Munich Re Gives The ECB The Middle Finger, Owns Almost 300,000 Ounces Of Gold
by Secular Investor
ZeroHedge.com
03/20/2016
Last week, we reported on the ECB’s decision to cut the interest rates and how Mario Draghi said ‘helicopter money’ is ‘an interesting concept that is being studied’. In the accompanying Q&A session, Draghi also said he did not expect the ECB would have to reduce the (already negative) interest rates even further which disappointed the markets. In fact, the disappointment was so big, the ECB already sent one of its members into the trenches to walk back on that statement.
In an interview with the Italian newspaper La Repubblica, the ECB’s chief economist said that the ECB would not mind reducing the interest rates once again. Not only did he leave the door open for further rate cuts, he also explicitly mentioned helicopter money as an extreme but theoretical solution for the lack of liquidity on the European markets.
‘He also said that so-called “helicopter drops” were feasible in principle, though they remain an extreme measure. “All central banks can do [helicopter drops]. You can issue currency and you distribute it to people,” he said. “The question is, if and when is it opportune to make recourse that sort of instrument which is really an extreme sort of instrument,” he added.’
This means the ECB is still willing to increase the liquidity in the Euro-system by all means, and this very likely is the first time a central bank is openly discussing helicopter money (the remark by Ben Bernanke during the Global Financial Crisis was more a tongue-in-cheek comment). On top of that, the message of negative interest rates seems to be well understood by some companies in the financial system.
Munich Re, one of the largest reinsurance companies in the world, has said it will increase its cash hoard as it doesn’t want to pay a fee to the European Central Bank to store the cash there overnight. This is a first step of a problem we already warned for about two weeks ago. We said that any further reduction in the negative interest rate would have to go hand in hand with banning cash from ‘the streets’. That made a lot of sense, considering people would just start to hoard cash under their mattresses to avoid paying an annual fee to store cash on the bank, and even if people would withdraw just 10 or 15% of their savings from the banks, the entire financial system might implode.
The Rest…HERE
