Decoupling economic output

If we have a decoupling between dept volume and bond interests, because of the low interest rates (and the disconnection of the risk premium, therefore) and the possibility of borrowing at the European Central Bank for government bonds, we go towards a dependence of economy from the state, as sociologist Benjamin Lemoine is outlining in an article in the newspaper „Le monde diplomatique“ („Zwischen Draghi-Dogma und Schulden-Orthodoxie“, Le Monde diplomatique, swiss edition, January 2022). Banks buying state bonds as securities and reselling (or scalping?) them, as mentioned above, e.g. to the European Central Bank, is in principle the same system that led to the financial crisis in 2008 when papers had been resold between banks with their risks, with the exception that we might be convînced that state banks and states hardly will go bankrupt and that the bonds are secure, therefore. State bonds might rest on liabilities like natural resources and on real economy, therefore, but as economy is depending more and more from state securities we do have a certain cycle of value and lending that could be decoupled from economic output.

Furthermore we still do have bad depts in the western financial system that were bought from private banks by state banks to stabilise the system. These papers have to be neutralized somehow what might affect the bond market because they are transformed in liquidity (central banks do print the money needed) and go back to the financial system as money ready for, e.g. market interventions of the states which could be another reason for a reduced coupling of the performance of real economy and working capital.

P.S. The financial interventions of the state could lead to a devaluation of state bonds.

Last Update: 18:12