podcasts | “Banks are subsidized by the government”
Boot argues that this situation means that high inflation can no longer be reduced. “It means that inflation will never go back into the bottle easily,” if this situation is maintained, says Boot. He describes the current situation: ‘Banks can deposit their money with the ECB at 3.25%. For this, they return an average of 0.4 percent to savers. This means that the banks are currently subsidized by the government at 2.85% per euro.’
Low-interest mortgages
According to Boot, banks consider this situation desirable because there are many outstanding mortgages with low interest rates which ‘also don’t reflect the correct current situation’. “There must be money somewhere, right?” Boot then sees that the bankers can no longer save themselves. “If this is the situation, then we are in a world where bankers can no longer bank. Then they have to be helped again every time something changes.”
“Money has completely detached itself from the underlying real economy.”
The economist is therefore adamant: ‘Money has completely detached itself from the underlying real economy. The only way to regain faith in the financial economy and in money is to anchor yourself in the real economy.” That’s what caused the banking crisis, says Boot. “Suddenly we see money coming out of the banks, just based on rumours. They can’t keep any more money.’
“Flying Anchors”
The task of fixing these “anchors” in the real economy rests with the ECB, says Boot. «In their communication they must trace the financial event back to the real economy. It may sound abstract, but the bottom line is that governments translate their spending into concrete services within society.’
He especially points to the many government compensation measures. ‘They simply lead to more consumption. When the government invests in public transport and interprets it as an investment in the capacity and strength of the economy, it has struck anchor. But the anchor has not been touched if compensation is given, because it is identical».