Go Draghi go!
Today, The ECB lowered the interest rate. Good? Yes. A lot of people argue that interest rates should not be too low for too long. I buy that argument. But looking at the facts it shows that, for many people and companies in Europe, interest rates haven’t been low at all. To the contrary. During the worst crisis since the Great Depression and in times of serious disinflation ‘real life’ rates in countries like Spain (21% unemployment the moment) and Italy (‘only’ 12% but extremely high ‘broad’ unemployment) were actually increasing, thanks to Eurozone monetary policy. It is only recently that rates are coming down, again. It will take years before we can start to talk about ‘too long’ for these countries (though we might have to introduce a land tax to prevent house price booms in the few areas with low unemployment). Low interest rates are no cure for all ailments. But high rates were killing these countries. Or in fact: households which are evicted from their houses as they can’t pay high interest ‘legacy’ mortgages and companies which go broke.