Mario Draghi signaled that the ECB would be moving away from interest rate cuts towards "unconventional" measures in the future. He also said the governing council did not want to send the signal that rates can go into unlimited negative territory.

Negative rates are seen as a way to weaken a currency and help boost inflation, but Draghi's comments have seen the euro rocket today.  Maxime Alimi, Senior Economist at AXA Investment Managers, says the ECB has now all but given up on trying to manipulate the currency in favour of trying to boost growth through QE.  "The ECB no longer counts on a weaker euro to raise inflation, perhaps for fear of a reaction from the Federal Reserve. Therefore, we do not expect a significant depreciation of the euro, going forward", said Alimi.  "Conversely, the interest rate channel and the portfolio rebalancing channel are coming back to the fore. If our assessment is correct, don’t fight the ECB: European peripherals, high yield and equities stand to benefit."

 Following the capital deficit of almost 8 billion Euros, the regulator of the Austrian financial market (FMA) has imposed a moratorium on the payment of the debts of Heta on March 1st, 2015, which will expire on May 31st, 2016.  "The Finance Ministry has said that Heta is not insolvent, and the guarantees offered by Carinthia and the federal government for Heta's debts will not be affected by the decision", Reuters wrote at the time. The suspension of the payments of Heta has been justified by the need to draw up a resolution plan, which would ensure equal treatment of all creditors, according to the press release of the FMA.  Back in 2015, the Austrian Finance Minister said that the bail-in procedure will also be applied to creditors, as the Bank Recovery and Resolution Directive (BRRD) was transposed into the country's national legislation and came into effect on January 1st, 2015.  Now, honoring the government's debt doesn't seem to matter in Vienna anymore, and judging by his own statements, the minister of finance is convinced that the financial situation of the country and its borrowing costs will not be affected.  Unfortunately, reality, in particular the one that is giving the European authorities nightmares since the beginning of the crisis, does not "bend" to political will. Frances Coppola further writes that "Carinthia's insolvency will lead to a heavy fiscal adjustment for Austria, amid an increase in borrowing costs", and the "value of no risk investments will see a massive drop, because government can no longer be considered safe". "The implications, not only for the financial stability of Austria but for that of Europe as well, are terrible", the Forbes journalist concludes. If we also add in the uncertainties concerning the application of the bail-in framework, it is almost certain that Europe will need bigger crises than the Brexit and the refugees' "cover" the growing cracks in its financial foundation. 

The Austrian authorities have taken yet another step on the mined field of financial "stability" of the so-called hard core of the Eurozone. Amid the nearing of the deadline for the moratorium set on the payment of the debts of Heta Asset Resolution, the bad bank set up for the takeover of the non-performing land of Hypo Alpe-Adria, the creditors have been presented with the buyback terms for the bonds guaranteed by the land of Carinthia. Their total par value is 11 billion Euros, and the "offer" includes the payment of 75% of the par value for senior bonds and 30% of the value of subordinated bonds, which means a total loss of approximately 3.2 billion Euros for lenders. "Creditors that refuse the offer could wait for as long as ten years for a ruling of the judicial system in their favor", said Hans-Joerg Schelling, the Austrian finance minister, according to Bloomberg. Schelling further said that "the offer is excellent", according to Bloomberg, and creditors "should be rational and accept it". For the buyback of the Heta bonds, Austria has set up a special investment vehicle, Kaerntner Ausgleichszahlungs-Fonds (The Fund for the Payment of Compensations of Carinthia). Unfortunately for the authorities in Vienna, the notion of "rational" is understood differently by creditors. "What the Austrian authorities have done is unprecedented in the developed world: they have announced a figure that they consider acceptable and they have asked the creditors to accept the offer", the partner of Swiss company Gold Partners AG who owns 200 million Euros worth of Heta bonds, told Bloomberg. The list of creditors that oppose the offer includes far bigger names however, such as German banks Commerzbank AG and NordLB, as well as PIMCO, the American investment fund manager owned by Allianz AG.  Bloomberg estimates show that the exposure of those who have rejected the proposal of the Austrian authorities is about 5 billion Euros and represents approximately 45% of the total debt, as the terms of the offer are non-negotiable, and its acceptance by two thirds of the creditors involves its unconditional application and for the other creditors as well.

