Question by Kalaki: If ECB monetizes, just what is the result of interest fees and the exchange fee in Europe?
If the European Reserve bank monetizes, what is the impact of interest rate fees and the currency exchange rate in Europe?
Solution by Uncle Leo
The conventional wisdom is that interest rates for Euro-denominated financial obligation would certainly rise and the value of the Euro would certainly fall in the money markets. However forecast is tough because the considerable quantity of government interference in the monetary markets is distorting common market forces. Also, the opacity of the derivatives market makes it essentially difficult to assess the net influence of by-products direct exposures. Money making of sovereign debt could be taken by connection vigilantes as capitulation by the Euro-zone. That would certainly exacerbate inflationary tendencies and the down trajectory of the Euro. The only means to manage the sovereign debt situation and maintain the stability of the Euro would be for the wealthier EU members repay the debts of the weak members. Opportunities of that taking place, nonetheless, are anyone’s estimate.
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