Negative interest rates don't help mend a broken economy

I've been following commentary from central bankers who feel poised to tell the market that if things don't come right with the amount of stimulus already being pumped into the system then there's a possibility that negative interest rates could come into play.

We've seen the likes of Sweden, Denmark, Switzerland and more recently the ECB lower rates to below zero in the hope of dissuading those sitting with hordes of cash in the bank accounts from keeping high balances in their bank account and instead withdraw it in an effort to stimulate the economy that's been sieged by deflation. 

The Fed Chair Janet Yellen came out not so long ago stating that if the economy were to weakening enough the monetary policymaker couldn't discount the use of negative rates which at the time spooked the market into thinking Fed members saw greater risks than what was presenting itself at the current time. 

Before that suggestion was made by Yellen, there were many on social media calling for the introduction of QE 4 which can only be described as absurdity as the markets reliance on free money is starting to imitate that of a junky realising that it was less than a year ago that Fed stimulus had stopped. We can't hide from the facts that these monetary easing programs has help lift most stock markets around the world as this money needed to find a home where returns were higher than the arbitrary low level of interest paid for keeping it in a bank account.  

If one considers the state of European politics and the mess that's been created by socialist governments promising the world yet delivering nothing that has led to somewhat of a revolution by voters demanding that the promises that were made be met. The problem comes where you have a nation that refuses to work and rather rely on social payments as a means to earn an income or where the retiring age has been dropped as low as 55 in some cases. 

The massive amount of debt racked up to fund this social experiment has reached new heights to the extent that it has resulted in many governments falling prey to being too reliant on this money and not doing enough or rather being squeezed when it comes to raising revenue for government to implement such policies.  

This all falls back on the ECB to pull a rabbit out the hat with no political cohesion taking place it forced to do whatever it takes to prevent deflation from gripping the economic region which is why Mario Draghi is on a continuous fight to ensure the eurozone doesn't fall victim to the same fate being felt in Japan.   

However the point being that politicians too easily fall back on the ECB for help because they themselves cannot maneuver as they come to the party with a bag of promise but are threatened to implement austerity measures from lenders leaving them stuck between a rock and a hard place. 

One such case was when Greek prime minister Alexis Tsipras called a referendum vote to decide whether Greece should accept bailout demands from lenders. The desperation EU leaders will go to after they know very well that what they are proposing is simply impossible is simply gobsmacking especially when it concerns a vote of which the voter must decide if the process whereby Greece must implement austerity measures to secure bailout is tantamount to asking a 6 year old child if misbehaviour deserves appropriate consequences. 

To add some flavour to the hold saga, Tsipras merely negotiated himself into more stringent measures that were proposed to him before the Greeks rejected the bailout terms meaning there's only more problems to come in the future. Simply a case of kicking the can down the road. 

In conclusion, an economy operates with two policy frameworks that are used to speed up or cool down a economy and that's the fiscal and monetary policy. There's only one predominant policy in play right now and that's the ECB. The longer governments hold out on fixing their economies the deeper the troubles will get for the eurozone.