The European Parliament backs the monetary policy carried out by the European Central Bank to guarantee price stability but warns that its effect won't last without structural reforms, budgetary discipline and productive investments in the Member States. Moreover, the risks of the ECB's unconventional measures need to be monitored carefully, the European Parliament cautions in its Annual Report on the European Central Bank.  Tom Vandenkendelaere MEP, Shadow Rapporteur and Member of the European Parliament's Economic and Monetary Affairs Committee, calls for a multi-tiered approach to stimulate growth and job creation: "We support the ECB's efforts to increase inflation to under but close to 2%, and its policy to increase the supply of money is slowly yielding results. However, we should not be blind to the risks of this approach and carefully monitor for negative side effects. In addition, Member States should deliver on their part and carry through the necessary reforms and productive investments to boost economic growth and employment."

Tom Vandenkendelaere is appreciative of the ECB's efforts to increase transparency and maintain close ties with the European Parliament: "Thanks to the ECB's efforts on greater transparency, most central banks are now in the habit of explaining important monetary decisions to the wider public."

The UN’s office for human rights has said refugee minors in Bangui, in the Central African Republic (CAR), have accused EU flag-wearing soldiers of sexual abuse. Two local girls, aged 14 to 16, said they were raped by peacekeepers in the Eufor-CAR mission. Two others, in the same age group, said they were paid for sex. Three of the four girls said the soldiers were from Georgia, which contributed 140 members to the EU’s 700-strong operation. Refugee children also accused French soldiers in the Sangaris operation, a unilateral mission. A seven-year old girl said she performed oral sex on a French soldier in return for a bottle of water and a pack of biscuits. A nine-year old boy said he, and several others, were abused. Children also accused UN peacekeepers. The UN assistant secretary general, Anthony Banbury, said on Friday (29 January) he knows of four new cases in Bangui. He said there were 22 UN cases in Central Africa last year, and 69 in total in the UN’s 16 missions around the world. Zeid Ra’ad Al Hussein, the UN high commissioner for human rights, said, also on Friday, she alerted the EU, Georgia, and France on 19 January. She said she was “heartened” by their reaction. But she added: “Far too many of these crimes continue to go unpunished, with the perpetrators enjoying full impunity. This simply encourages further violations.” Banbury told press in New York: “It’s hard to imagine the outrage that people working for the United Nations in the causes of peace and security feel when these kinds of allegations come to light.” The Guardian, a British daily, said he was close to tears. For its part, the EU foreign service said it has “a zero-tolerance policy as regards sexual misconduct or criminal activity.” But it added that “responsibility for any investigation, disciplinary or criminal action remains in the hands of the contributing states.”  The Georgian defence ministry said: “In case such grave crimes are proven, perpetrators … will be brought to justice.” France made similar promises.  The EU sent Eufor-CAR to Central Africa in April 2014 to protect refugees in a brutal civil war. It pulled out in March 2015. Troops mostly came from EU states Estonia, Finland, France, Latvia, Luxembourg, the Netherlands, Poland, Romania, and Spain.  Georgia, an EU and Nato-aspirant state, sometimes takes part in EU operations.

What is happening now is extremely dangerous because it could easily lead to a repeat of the 2008 financial crisis, only on steroids. If you look up a graph of global oil demand, you will note that, except during brief recessions, oil demand always goes up. That is because new oil consuming machines, which perform more work than humans alone could ever hope to do, are constantly being built. Last year China alone built 22,000,000 new vehicles. The world population is increasing, and globalization has displaced manufacturing far away from where products are finally consumed. So more oil is continually needed. Ask yourself what has to happen if all the oil the system needed wasn't available. It follows that since there is no substitute for petroleum in transportation that can replace the energy now obtained from oil in any reasonable period of time, the economy would be forced to shrink. Wishing won't deliver goods from China to the US, or move people to work, or fly tourists from the EU to the Olympics in Brazil. The price of oil could go to $300 a barrel, and the amount of oil produced could only be expanded so fast. It takes time to find oil and drill wells. Any shortage caused by lack of investment in oil exploration today, will take time to remedy. Therein lies a potentially dangerous condition - the time delay getting new oil to a refinery. With the record level of debt just about everywhere, and with interest rates near zero, a recession caused by a physical shortage of oil could rapidly transform a shrinking economy, otherwise known as a recession, into a financial collapse that takes down the banks and everything else. We could regret that today's low oil prices caused the search for replacement supplies to virtually disappear. That could be the thing that pops the global debt bubble that has been blowing for the last 35 years. That experience would be a lot more unpleasant than expensive gasoline or diesel fuel. All this talk of shutting down US shale producers is silly. Any shutdown forced on them by a world oil price at which US shale can't compete will only be temporary. Even if most of the current US frackers go broke, so what? The oil is still there and somebody owns it. When prices rise, as the Saudis pray, back will come the frackers. And what with Iraq coming back on stream, the oil world has changed, not that Saudi seems to have noticed. OPEC has never been anything other than a price fixing cartel and the sooner it collapses the better.

