Ignacio Marco-Gardoqui: The party is over


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The real estate financial crisis at the end of the first decade of the century arose as a consequence of the bursting of the irrational bubble to which the markets had arrived as a result of practically unlimited monetary availability. Interestingly, the medicine applied to cure this disease was to inoculate the system with the same active ingredient that had caused it. Thus, the monetary policy practiced since then throughout the developed world has been based on the contribution of huge amounts of money, at ridiculous rates. In this way he has weathered, with more pain than Gloria, a situation that never really got off the ground.

Later, when things got worse due to the appearance of the pandemic and to avoid the complete collapse of the economy, the balance sheets of the central banks were increased even more, with new contributions of money and interest rates were lowered. even negative levels.

In the end, this anomalous situation has led to inflation that threatens the stability of the Western economy. We always tend to attribute the responsibility for this inflation to the rise in prices of raw materials, mainly energy. But there is no doubt that the actions of the central banks in monetary matters have also caused enormous inflation, fundamentally of financial and real estate assets that are not included in the CPI.

The news that the Fed will end the monetary party by not renewing its debt purchases and raising rates – is expected four raises of 0.25% each throughout the year -, has been widely reported in the media. Not so the reasons given by the regulator to adopt such a drastic cut, which have gone unnoticed. He said that his main concern was to maintain the stability of the economy and that the greatest danger for him was excessive inflation and that is why he felt compelled to fight against it, tightening monetary policy, whose past laxity is one of the causes that most affected him. affect.

The situation in Europe is relatively similar. Enough to expect similar behavior from the ECB. It may differ in the intensity of the withdrawal of the stimuli and in the deadlines for action, but whoever thinks that the monetary party is over is not mistaken also on this side of the Atlantic.

Apart from its implications in the financial markets and the increased cost of financing as a result of rate hikes, there is a Spanish derivative that we should watch. You may have noticed that we haven’t talked about the risk premium for years. It is so, because it has disappeared. And it has done so because investors had the guarantee, from behind, of the ECB, which bought national debt products as if they were pipes.

If that guarantee disappears or is modulated, as a consequence of the withdrawal of the stimuli, investors will begin to discriminate the rates required based on the guarantee offered by the issuer, as It is logical and usual. The question is obvious: Do we enjoy a good reputation, as a country that complies with budgetary orthodoxy? The answer, sorry, is no. And that answer leads us to another question: Will they therefore require higher rates to subscribe to it? The answer, I feel it again, this time is yes.

We continue: How will this extra cost affect our deficit? From the reduction of which expenditure chapters will the necessary millions come out to compensate for the excess cost of the debt? Here the answer is simple. No one knows, because no one thinks of her.

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