'..Sinn points out that most of the crisis countries are still far from having regained competitiveness, which can be largely deemed an unintended consequence of the ECB's interventions. Since private capital markets have been undercut via the printing press, Germany's banks and insurers are no longer able to earn interest rates that adequately reflect risk .. Indeed, central banks are ultimately robbing savers everywhere these days. The prudent are forced to pay for the mistakes of those who have been irresponsible and have squandered their capital.’<blockquote>'Sinn then points out that the ECB, via its lowering of credit rating standards for central bank refinancing, enabled the national central banks in the periphery to undercut capital markets. Much higher interest rates were demanded in the capital markets, reflecting the higher risks in the crisis countries.
The conditions offered by the ECB in terms of refinancing were such that banks in the still healthy countries could no longer compete with it. In short, the ECB has driven away private sector competition in the capital markets of the periphery. This has contributed to the further fragmentation of European capital markets, since without the lure of higher interest rates, private investors have no good reason to take the risk of investing in the crisis countries. Higher interest rates would however have forced these countries to save more and enact sweeping structural reforms of their labor markets and government finances, which would ultimately have made them more competitive and lowered their ingrained balance of payment deficits. Sinn points out that most of the crisis countries are still far from having regained competitiveness, which can be largely deemed an unintended consequence of the ECB's interventions.
Since private capital markets have been undercut via the printing press, Germany's banks and insurers are no longer able to earn interest rates that adequately reflect risk. Insurers have been forced to recall the return guarantees that have traditionally extended to their policyholders.
Sinn stresses that the advantages accruing to German debtors via low interest rates must be seen in the context of the fact that Germany is actually a net creditor to the world, not a debtor. Creditors are losing out when interest rates are artificially lowered. It is as though “
the ECB were acting as a purchasing agent of German savings, which it then services and distributes to the crisis countries at whatever conditions it deems appropriate”. Sinn estimates that the crisis countries have enjoyed €205 billion in interest savings due to the ECB's interventions, interest that exporters of capital such as Germany would otherwise have earned.
Sinn concludes that “
it is not entirely wrong in this context to talk about the expropriation of German savers by means of low interest competition via the printing press.”
Indeed, central banks are ultimately robbing savers everywhere these days. The prudent are forced to pay for the mistakes of those who have been irresponsible and have squandered their capital.’
- Acting Man,
Hans-Werner Sinn on the ECB and TARGET-2, November 2013</blockquote>
Context<blockquote>
'..ethics in particular .. absolute principle of ethics..'Banking Reform(Banking Reform) - 'Ten Real Problems, Fractional Reserve Lending..'</blockquote>