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Central banks beginning to think the Euro is garbage as they swap reserves for the British Pound

Central banks beginning to think the Euro is garbage as they swap reserves for the British Pound

Perhaps EU President Jean-Claude Juncker and ECB head Mario Draghi didn’t get the memo, but it appears that central banks are beginning to think that their continental currency is garbage.  And in response to the declining confidence and trust in the Euro, many are making the move to instead fill their reserves with the British Pound despite all the rhetoric over Brexit.

With ongoing turmoil raging in Europe over populism, radical political upheavals, and a central bank that has failed in dealing with the debt problems of Greece, Italy, and even Germany, global central banks believe the European Union has the potential for breakup, and that the British currency is much more stable despite the UK’s soon to be exit.

Concerns over political instability, weak growth, and the European Central Bank’s (ECB) negative interest rate policy have led central banks to cut euro exposure; the Financial Times reported, citing a survey of reserve managers at 80 central banks.

The results were compiled by the Central Banking trade publication and HSBC.

It shows that bankers from around the world see the UK as a safer prospect for their reserve investments than the eurozone. They favor the British currency as a long-term, stable alternative, despite uncertainty over Brexit which was formally triggered last week by the PM Theresa May.

The research also shows the stability of the eurozone was this year’s greatest fear for the 80 central banks. Together they are responsible for investments worth almost €6 trillion. Some of them have cut their entire exposure to the euro, while others have reduced their holdings of investments denominated in euro to a bare minimum.

More than two-thirds of the 80 central banks had changed their portfolio allocation, while roughly the same amount had changed the duration of their investments. – Russia Today

The dollar still remains the most popular currency for central banks to hold in their reserves, but this is also slowly being supplemented with physical gold and even the Chinese RMB.

With the likelihood of more countries choosing to leave the EU in the coming months or years, the grand experiment that led to the creation of the continental currency may be coming to a end very quickly.  And this also may be why ECB Chief Mario Draghi is now hinting strongly for the beginning of the end on NIRP and QE, because the monetary policies he and Europe’s central bank have implemented over the past half decade are on the brink of imploding the entire European financial system.

Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.comRoguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.


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