EU Member States have accepted, on Tuesday, the European Commission’s (EC) proposal to invest 217 million euros in 15 trans-European energy infrastructure projects, according to the EC. Of this amount, Transgaz will receive 179.3 million euros for development in Romania of a gas pipeline that will link Romania to Bulgaria and Hungary, part of of the broader BRUA pipeline, intended to reach Austria.  Of the 15 projects selected by the Commission, 9 are in natural gas (which will receive financial assistance of 207 million euros) and 6 in the electricity sector (which will benefit from a total aid of 10 million euros). Divided on other considerations, of the 15 projects, only two are construction works, with a total funding of 188 million euros. The other 29 million euros will provide the necessary funding for studies and analysis for 13 projects. “With this funding we will help secure supplies and we fully integrate the European energy market by connecting networks across Europe. We must continue to modernize our energy networks to bring any isolated country in the European energy market”, said the European Commissioner for Energy, Miguel Arias Cañete. In total, for 2014-2020 were allocated 5.35 billion euros for energy infrastructure of trans-European energy infrastructure under Projects of Common Interests label.

Despite the evidence that migrants from the Middle East and Africa are continuing to flee war and poverty in their home countries and will strike out to Europe again in huge numbers this year, European leaders have taken no major new steps to curb the flow. Nor have they agreed on a comprehensive border policy or prepared for another influx that could rival last year’s, when more than a million asylum seekers reached the Continent, many of them headed to Germany.  Prime Minister Manuel Valls of France issued a stark warning in an interview broadcast on Friday about the future of a unified Europe, saying the very idea was under threat unless the Continent could protect its borders.  Speaking to the BBC at the World Economic Forum in Davos, Switzerland, Mr. Valls said the Continent could not accommodate the enormous numbers of migrants and warned that they could destabilize European societies. “If Europe is not capable of protecting its own borders, it’s the very idea of Europe that will be questioned,” he said. “Europe has forgotten that borders are required.”  The Schengen zone, which permits largely unchecked movement across most of the Continent and was described by Mr. Valls as “one of the great European projects,” has been under severe strain as countries have introduced border controls aimed at stemming the flow of migrants.

Germany’s industrial production has slipped to ZERO per cent and customer confidence has plummeted in just part of a catalogue of disasters for Chancellor Angela Merkel.  A fall in Germany's prosperity could drag the eurozone down with it - a scenario becoming more likely amid growing signs of the country's slowdown.  The country has the biggest economy in Europe and is where a large portion of the bloc's wealth is created.   Germany's money has helped the eurozone struggle ahead, despite the ailing finances of Italy, Spain and Greece.  If the German economy crumbles it could start a domino effect that would pull down other countries' economies with it.  That would also be a huge hit to Britain as Europe is one of the UK's biggest trading partners.  The biggest shock facing Germany is the slowing global economy, which spells disaster for its export-driven growth. China is one of Germany's biggest markets, and its falling demand is expected to hit home hard. France is one of Germany's closest trading partners and its economy is struggling, further dampening demand for German exports. Expert Peter Lundgreen, head of investment firm Lundgreen's capital said: "German exporters are feeling the pain from the slowdown in business investments in many emerging market countries, as commodity prices have tumbled."  Germany's industrial output has helped underpin the country's economic growth - but these numbers have been undershooting expert expectations for months.  Domestic consumption has also powered the country's growth over the past year but consumer confidence has been falling since June last year, which indicates that consumption is set to fall too, Mr Lundgreen added.

"We have a clear aim with the Energy Union. It is to strengthen the security of energy supply and increase energy efficiency at an affordable cost", said András Gyürk MEP, the EPP Group Shadow Rapporteur, after the adoption of the European Parliament initiative Report on the Energy Union. "It is up to economic actors to decide which projects make economic sense and what could be the potential of extraction projects in the area of energy. The European Parliament must do its best to provide a sound regulatory environment that includes strict standards with regards to climate, health and environment", Gyürk said. An important brick in the construction of the Energy Union is the plan to achieve a goal of 10 percent cross-border interconnectivity in the internal EU electricity grid.  "Increased interconnectivity is a crucial step towards achieving a true internal electricity market in EU. It must be achieved by more infrastructure as well as better access to the existing infrastructure", said Bendt Bendtsen MEP, the EPP Group Shadow Rapporteur, after the adoption of the initiative Report 'Making Europe's electricity grid fit for 2020'. "It will enable the EU to make better use of the electricity produced in Europe and thus lower dependence on imports, resulting in better energy security and lower electricity prices, to the benefit of European businesses and citizens", Bendtsen concluded.

I dont think Yellen made a mistake , she knows she had to raise rates because she knows that most American pension funds were modeled on an interest rate of about 6 to 8% which they have been unable to achieve for the last ten years. This would have forced pension funds to take more riskier positions. It is also compulsory for pension funds to have a % in government bonds. If these pension funds come under pressure and they have to liquidate, this could put government bonds under pressure. Most European Nations are bankrupt so if their bonds become under pressure we are looking at a very large problem GLOBALLY. There is 200 trillion in the bond market and for the large movers whom might be looking for a bid on 500 billion of bonds and not receive a bid would cause panic.  Differentials in spreads between the USA and Europe because of negative interests rates will cause large capital inflows into the USA, this will cause equity and asset inflation in the USA which will necessitate even higher interest rates, which will cause the USA dollar to soar, That means all of those countries that borrowed in USA dollars at cheap interest rates will find it harder to make payments, USA rising, there currency in decline.  Then you have to look at the west, socialism has only been born from WWII, we had the population explosion (the bubble) and now we are all coming up to retirement, which has not been funded because politicians thought that we would reproduce at the same rate but we didn't, I come from a family of seven and I have two children, which does not even replace the population. Western nations are in decline. Japan demographics are terrible and so is Germany. If you think Merkel is a nice lady letting in 800 thousand refugees from Syria.... think again. She needs these people to pay taxes to pay for her older generations pensions.

Get ready for a very bumpy ride...

I hope this will be the downfall of this nightmare called EU...

PARIS –  Polling agency projections suggest the far right National Front took the lead in the first round of France's regional elections on Sunday, in a new boost for Marine Le Pen's anti-immigration strategy and a new blow to President Francois Hollande's Socialists.  The agencies Ifop, OpinionWay and Ipsos based their projections on actual vote count in select constituencies. They projected that the National Front won between 27 and 30 percent support nationwide, followed by former President Nicolas Sarkozy's Republicans party and the governing Socialists.  The elections Sunday took place in an unusually tense security climate just over three weeks after deadly attacks on Paris -- a climate expected to favor conservative and far right candidates.  While National Front had significant support Sunday, it's unclear whether the party can translate that into victory in the second round of voting on Dec. 13 for leadership of France's 13 newly drawn regions.  Sarkozy's Republicans party and its allies were projected to come in second place at around 27 percent.  The Socialists, who currently run nearly all of the country's regions, are projected to come in a weak third place, with between 22 and 24 percent.  The Paris attacks on Nov. 13 that killed 130 people and a Europe-wide migrant crisis this year have shaken up France's political landscape.  The National Front is hoping the two-round voting that started Sunday will consolidate political gains she has made in recent years -- and strengthen its legitimacy as she prepares to seek the presidency in 2017.  The unpopular Hollande has seen his approval ratings jump since the Paris attacks, as he intensified French airstrikes on Islamic State targets in Syria and Iraq and ordered a state of emergency at home. But his party, which currently runs nearly all of France's regions, has seen its electoral support shrivel as the government has failed to shrink 10 percent joblessness or invigorate the economy.  Many political leaders are urging apathetic voters to cast ballots as a riposte to fundamentalists targeting democracies from France to the U.S.  First-time voter Eli Hodara, an 18-year-old Paris student, expressed hope that more young people would turn out.  "I think it is important to vote even if one leaves the ballot blank," Hodara said.  It is the last election before France votes for president in 2017, and a gauge of the country's political direction.  "It's an important moment, important for the future of our regions, important also for the future of our country, important with regard to the catastrophic and dramatic events that have hit France," Le Pen said as she cast her ballot in the northern city of Henin-Beaumont.  The arrival of hundreds of thousands of migrants in Europe and the exploits of IS, which has claimed responsibility for the Paris attacks, have bolstered the discourse of the National Front. It denounces Europe's open borders, what it calls the "migratory submersion" and what it claims is the corrupting influence of Islam on French civilization.  Le Pen is campaigning to run the northern Nord-Pas-de-Calais-Picardie, which includes the port city of Calais, a flashpoint in Europe's migrant drama. Polls suggest she could win.  Her young niece, Marion Marechal-Le Pen, appears to be on even stronger footing in her race to lead the southern Provence-Alpes-Cote d'Azur region, including the French Riviera and part of the Alps.  A win for either would be unprecedented in France.  The party was long a pariah, and voters left and right joined together to keep Marine's father Jean-Marie Le Pen from winning a presidential runoff in 2002. However, Marine Le Pen has worked to undo its image as an anti-Semitic party under father and co-founder, Jean-Marie Le Pen, and has lured in new followers from the left, the traditional right and among young people.  Socialist Prime Minister Manuel Valls and the conservative-leaning national business lobby issued a public appeal this week to stop the National Front's march toward victory.

Sixteen Romanian energy projects are included by the European Commission on the list of projects of common interest (PCI) to achieve the objectives of the Energy Union, according to the first annual report on this initiative. By including them on the list, projects are eligible for funding via Connecting Europe financing facility.  European Commissioner for Climate and Energy, Arias Cañete, said at the launch of the report: “A modern and reliable energy infrastructure is an essential element for the energy to circulate freely in Europe. All these projects will support the integration of energy markets, will diversify sources and supply routes and will end the isolation of some Member States. Our funds, invested in these projects, will serve the goal of providing to all Europeans clean energy at affordable prices.” Maroš Šefčovič, Vice-President responsible for energy union, said: “After nine months, we can say with confidence that we did not strayed from the path to realize the Energy Union. My messages for 2016 are clear. First, the EU should continue to play a leading role in the transition to a low carbon economy. Second, this transition should be socially equitable and focused on the consumer. Third, geopolitical challenges that we faced this year will not disappear. Also, 2016 will be the year when we will establish a robust system of governance, ensuring predictability and transparency, the environment that investors need. In conclusion, 2016 will be a year of accomplishments!”

Ukraine has banned all Russian planes from using its airspace and exports of Russian gas to Ukraine have been halted by state-controlled giant Gazprom.  The decision was announced by Ukrainian Prime Minister Arseniy Yatsenyuk at a televised government meeting.  Gazprom said it had halted gas deliveries to Ukraine because it had used up all the gas it had paid for.  But Ukraine said it had stopped buying from Gazprom because it could get cheaper gas from Europe.  The airspace ban applies to military planes as well as civil airliners.  "The Ukrainian government has decided to ban all transit flights for all Russian airlines in Ukraine's airspace," said Mr Yatsenyuk.  "The government is instructing [aviation authority] Ukraerorukh, in line with the norms of international law, to inform the Russian Federation that Russian airlines and Russian aircraft do not have the right to use Ukraine's airspace any longer." Following previous clashes over gas supplies, the two countries had agreed that Ukraine would pay for its gas in advance.  But Gazprom chief executive Alexei Miller said on Wednesday that Ukraine had already used up all the gas it had paid for. In a statement, Mr Miller said that "deliveries have been stopped until the receipt of new payments from the Ukrainian company. "The refusal to buy Russian gas will create serious risks for the reliable transit of gas to Europe through Ukraine and for the supply of gas to Ukrainian consumers during the upcoming winter," he added.

The worst effects of the European recession risk becoming permanent in places, according to a left-leaning think tank.  The IPPR's latest report pointed to the high level of unemployment and underemployment across Europe and said the chances of these becoming entrenched is "deeply alarming".  It said there was 10% unemployment and a 5% underemployment rate in Europe.  The UK's main problem was low productivity, the IPPR said.  The official unemployment rate for the 28 countries in the EU was 9.3% in September, down from 9.4% the previous month. The rate in the 19 countries that use the euro stood at 10.8%, down from 10.9% in August.  The IPPR said that unemployed workers risked being left behind as globalisation and technological progress lead to changes in the skills that employers require. The report suggested that European countries look to Germany as a good example of maintaining workplace skills and high productivity rates. Germany - Europe's largest economy - invests 50% more on average than other countries in research and development.  The report also found that the UK's in-work training had fallen by 4 percentage points since 2008 - the largest decline for any EU country. The IPPR said it welcomed the apprenticeship levy and the target for creating three million apprenticeships. However, it called on the Chancellor, George Osborne, to hold off making any further cuts to the education and adult skills budget in Wednesday's Spending Review.

