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The major economic problems we are facing today are caused by politics and exacerbated by central banks. With the bond-buying program, central banks createdMoral hazard, while they are now fuelling a recession with interest rate hikes. That's what stock market analyst Kees de Kort says in conversation with Paul Buitink and Joris Beemsterboer of Holland Gold. He therefore advocates the abolition of central banks. Banks and governments will then have to pay for the risks themselves and will therefore have to pursue a more sensible policy.
According to the stock market commentator, central banks should have raised interest rates much earlier, so that they now had the room to cut rates and ease the economic pain. But because they haven't done anything all this time, they're now in trouble. Due to high inflation, they have to take action to defend their own right to exist. And they do that by drastically raising interest rates, while that does not address the real cause of inflation. The causes lie on the supply side and not on the demand side. In an attempt to save their credibility, central banks are actually creating more economic problems, according to de Kort. "Politicians have made sure that the problems have become big with energy policy and lockdowns. And now the monetary authorities are taking it a step further."
Moral hazard
According to the stock market commentator, government bond yields should be left entirely to the market. Precisely because central banks always intervene by buying government bonds, any incentive for politicians to implement necessary reforms disappears. As an example, he cites the Italian government, which has been failing to implement reforms and make the economy more competitive since the 1980s. The culture of devaluing the currency has never gone away, as the ECB is still ready to intervene if interest rates get too high.
According to de Kort, Italian interest rates should simply skyrocket, so that there is finally an incentive for the Italian government to take measures. And if they can no longer pay the debts, then according to the stock market commentator, that is an Italian problem. The Dutch taxpayers should not have to foot the bill for that. That is now in danger of happening because the ECB wants to keep the currency union together and intervenes in the bond market. As a result, countries such as the Netherlands and Germany pay more interest than they would otherwise pay.
Inflation
According to de Kort, the skyrocketing inflation is also largely attributable to politics. Climate policy and sanctions against Russia have made energy more expensive, with the result that people can no longer pay their bills. But instead of addressing the causes of high inflation, governments and central banks are now pushing us further into crisis. According to de Kort, the failure of politics is the worst: "We did it all ourselves. It's the result of consciously made decisions and sticking to them."
