This Article is translated by DeepL Translator. The original Article is in German and can be found here
Bail out, helicopter money and other Tricks of central banks and states.
Two days ago I posted a video with several topics.
Covid 19: a.k.a. Scapegoat
Gold & Kryptos: why they fell
Yield curves: now things are getting really tight
REPO shops: Alarm signals since September 19
What ever it takes: My opinion and topic of this article
In this article I would like to discuss the measures taken by the central banks and shed light on the situation of the "one-person company" ( EPU ). In relation to the situation in Austria, although it is likely to be similar in other EU countries.
In order to understand what is happening today, we first have to look into the past.
Let us start with the interest rate level before the last crisis. At that time a savings deposit with a commitment of up to one year still generated 3-4% in interest rates. After the dotcom bubble at the beginning of the 2000s, interest rates also fell considerably, but from autumn 2005 they slowly returned to the level of the 1990s.
In terms of interest rates, one could speak of a sustained stabilisation of the economy and the dotcom crisis was overcome. As sustainable as it is possible in a fiat currency system.
Since the last crisis, savings interest rates have not even come close to pre-crisis levels and have been somewhere in the 0.xx range since 2015.
This has put EPUs under pressure. I have been through this myself and I am still going through it.
A big problem in Austria for EPUs is social security. The issue here is not whether or not social security makes sense, but rather data collection.
Social insurance refers to the data from the tax office and calculates the insurance contributions based on the profit. The problem lies in the duration from data entry to effective assessment.
It is quite possible that 1.5 years will pass before the effective taxes are fixed. As the social security accounts for about 27% of the profit, this results in quite respectable amounts, depending on the profit. These amounts must/should now be put aside for about 1.5 years and if possible not become less. And this is exactly where the problems start, the amount melts away just because of bank fees, if we add the targeted inflation of 2% p.a. it gets even worse and interest income is unfortunately not an option.
If an EPU wants to be on the safe side, it has to set aside 50% of the generated turnover, in words: "fifty percent", in order to be able to pay taxes and social security without stress. Most EPUs and many small businesses are hardly able to do this, let alone save up reserves for the current situation. So these companies must and, in my opinion, should be supported. I am talking about facilitating payments and deferring tax and social security premiums, so that companies have room to breathe. But that brings another problem to light, and such deferrals and payment facilities only postpone the problem into the future. Social security and taxes will be paid at some point.
So much for the situation of EPUs and small businesses.
Both in the United States and in Europe, the motto "what ever it takes" has been issued. No matter how much money needs to be printed, we will do it. It should be noted that WE means the taxpayer.
For several years now we have been told that the economy is stable, that the banks are better off than ever and that everything is great.
This, of course, raises some questions in the current situation:
Why is it actually not possible for EPUs and small entrepreneurs to build up reserves for 2 to 3 months in case of a collapse in sales due to external influences?
How can it be that whole branches of industry have to be supported by governments and central banks?
How can it be that banks, see Italy, must be subsidized by the state?
As mentioned at the beginning of the article, after the dotcom crisis, savings interest rates have risen back to pre-crisis levels, which, at least superficially, signals that the crisis is over. If we start from savings rates, it must unfortunately be said that the last crisis is not even close to being over and that the whole economy has survived for so long only because of cheap money from the ECB.
This extremely low interest rate level has put savers, EPU and small entrepreneurs in a very unfortunate position, as they were not and are not able to generate reserves. We see a further worsening of the situation on the political side. How is it possible that small entrepreneurs and EPUs have to work for about six months for taxes and social security only (in Austria)? This is a tax burden which, plain and simple, is an absolute madness.
The imminent support of entire branches of industry - we are talking about around 870 billion euros here - and the ECB's bond and share purchases are once again creating completely false incentives. As a result of the cheap money of recent years, many companies have become more indebted than would actually be economically viable. It is precisely these companies, which have been on the brink of ruin for some time, that are now being supported by the taxpayer. This encourages a large part of the companies to do nothing in the future, because the taxpayer will step in. At the same time, however, companies that try to work economically and stand on solid ground are punished. Their taxes are also used to support these zombie companies, which account for 10-15% of all companies in Europe.
If these zombies fall, the banks will go along with them and the 870 billion will not be enough by far
What used to be true for the banks, namely that the taxpayer pays for them, now applies to the entire economy.
These completely false incentives will blow up in our faces. Attempts are being made to put out fires with petrol.
The real disaster, however, lies in the fact that the very institutions that caused the whole tragedy, namely the ECB and the Member States, are seen by the general public as saviours and are in no way called to account.
Another effect we can look forward to is the tacit introduction of new laws and regulations that will further restrict our freedom. An example of this is the abolition of cash. Since cash is so terribly dirty, which it is in fact, it is far too dangerous to continue using it. However, I am not aware that cash has become dirtier since Covid 19.
I'm sure there will be some other restrictions and if the cover of AML and terrorist financing is no longer enough to justify it, Covid 19 will step in.
Another action that has obviously already been decided in the United States is helicopter money. Every citizen will receive a check for $1000 at his free disposal.
Sooner or later we will see something like this in Europe, but the general public does not understand what this means.
Prosperity has nothing to do with the amount of money in the account, but with the amount of products and services we can afford with it.
So far, inflation has not really had an impact on the real economy. 75-80% has flowed into the financial economy and the real estate market, where it has caused stock prices to rise and property prices and therefore rents to rise. Daily shopping has not yet been affected as badly.
But with helicopter money, the artificial currency expansion and thus inflation will arrive directly in the real economy.
A few will take the helicopter money and immediately take it out of the fiat currency system and invest in precious metals and crypto currencies, all others will use it for purchases and the like and after a while they will wonder why all prices have risen. If things go really badly, we will slide into hyperinflation in the near future through such actions and with the given money we might be able to buy a loaf of bread. By the helicopter money is only very short-term real help suggested, as soon as the inflation is through we will wish the helicopter money had never existed.
Those who have immediately taken the money out of the monetary system will laugh up their sleeves, because the precious metals and the crypto-currencies will probably go through the roof.
So, that was my personal opinion. Please write me your opinions in the comments so that this article will be an added value for all readers.
In this sense
Tschüss Euch
Translated with www.DeepL.com/Translator (free version)
