Low interest rates and the risks involved

Since the last financial crisis , there is only one strategy of central banks - low interest rates. In Europe, however , the Governing Council must make monetary policy for the entire euro area , not just for individual countries.

As the current economic situation it is different in the countries of the Euro - Fed is anything but boring.


The short-term investments are often below the inflation rate. The negative real interest rates are very annoying for savers .

Much more important and dangerous I find the situation in other financial market segments . The Investors are willing to accept much higher risks in exchange for a possible higher rate of return.

The consequences are then stretched valuations in market segments . For example, in corporate loans, or the increased M&A activity that drives the consolidation of markets.

Jens Weidmann ( Bunde Bank President ) has even spoken of a "creeping expropriation of German savers ". This is too far also for me . The expansionary monetary policy is justified in terms of the price outlook .

Nevertheless, the growing risks associated with incremental duration of measures considerably .

For one thing we should not forget:
These processes and countermeasures are not intended to help us out of the crisis . The structural adjustments in individual euro area countries are inevitable!

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The Great Gold Crash

In the face of the current single day fall in the gold prices I have to ask a question after the sense of all this...
For no apparent reason the gold prices have plunged more than $100 an ounce in a day?!

Actually I compared the basic principles of the financial, derivatives, futures markets and stocks with the rules of casino games. But after the current events and developments in gold prices I am not sure, if there are any "rules".
During my MBA study I have learned a lot about the principle of arbitrage and the dynamic of the market that should guaranty the fair prices on the markets.

So the questions are:
"What is the "real" and "fair" gold price?"
"And why the gold prices crashed now?"


To be honest, we do not know. We cannot say exactly, even in retrospect, what happened, because fundamentally nothing has changed in the gold market. Gold is still one of the scarcest commodities in the world.

The analysts named two reasons for the current crash for gold prices (of course published after the crash!:-):
Firstly, many investors feared that Greece, Spain and Italy could soon be throwing large amounts of their gold reserves to market.
Second, China has reported weaker than expected economic data.

Both reasons do not make any sense for me and I cannot accept these as a trigger for the crash. The "large amounts of their gold reserves" are still too small and wouldn't have any bigger impact on the market.
And the sale of the gold reserves would have catastrophic consequences for the reputation of the countries with investors.

I tend to the steep thesis that some investors would bet on the falling gold price and then denigrated the market successively to even conjure up the fall in prices at which they earned then.

The reason remains unclear, but for me (for us all) doubts quickly rise if under these aspects we should build our pension plans based on this fundaments...:-/

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