Europe Slowly Sinks Further Into the Abyss of Timidity

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


Europe’s grand experiment in negative interest rates is about to get a teensy bit grander, but not everyone is happy about it:

Analysts and portfolio managers said they remain skeptical about the efficacy of negative interest rates in stimulating growth and inflation. “The key difference this time is that the market is much less receptive to the idea of the ECB generating inflation than they were a year ago,” said Jack Kelly, head of global government-bond funds at Standard Life Investments.

….Markets anticipate that the bank will lower the interest rate it pays on overnight commercial bank deposits by 0.1 percentage point in March, to minus 0.4%, investors say.

It has long been taken as axiomatic that a motivated central bank can generate inflation whenever it wants. But is this true? In theory, it still is: if a central bank creates a vast enough pool of new money, eventually inflation has to follow. But in the real world, there are political limits to just how vast such an expansion can be, as well as plain old limits on the amount of nerve that central bankers have. So now the question is whether it’s still true in practice that a central bank can generate inflation at will. It sure looks like the answer might be no. And if that’s the case, there are also limits on the amount of monetary stimulus that a central bank can provide.

And if that’s true, then the only way out of Europe’s hole is with fiscal stimulus: lots of countries running big deficits for a good long time. But that doesn’t seem to be in the cards either. And so we’re stuck.

THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

If you value the reporting you get from Mother Jones and you can right now, please consider joining your fellow readers with a donation to help make it all possible. Whether you can pitch in $5 or $500, it all matters.

If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

payment methods

THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

If you value the reporting you get from Mother Jones and you can right now, please consider joining your fellow readers with a donation to help make it all possible. Whether you can pitch in $5 or $500, it all matters.

If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate