The ECB ended its bond purchase program in January but European bank loans and deposits rose to new all-time highs.
All the growth came from the increase in mortgages outstanding, in what has become a long running saga.
Virtually free mortgage credit goes a long way to promoting a housing bubble.
The ECB is promoting one with negative interest rates.
While I was in France for 3 months this winter, I saw mortgages advertised at a 0.5% interest rate.
So, naturally, that begets a central bank subsidized bubble.
The ECB’s monthly data on the European banking system shows that without that bubble, the European banking system would be shrinking.
The ECB has created an illusion from which it cannot easily walk away.
Here’s why that’s critical to us as investors in the US markets.
Do you like gold? If you do, read on. And if you don’t, listen up!
There are good reasons to follow gold and the mining stocks, if only that they provide great swing trade profit opportunities. These can either be in line with, or counter, to the direction of the broader market.
Now I’m not one of those people who will tell you to have 10% of your portfolio in gold as an insurance policy.
Gold is a terrible insurance policy.
Sometimes its price is pro-cyclical with the broad market. Sometimes it is countercyclical.
And gold gets into these interminably long secular bear markets, such as from 1980 to 2001, when the only thing it insures is losses.
It has even been a very tough trade in recent times since 2011. What should have been a new 4 year cycle up phase beginning in 2017 has never really gotten off the ground.
But a recent 32-month pattern suggests that maybe, “We ain’t seen nothin’ yet!” Or maybe that’s wishful thinking.