The European Central Bank, under Italian banker Mario Draghi, cut its bank deposit rate below zero in an effort to â??avert the dangerous threat of deflationâ? and to spur the â??sluggishâ? euro-zone economy.
European monetary policy gradually has shifted toward more and more inflation. It started off with a hard-core resistance to inflation under a Dutch president of the European central bank, then made way for a Frenchman, and now an Italian has taken over.
The idea is to encourage bankers to start making loans instead of depositing their funds with the central bank. In the United States, the Federal Reserve actually pays interest on bank deposits. Not surprisingly, U.S. banks are not lending to small business like they used to.
Read more about whether the European Central Bank’s rate cuts are a good or bad thing for the global economy at Eagle Daily Investor.