Interest rates should go up and not down in Europe, to protect the Euro

The monetary authorities in Europe are falling into a trap of new thinking (completely mistaken) of economic issues. They are listening to the americans, and allowing the euro to go down the sink, either pushing Europe to print money or to reduce interest rates. Europeans are running around like chickens without their heads and allowng this pressure in. Raising interest rates in the euro zone will fight the inflation that is rising and at the same time give investors confidence to remain invested in the commom currency. It might be expensive to run the debt but it will give a boost to confidence. Investors are not being rewarded to run the risk and they will run away and let the currency disappear. Risk-reward is the name of the game and interest rates should go up. Raising the interest rates for the euro will protect the euro-zone. The market corrects itself to some extent but we are facing a total lack of confidence and the only ones gaining for the time being are the governments of Germany, Holland and France, but its not sustainable in the short run. They should hike short term rates to at least 3% a year and then we would see a complete turnaround in the situation.

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One Response to Interest rates should go up and not down in Europe, to protect the Euro

  1. Paulo says:

    Ola Ricardo, sempre acompanho seu blog. Falando de bolha imobiliaria, os anti-bolhas dizem que o crédito imobiliario é apenas 5% do PIB, bem diferente dos EUA onde era 100% do PIB, porém mesmo com 5% do PIB o aumento dos preços foi astronomico, bem maior que os EUA, imagine se fosse 100% do PIB. Gostaria de entender o porque de um percentual pequeno do PIB (5%) no credito pode aumentar tanto o preço dos imoveis, mais que os EUA que foi 100 % do PIB.

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