Knot doubts about purchasing program – Financieele Dagblad (Registration)

Knot doubts about purchasing program – Financieele Dagblad (Registration)

The buying government bonds is a monetary horse agent. Possibly it only works temporarily from the positive exchange rate on inflation and the economy.

That, President of De Nederlandsche Bank (DNB) Klaas Knot said Sunday in the television program Buitenhof. He gave it to doubt on “the necessity and effectiveness’ of the aid announced by the European Central Bank this week.

Error!

Knot confirmed in the program that he voted against the exceptional ‘abnormal’ aids . Het Financieele Dagblad reported that last week, according to insiders. Asked whether the ECB commits a historic mistake to buy up to € 1,140 billion in bonds Knot replied: “I hope not ‘

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Klaas Knot

Reuters

Earlier, other countries already buyback operations, quantitative easing or QE in the jargon, is performed. In the US, the UK and Japan, the central banks of many hundreds or even thousands of billions of repurchased own government bonds. The estimates of the range has worked there. “If you already believe that it worked there, alleged that success is not just projecting on the eurozone,” Knot said.

Exchange Channel

He said that QE leads to a depreciation of the euro. Through this channel strengthens the competitiveness of the euro area and gives a boost to the economy. The only question is how long that momentum continues to work and how large it is. Knot suggested that the Netherlands has

always had a strong currency and that the purchasing power has shored. It made a gradual wage possible and as Netherlands remained competitive. QE is so reasoning is not required.

Knot said the buy-back program is not intended to rid banks of their loans. It is mainly non-bank parties which targets the ECB. For example, pension funds and insurers must be tempted to hand in their documents and using the proceeds to buy riskier paper. If they are then also outside the eurozone do then this reinforces the effect on the exchange rate.

The banks can just get on a regular basis money from the ECB. These settings can bring loan collateral in Frankfurt and before then get resources that they can then use to lend to businesses and citizens.

Inflation

He acknowledged that inflation is low in the eurozone. But he stressed that core inflation, which the oil is disregarded for more than a year is very stable. According Knot were concerns about deflation, a prolonged period of falling prices, not acute enough to interfere in now.

If the ECB buys bonds, there is a potential for redistribution wealth between countries where the risks are shared. However, at the announcement of the buyback program is said to risks largely not be shared. In addition, there is a chance that monetary easing leads to financial bubbles.

Present

The fall in oil prices above Knot ‘a gift’, as well as the cheaper euro. Knot expects both elements will make the economy well and that there is room for tax windfalls.

About the Greek elections Knot said that the outcome does not change the challenges facing Greece is. It is according Knot not raised that the country gets out of the euro.