The Organization for Cooperation and Economic Development (OCDE) has worsened its estimates concerning the growth of the world's economy, for the second time in the last three months, as the slowdown of the emerging markets is affecting other countries as well, such as Germany and Japan.

The OCDE forecasts that the global economy will see a 2.9% advance this year, down from its 3% September estimate, and after the 3.4% growth of 2014, respectively. According to the OCDE, the economic growth will accelerate to 3.3% next year, down from the previous 3.6% forecast.  "The growth outlook for the global economy has worsened this year. The forecast for emerging markets is currently the main reason for the global uncertainty", the OCDE warns: "The difficulties on the emerging markets are greater. If the situation of those countries deteriorates, the growth of Japan and the Eurozone will be affected".   According to the OCDE, the Eurozone will see 1.5% growth in 2015, and 1.8% in 2016.

Another flop for Jean-Claude Juncker's migration initiative as a major bounty fund for Africa raises just €78million - out of a target of €1.8 billion. The European Commission president wanted to raise the money to give to African states in exchange for them accepting the deportation of migrants. But a whip round among member states raised just a fraction of the target, leaving the entire deportation programme in doubt. It follows the flop of the relocation scheme which has moved just over 100 people out of a target of 160,000. I'm told Juncker and Merkel will press for more money for Turkey

The leader of the People's Movement Party, Traian Băsescu, feels that the decision of president Klaus Iohannis to nominate Dacian Cioloş as prime-minister is "a good solution". Băsescu has made no further comments, even though it wasn't long ago that he was harshly criticizing the solution of a technocratic government. Sunday night, on B1TV, Traian Băsescu said that the "technocratic solution" is for "banana republics", and he said that appointing a technocrat or a general as government head was basically "the same". According to Mediafax, at the time, the former president also said that the creation of a technocratic government would represent "a guaranteed failure": "It would be the greatest mistake, who in the Parliament would listen to those technocrats? They have to pass budgets, they have to pass laws, who would listen to them? These parliament members, good or bad, have to do their homework and work with a political government. This technocrat stuff has never worked anywhere in Europe (...) The technocratic solution is for banana republics, bringing in technocrats or bringing in generals it's basically the same (...) A technocratic government would be a guaranteed failure".  On the other hand, over the last few days, Traian Băsescu has been saying that president Klaus Iohannis has very few options for the prime-minister position, namely Dacian Cioloş or Lucian Croitoru. The latter was his option during the 2009 political crisis, when the Boc government was dismissed through a vote of no-confidence by the Parliament, and when the majority at the time proposed Klaus Iohannis as prime-minister.

The forced collective suicide of European nations

Hungary pays off IMF debt, may eye EU exit

So, it seems that despite all of the ZIRP and all of the QE debasement around the world (which was supposedly to "stimulate" economies), none of it has worked. What a surprise! The proof of the pudding is always in the eating. That is the ultimate of pragmatics. Any fool can see from economic history that permanent debasement by whatever tricks are used never works to "stimulate" any economy but just makes things all much worse. However, the fools in control at present cannot even see that, and many of them are supposed to have degrees in History from good universities...Oh those polices stimulated the economy, there is absolutely no doubt about that. But its just been a temporary boost, requiring another "hit" as soon as the last one wears off. The underlying problem is the macro-economic imbalances between young and old, poor and rich, trade surplus nations vs trade deficit nations. These have led to a surplus of global savings on one side, and a deficit of global consumption on the other. The stimulus polices (such as our housing bubble) have simply papered over these imbalances temporarily, but the global plutocratic elite don't want to take the necessary rebalancing steps since they will be big losers from this, and the older wealthier voters/supporters who form their power bases will be losers too... GDP is simply a measure of spending (or in some cases such as imputed rent - imaginary spending). If a government borrows or prints lots of money and makes it cheaper (by lowering interest rates) for others to also borrow and spend, then inevitably spending goes up.   GDP does not differentiate between the spending of earned, and borrowed money.  If I lost 50% of my income but borrowed the missing amount and some more to 'Stimulate my economic activity' naturally my spending would go up. Is that sustainable though? No. I still only have half the underlying income I used to have, but now I have a pile of new debt too.  So the short answer to your question is that borrowing and spending (temporarily) raised GDP because GDP measures borrowing and spending among other things.