Easy to make money
PIM of SPAIN | July 30, 2009 at 09:16 amby
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In Europe the banks do a good business, almost as good as in the United States. They borrow money from the European central bank (ECB) and then lend it back to the government.
“The ECB loans money at low rates to the banks - hoping to encourage consumer and business lending. In June, for example, the banks borrowed 442 billion Euros at a fixed interest rate of 1%. But lending to business and households is at its lowest level since records were kept, and are slowing down,” reports the International Herald Tribune.
“In May, Europe's money supply grew at a 3.5% annual rate,” is reported in the same article. “But lending to the private sector in June slowed to 1.5% from 1.8% a month earlier. Loans to nonfinancial corporations actually fell in May, while lending to households grew at less than 1%.”
If they didn't lend the money out, what did they do with it? Well, they did lend it back to the people they borrowed it from. In June the banks bought $75 billion worth of government bonds and lent nearly $30 billion directly to European governments.
Of course, the banks are doing fine. They earn money without taking the risk of lending to the real economy. But what good does it do for the economy? None.
Only higher bonuses for the bankers themselves, so easy is it to make money. Looks like a stimulus scam.
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