the costs.

If everything is approached in a positive way, with the light of our Lord, hopefully positive developments will take place, and the results will be peace and continuation of the economic Recovery.  The huge stimulus certainly augurs well for the Euro Area and Europe.

Kind regards,
Durudarshan H. Dadlani

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NOTE : I hear the U.S. property market has improved by about $7 Trillion, since the collapse of 2008 and refinancing and restricting of that market.  Saying that $5 Trillion had been written off then, in 2008 and shortly thereafter, this means there has been a positive benefit of $2 Trillion.  That is worthy of celebration.