What we have today on a large scale are truly negative interest rates, says Valentyn Lazeya, Chief Economist of the BNR. He specified that his statements are personal opinion.

“Very real negative interest rates primarily penalize bank depositors. Bank debtors (creditors), who in Romania have interest rates of 8-9-10% with inflation of 15%, are making a scandal for nothing. In fact, the real losers, the biggest losers, are the bank depositors who are being penalized by these very low interest rates,” Lazea said.

According to him, after the crisis of 2008-2009, the debt increased (not in the world): from 195% of world GDP to 256% of world GDP in 2020. 99% of world GDP is public debt, the rest private.

How does this increase in debt occur?

“By printing money in virtually unlimited quantities by central banks. Printing leads to a decrease in interest rates to levels close to 0%, this is in the context of inflation, which for structural reasons was very low,” explained the chief economist of the BNR.

• “Decreasing interest rates means an increase in appetite for loans, an increase in the issuance of bonds, not only state, but also corporate and municipal bonds. If these securities are bought by central banks, which is what happened, there is a constant recovery of money emission.”

• “Money is issued out of nothing, that is, out of thin air, but not against something. They are issued under securities, municipal, corporate law, etc.”

According to Lazea, this circle creates the “elephant in the china shop” problem that Westerners have to deal with.

He noted that theoretically there are 4 ways to reduce debt:

• “1. The war was in history, but it is no longer relevant, please let us hope that the debt will not decrease because of the war.

• 2. Erasing the debt like the ancient Jews in the jubilee year once every 50 years. This creates a moral hazard.

• 3. Inflation or hyperinflation, which reduces the debt in real terms because the debt remains unindexed to inflation in nominal terms.

• 4. Financial repression. This is what we have today on a large scale: negative real interest rates. Very real negative interest rates that primarily harm bank depositors. Bank debtors (creditors), who in Romania have interest rates of 8-9-10% with inflation of 15%, are making a scandal for nothing. In fact, the real losers, the biggest losers, are bank depositors who are punished by these very low interest rates. In fact and legally, the debt is being burned or reduced by the practice of these truly negative interest rates, especially since 2009-2010.”

He also stated that we in Romania are focused on inflation versus recession.

“To me, the biggest problem, at least in Western economies, is not the recession, but the huge debt we have (public and private combined),” he said.

• “According to the latest forecasts, no EU state will fall into recession this year. Not even the Germany it was originally thought to be, let alone Romania. This year’s growth is estimated at 2-3%.

• The debts reached in the West are huge.”