Who said that Halloween comes exclusively from Celtic culture? And that zombies are pure fiction? Well, no! Central banks and the monetary policy of the last decade are also responsible for the fact that there are zombies among us… Lots of zombies! And I must admit that they scare me.
Let me explain so that my irony is understood.
In the last decadewe have seen how central banks have relentlessly run the money-making machine to contribute to the financing of states and companies that have had an extraordinary opportunity to finance themselves at very low interest rates.
And this is when the living dead appear! Companies and states up to their eyebrows in debt that live “in the other world”and that wander among usthanks to the massive transfusions of money flowing through the veins of the economic system.
The monetary policy followed in recent years by central banks has changed the rules of the game.
On the one hand, there are the zombies – read deficit states in debt up to their eyebrows and companies in the same or worse conditions – that wander and crawl in the world of the living thanks to the fact that they are nourished by financial resources at a cost close to zero. as a consequence of the monetary policy pursued by central banks in recent years
Interbank Market: Three-month Euro Zone
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On the other hand, there are savers, who have serious difficulties in making their savings profitable using traditional financial instruments (mainly deposits and fixed-income assets),as a result of the current low, or even negative, interest rates.
But the effects of current central bank-led monetary policy do not end there. As low as inflation has been in recent years,the existence of negative real interest rates is a reality, making it very difficult for households to keep their savings without them being gradually swallowed up by inflation.
Against this backdrop,savers are being pushed to take greater risks to obtain higher returns by investing in (financing) these zombie states and companies of dubious solvency.
Savers are presented with a difficult choice. Either we allow ourselves to be sucked dry by negative real interest rates until our savings are wiped out, or we gamble our money on investments that may be more profitable while assuming greater risk in return.
Financial assets
Either we allow ourselves to be devoured by inflation or we feed the zombies by financing them. Difficult choice! Silly me who thought Halloween was only of Celtic origin and zombies were a fiction!