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 Forecasting America's Destiny ... and the World's


Generational Dynamics Web Log for 3-May-2013
3-May-13 World View -- European Central Bank considers negative interest rates

Web Log - May, 2013

3-May-13 World View -- European Central Bank considers negative interest rates

Turkey's Erdogan will pressure Obama to intervene militarily in Syria

This morning's key headlines from

Hezbollah leader Nasrallah says he will defend Syria's Assad militarily

People watch Nasrallah on television on Tuesday (Daily Star)
People watch Nasrallah on television on Tuesday (Daily Star)

Syrian opposition leaders are denouncing the "threats" by Sayyed Hasan Nasrallah, the leader of Lebanon's Iran-backed Shia terrorist group Hezbollah. Nasrallah declared on television on Tuesday that Hezbollah was already active militarily in Syria, and that Hezbollah and possibly Iran would intervene further if necessary to prevent the downfall of Syria's president Bashar al-Assad. According to Nasrallah:

"Syria has real friends in the region and the world that will not let Syria fall in the hands of America, Israel or Takfiri [Salafist Sunni] groups. They will not let this happen.

We tell you that you [rebels] are unable to topple the regime through military means. After two years and based on facts on the field ... you have no ability to do so. This is the case when you are now only fighting the Syrian army and the popular forces loyal to the [government]. Up to this moment there are no Iranian forces in Syria.

What if dangerous developments occur, forcing states or resistance groups to step in the field in Syria? Whoever wants to save Syria ... feels sad for the daily bloodshed in Syria ... and does not want the Palestinian cause to be lost ... should push for dialogue and a political compromise."

The remarks were denounced by the Syrian National Council (SNC) leaders, who said that they had "hoped" that Nasrallah would act more responsibly, but they "have heard nothing but threats." Daily Star (Beirut) and Al Arabiya (Dubai)

Turkey's Erdogan will pressure Obama to intervene militarily in Syria

During an upcoming visit by Turkey's prime minister Recep Tayyip Erdogan to Washington, Erdogan will tell Obama that "it is clear" that the al-Assad regime is using chemical weapons. He said on Thursday:

"We will discuss the issue of chemical weapons with US President Barack Obama during my visit to the US. It is clear that [chemical weapons] are being used by Assad's regime. The opposition outmatches the regime on the ground, but the regime uses chemical weapons, war planes and helicopters. Air is the only field in which the regime is ahead of the opposition."

This is Turkey's first official confirmation that Syria has used chemical weapons, and Erdogan is pressing for Western military intervention in Syria. Zaman (Istanbul) and Hurriyet (Ankara)

European Central Bank considers negative interest rates

With the new bad economic data coming out of Europe almost on a daily basis, the European Central Bank (ECB) president Mario Draghi announced a lower interest rate of 0.5%, the lowest in its history.

Draghi had resisted lowering the interest rate because of fear of inflation. But the inflation rate in the eurozone has fallen sharply in the eurozone during the past month, so Draghi felt that a lower interest rate was justified. It's worth pausing a moment here to point out again that for the last ten years I've been predicting a global deflationary spiral during this generational Crisis era, while mainstream economists and various politicians and pundits have been predicting high or hyper inflation, and that they've been consistently wrong ahd I've been consistently right.

The second reason that Draghi has resisted lower the interest rate was because there was no reason to believe it would do any good. The ECB has pumped trillions of dollars into the banking system, allowing eurozone member nations to go even more deeply into debt at cheap rates, and artificially boosting stock prices as all that liquidity pours into the stock market. But none of the money is being loaned to individuals or businesses, so the overall economy is not being helped (which is what Generational Dynamics has been predicting).

So now Draghi wants to try something else: Make interest rates negative for money that individual banks deposit with the central bank (the ECB). That deposit rate has been zero for a while, but now Draghi is considering charging money to banks that want to deposit money in the ECB. The reasoning is that if an individual bank can't deposit its extra cash in the ECB, then it might loan it out to private individuals or businesses (which Generational Dynamics says won't happen). A negative interest rate is a sign of an accelerating deflationary spiral, since it means that cash is actually becoming more valuable with time, rather than increasingly worthless, as the inflation pundits have been claiming. Bloomberg

(Comments: For reader comments, questions and discussion, see the 3-May-13 World View -- European Central Bank considers negative interest rates thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-May-2013) Permanent Link
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