this post was submitted on 21 Sep 2023
121 points (82.7% liked)
Europe
8324 readers
1 users here now
News/Interesting Stories/Beautiful Pictures from Europe ๐ช๐บ
(Current banner: Thunder mountain, Germany, ๐ฉ๐ช ) Feel free to post submissions for banner pictures
Rules
(This list is obviously incomplete, but it will get expanded when necessary)
- Be nice to each other (e.g. No direct insults against each other);
- No racism, antisemitism, dehumanisation of minorities or glorification of National Socialism allowed;
- No posts linking to mis-information funded by foreign states or billionaires.
Also check out [email protected]
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
I am not an economist by any stretch but I've understood this much: The ECB literally can create money out of thin air. The issue is just that money in and of itself is meaningless. The interesting bit is the ratio of money in circulation vs. goods/services available for purchase.
Even expanding the money supply doesn't "magic money up out of the air" in the sense to which I'm referring.
If the ECB expands the money supply, it generates inflation. That effectively taxes everyone holding euros or euro-linked assets and transfers the real wealth associated with that to whoever winds up with the new money being created.
Actually, it can't. The issue is not printing it, the issue is issuing it: The way reserve banking works is that when the central bank wants to increase the amount of money in circulation it lowers the interest rates banks have to pay for ECB euros, which the banks then use to give out loans in private bank euros (hence reserve bankings -- the banks can lend out more book money than they hold in ecb money).
The reason why the Eurozone has been in deflation or just barely scraped past is that the banks weren't willing to give out loans -- they were consolidating, reducing risk, because believe it or not they don't like being nationalised and having bureocrats breathe down their neck. (if nothing else that gets in the way of shady business).
There were talks about "helicopter money", that is, right-out giving every citizen money, no questions asked, to spend, an excellent idea but the thing never materialised not in the least because the infrastructure to do it simply isn't there and getting politicians to cooperate in something that looks suspiciously like a UBI (even if short-term and all in all a low amount) is an uphill battle. It's probably one of the reasons why the ECB is now thinking very loudly about a digital euro as then they could simply do it based on the stability mandate they already have.