New York, NY (PRWEB) July 16, 2012
To Michael Lombardi, lead contributor to Profit Confidential, the desperation of central banks to boost economic growth around the world is very apparent. Lombardi cites the European Central Bank (ECB), which cut interest rates to a record low of 0.75% in response to the financial crisis gripping the eurozone, and the Central Bank of England, which increased its asset-purchase program by another 50 billion pounds, for a total of 375 billion pounds.
“The ECB stated afterward that risks to economic growth were to the downside, but that inflation was under control and did not show signs of reigniting,” notes Lombardi.
In the article “Money Printing Like Never Before,” Lombardi says that lowering interest rates does very little to stimulate economic growth among the 17 nations that make up the eurozone, but it may alleviate pressure on eurozone banks as interest rates in Greece, Italy, and Spain continue to climb.
“Of course, ‘asset-purchase’ is just another fancy term for quantitative easing (QE) or good old-fashioned money printing,” says Lombardi.
Since the Central Bank of England currently has interest rates at 0.5%, which is where they have remained since 2009, there really was not much room to move them lower, Lombardi states, so the only other option for them is money printing.
“If consumers in England, as in the eurozone, are overly indebted and are afraid to spend because of the financial crisis, how is this extra money going to help stimulate economic growth?,” asks Lombardi.
Lombardi does note that it will certainly help the banks.
“Lower interest rates relieve pressure on banks as they transact business every day,” says Lombardi. “The problem is that lack of confidence in economic growth and high debt levels signal the average consumer is hard-pressed to spend to get the economy going again.”
Lombardi also highlights that the People’s Bank of China—China’s central bank—cut its interest rates for the second time in a month.
“The problem is that China is an export country. With its largest customer, Europe, in a recession and with the U.S. headed towards recession, China feels the effects,” says Lombardi.
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Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.
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Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.