US-EU competition, Draghi asks European savers to invest on the continent
Mario Draghi says that the gap from the economy USA and that of Europe is very broadconsequentially 500 billion euros (half a trillion) per year for several years would be needed. Naturally I have no data to refute or support the reasoning of the former President of the ECB, but taking the amount and the argument at face value, the question always arises: “Where do we get all these trillions of euros?”.
Draghi suggests asking those who have liquid assets and, if I understand correctly, directly from savers. And here’s the question: in exchange for what? Even having a great open-mindedness How do you plan to involve the various European states by draining savers’ liquidity? With debt securities or something else? Let’s hypothesize that this is possible and maybe even with something attractive the enormous market demand, for the next 5 years, would reach the beauty of 2,500,000,000,000 (2.5 trillion euros).
Do we have that much savings out there? Now let’s suppose that Mario Draghi has a really interesting recipe that produces income, jobs and economic expansion, thus being able to align itself with the US market, who will govern a revolution of this magnitude?
Assuming that multiplication parameters for the speed of circulation of money are used, even just twice, we would get 1 trillion a year which is not a modest sum and if we then spread it over a five-year period the amount becomes monstrous.
As I wrote earlier, for the moment I have no way of doubting Draghi’s recipe who said in Ghent in Belgium: “To delude yourself that the public money of individual states is enough is in any case in vain, because ‘it will never be enough'”. Draghi gave clear indications, albeit in the form of questions or suggestions: on public funding at a national level, he underlined that it is necessary to evaluate how much “fiscal space” the new stability pact can guarantee to individual countries”.
Well, asking the market for such a considerable amount seems a bit utopian to me; indebting the EU could lead to an endless spiral, printing money is only possible if the ECB agrees with the requests and objectives (obviously it is necessary to present the financial plan), it would also be necessary dissolve all the ties and snares that still hinder the possible budgetary flexibility of the various states.
So what to do? We could resort to a bank or insurance guarantee which has a much more modest cost which can vary from 0.20 to 1%, guaranteed by all European states, and to be even more optimistic let’s say that the economic and financial returns for the EU they should amply cover the “debt” contracted, always admitted and allowed to find banks or insurance companies willing to cover it. Utopian? I don’t know, but at the moment I haven’t found any other low cost alternatives for these huge amounts. We await further developments and numbers to be able to calmly evaluate how this ambitious project can evolve.