Has the European Central Banks forgot about its job? The Eurozone is speeding towards a crisis, which is in big part of the ECB’s own making, but the crucial problems stay untouched, while somehow the crypto domain has become the ECB’s new raison d’être.
Here’s what has happened – in brief ⬇️
Here’s how the ECB describes its own mission: “We work to keep prices stable and banks safe.”
Here’s the situation: Eurozone inflation hit 8.6%, in part because the ECB decided to play politics and printed absurd amounts of euro in spite of basic common sense.
Here’s how the ECB tried to handle it: only three full months after the American Fed started to raise rates did the ECB wake up and contrary to its previous announcements also declared its intentions to raise interest rates. This suggested a confusion and even panic within the ECB’s walls, which have easily passed on to the European markets.
Here’s the problem risen from the ECB’s lamentable “handling”: the difference between Eurozone countries’ interest rates (the spread) started to grow, putting heavily indebted countries like Italy at risk of debt crisis (their bonds become a bigger risk for investors, who expect higher yields for taking the risk, which pushes the rates higher, which in turn makes repaying countries’ existing debt more difficult, which increases the risk…)
Here’s how the ECB tried to handle this one: last month it announced it will be buying vulnerable debt, which would imply for example that for every German bond coming to maturity the ECB would buy an Italian one. This would not only be unpleasant for countries like Germany, but also, as the ECB will find itself pumped with risky debt, very dangerous for the euro.
Here’s what ECB is working on now: no, not the solution for tackling inflation or keeping the Eurozone together. The ECB is very preoccupied… by the DeFi, stablecoins and Bitcoin mining.
Mrs Lagarde has been pushing the EU lawmakers to regulate crypto as much as possible (or not possible, she is not in the habit of going into details). She has applauded the MiCA and the new crypto AML regulations and called for a MiCA2, to stifle crypto even more.
This week the ECB has issued another report on “crypto financial risks”, where it argued that “stablecoins are anything but stable” (of course they have extrapolated the example of one very special – algorithmic – stablecoin on the whole domain of collateralized stablecoins🤦♀️)
It has also published an article accusing Bitcoin of being anti-environmental (statement denied so many times, but mostly… since when the ECB is in charge of the climate?)
Looking at this relentlessness on the crypto issue, we cannot help but wondering: is it a way to distract us from the ECB’s incompetence? Or Bitcoin does become too dangerous of a competition?