The European Neutron Bomb Has Dropped

For anybody drinking the economic recovery Kool-Aid, today's historically unprecedented experiment by the European Central Bank (ECB) to impose negative bank interest rates should be like a bitter squeeze of fresh lemon on the tongue.

If things are so rosy then why exactly are such desperate measures necessary?

One would think that economic recovery and the most extreme forms of monetary intervention in all of history would not be compatible. Either the economy is healthy and recovering, or it isn't. The fact that the world's central banks are engaged in increasingly risky and untested programs of larger and larger proportions strongly suggests the latter.

Here's the full suite of European Central Bank moves announced today (Thursday, 6/5/14):

European Central Bank Takes a Radical Step

Jun 5, 2014

FRANKFURT — The European Central Bank cut its benchmark interest rate to a record low on Thursday and, in an unprecedented attempt to stimulate the euro zone economy, said it would begin charging interest on deposits held by the bank.

The so-called negative deposit rate has never been tried on such a large scale and is a bid to push down the value of the euro and encourage banks to invest excess cash rather than hoard it in central bank vaults.

The European Central Bank cut its benchmark interest rate to 0.15 percent from 0.25 percent, and the deposit rate to minus 0.10 percent from zero. The rate cuts will take effect next week, on June 11.

The central bank will also begin offering four-year loans to banks at the benchmark interest rates, under conditions meant to ensure that lenders use the money to issue loans to businesses. For example, the central bank loans will be designed to discourage banks from using the money to buy government bonds.

(Source)

Will these unprecedented moves 'be enough' or will there be more if necessary?

Of course the answer is always 'more.' In his news conference, Mr. Draghi said:

"We think it is a significant package," he said. "Are we finished? The answer is no. If need be, within our mandate, we aren't finished here."

Mr.