TourMaG.com – To summarize, the setbacks we are experiencing at the moment, on oil and inflation in general, come from the over-success of state over-intervention … Marc Touati: And monetary, it is a novelty. We had known that for a year in 2008 and it was limited. And since central banks were financing public debts, it makes covid debts look like they cost nothing.
We have the impression of a recovery that has cost nothing.
Once the central banks stop printing money, therefore buying the public debt and therefore financing the states, the interest rates on state credits will increase, but also on credits.
With such momentum, we will see a reduction in stock market and real estate bubbles. As soon as we return to a normal world, the tourism sector is the one that will suffer the least and that is good news.
“The return to the normal world will be violent”
TourMaG.com – If I understand correctly, in your opinion, is it time to put an end to printing money? And therefore that the European Central Bank let the economy resume its normal course. Marc Touati: This is the whole problem. Despite inflation, the ECB does not want to stop printing money, so it is buying government debts. A month ago, a rare phenomenon went almost unnoticed: the President of the Bundesbank (Federal Bank of Germany, editor’s note) resigned.
The Germans want to stop with this printing press, but Christine Lagarde, who is currently the head of the ECB, does not want that. We are facing instability in the euro area and it is dangerous. The ECB is exaggerating in a policy that I find far too lax.
TourMaG.com – In Germany, inflation (in Europe, editor’s note) exceeded 4.5%. Is this worrying? Marc Touati: In the sense that the Germans don’t like it, yes.
Then France is not spared, with a rate of 3.2%, it is a lot. And unfortunately inflation will continue to rise.
TourMaG.com – When Emmanuel Macron boasts that France has one of the best growths in the euro zone, is he wrong in his analysis? Marc Touati: When we say that we are doing better than Germany, we are wrong. The government across the Rhine quickly halted the infusion and public spending as we continue. Of course, growth in Germany is returning to almost normal, but in the end we will have to foot the bill.
“Some prefer that we stay in a parallel economy on a drip”
TourMaG.com – Are we facing an artificial economic recovery? Marc Touati: Completely. There are two effects to explain it, one of which I call the bottom of the pool syndrome. Once you hit rock bottom you come back up. The GDP fell by -8% in 2020, we will register a growth of 6.5% in 2021, it is a little logical.
I would even say that with the aid that the State has distributed, growth does not represent much. The debt has increased by 450 billion euros, but we still have not found the GDP of 2019. It is expensive to pay the tenth of a point of growth.
We pride ourselves on posting the strongest growth since 1969, it’s window dressing. From 2023, we will return to usual levels of growth, of the order of 1%.
When we return to a normal world, we will also return to normal growth. Today, I have the impression that many people have an interest in the pandemic lasting.
I’m not into conspiracy theory, but some prefer that we stay in a shadow economy on a drip. It has to stop, but the return to the normal world is going to be violent.
Despite a historic recession, we have never had so few bankruptcies in France. When I spoke to Bruno Le Maire, I told him that the government had made a mistake, giving money anyhow. It is essential to target aid, depending on the activities.
Debt covid: “We are sitting on a powder keg”
TourMaG.com – Currently the French State has a colossal debt which in January exceeded 120% of French GDP and could cross the 2,600 billion mark. Honestly, France will never reimburse this sum? Marc Touati: She will have no choice but to repay, at least the interest on the debt. This is the whole problem. Today we don’t see the cost of debt, because the ECB buys everything, with interest rates around 0%. As soon as interest rates start to rise, then it will cost us dearly.
We will see the real price of the “whatever the cost”, at this moment. We are currently in a headlong rush that no one wants to stop.
We are playing a very dangerous game, because the day we have to pay the bill, it will be complicated. The ECB will maintain the status quo in 2022, so that the presidential elections take place normally. With the rise of populism in France, the ECB will do everything to avoid a social and economic crisis before the elections. We’re sitting on a powder keg with this debt. We must no longer rely on state aid and very quickly reimburse the EMPs and fend for ourselves. Then by relying too much on aid, we are no longer competitive. For companies, I advise them to develop 4 strategic avenues: develop niche products and services, promote know-how, innovate and have international influence. With this, societies will be armed for the next crisis. There will be a crisis in the next few years. In 2020 we were to have a little crisis, but with the pandemic we didn’t have it. We have not finished the 2008 crisis, we are accumulating crises and we risk waking up with a hangover.
TourMaG.com – At the same time, with the printing press of central banks, it has never been so easy to invest, since interest rates are very low … Marc Touati: Well done ! You are right, we have to take advantage of the interest rates which are at very low levels because it is not going to last forever. If you have investments to make, now is the time!
“We are in the same situation as Internet bubbles or subprime”
TourMaG.com – You say that with debt, we are sitting on a barrel of powder, but the stock market raises fears of the worst. When Elon Musk makes $ 36.2 billion from Tesla shares, just because the automaker has sold 4.4 billion cars … there’s a problem. The stock market is no longer connected to economic reality. Is this worrying? Marc Touati: Sure, we are on a bubble.
In economics this means that the financial reality goes too far compared to the economic reality. Normally stock markets reflect economic reality.
With morphine from central banks, free money, we have lost the scale of values. Everything is on fire. We find ourselves in exactly the same cases as the internet bubble or some subprime, in which we forgot that trees do not rise to the sky. Excesses are paid for. From a societal point of view, it is also very dangerous. The richer become richer, with less redistribution, this increases inequalities. At the same time, with cryptocurrencies young people think that it is possible to make money in front of their computer, it is dangerous.
TourMaG.com – Is a stock market crash possible in the coming months? Marc Touati: Sure. The word crash might be a bit loud, but we’re going to see a correction. Once central banks stop printing money, then stock prices will regulate.
The ECB should stop after the French elections or before, if the Germans bang their fists on the table.
TourMaG.com – With cryptocurrencies, this is the first time that a teenager can create a means of payment on his own in his corner, outside the monetary circuits … Marc Touati: It’s incredible. There is an abuse of language, it is not a currency, it is just a medium of exchange. On the other hand, it has already happened in history. The authorities did not legislate in time and therefore this sort of thing is based on a loophole.
We are no longer in rationality, so no one knows what will happen to cryptocurrency prices. We are in a virtual world and no longer in the real world.
Posted by Romain Pommier
Journalist – TourMaG.com
See all articles by Romain Pommier