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In this case it seems more like the ECB that's shoveling free money to the Euro banks.
by ummonk 5y ago
In this case it seems more like the ECB that's shoveling free money to the Euro banks.
- landemva 5y agoYes, with 0.05% sugar at Federal Reserve because the loaned funds need to be deposited somewhere.
- Rexxar 5y agoI don't think it's in this direction: negative interest rates means that banks lose money when they let their money on ECB account so they have to use it somewhere else. Here, they use it to buy dollars.
- dragonwriter 5y agoNegative interest rates mean that banks get extra money for taking short term loans to cover reserve shortfalls, which sounds a lot like having better-than-free money shoveled at them.
- Rexxar 5y agoThey don't take this loans from ECB, but from other banks that don't want to let their money on central bank account.
- neilwilson 5y agoAnd the bank who had the dollars, why would they want money on account at the ECB on which they get charged? It's an exchange, not a conversion remember.
- Rexxar 5y agoThey have probably other reasons to buy euros (because they need them, not to put them on their ecb account). It's an exchange as you say, every participant has its own reasons to trade.
- neilwilson 5y agoBut that's a fallacy of first use isn't it. Somebody has to hold the money in their ecb account at some point, because everything is merely an exchange. You can't get rid of it. All you can do is move it around.