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Comment by misja111 | Hacker News Reader

Yeah it's not just the USD being strong but also the Euro being weak. Main reasons:

- the EU currently has a trade deficit. This is the first time ever. Reason is the energy crisis due to sanctions against Russia: energy prices have skyrocketed and EU is importing loads of energy

- the ECB has been printing money like crazy in the last 14 years. So far this money had been absorbed mostly by banks but slowly but surely it is starting to trickle into the real economy. Recently the ECB has finally increased interest rates and stopped buying Southern European bonds, however they had to start up their bond buying program again because Southern European government bond interest rates went up dangerously fast. This has undermined the belief that the ECB will be able to effectively battle inflation

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> Recently the ECB has finally increased interest rates

Did they? I thought they agreed (or iterated) that a rate increase is almost certain. But the increase itself is yet to happen (and it's not clear they are going to increase it by how much)

Mm you're right, ECB agreed to increase rates but the actual increase will happen only on July 21st.

> the ECB has been printing money like crazy in the last 14 years. So far this money had been absorbed mostly by banks but slowly but surely it is starting to trickle into the real economy.

This is wrong, none of the money the ECB "prints" goes out into the real economy (see [1] e.g.).

[1] https://themacrocompass.substack.com/p/tmc-6-all-they-told-y...

It definitely does go into the real economy. They mostly use the new money to buy government bonds, and governments end up spending it (mostly) on people, who then spend it on things. The article you cited is just an explanation of the (long, complicated) technical process by which this happens. The claim money printing doesn't cause inflation is mainly backed by the claim that most Americans used the money "printed" and given to them by the USG to pay off debts, thus destroying money again. But it doesn't really destroy money if you're printing money and then using it to pay off debts. It just devalues the debt itself, because the total money supply has still increased, so the repayments are worth less than the lender expected.

You can't use central bank reserves to buy government bonds! They're not legal tender.

You can't own central bank reserves at all, but all banks accept them for money transfers from other banks. That's how money transfers between banks work and being able to do that is why you have a bank account at all. Paying for things this way is as money as it gets.

Yes, central banks buy government bonds from commercial banks but that is irrelevant. The commercial banks effectively act as pass-throughs. They buy government bonds knowing that they'll immediately offload them to the central bank. The way money printing works in the modern economy is much more complicated than it used to be, but it boils down to the same thing with the same problems.

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