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'Plenty' of negative effects from ECB cheap money, Deutsche Bank CEO says

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'Plenty' of negative effects from ECB cheap money, Deutsche Bank CEO says

Looser ECB monetary policy is not encouraging smaller business to invest more, but it will have plenty of negative effects such as concentrating wealth among the rich, according to Deutsche Bank AG CEO Christian Sewing.

Speaking at the Sibos financial conference in London on Sept. 25, Sewing also said recent actions by the central bank will not boost the slowing European economy.

On Sept. 12 the ECB cut the rate on its deposit facility to negative 0.50% and re-introduced quantitative easing. This came against a background of heightened trade tensions, with import tariffs between the U.S. and China jumping to between 21% and 23% on average from 3% to 5% previously.

Sewing said the adverse impact is beginning to materialize, noting that the IMF has blamed lower-than-expected economic growth figures on the trade spat.

But he said it was more than just about trade flows and tariffs. The two largest economies in the world are engaged in a structural conflict about economic and political dominance and this poses a long-term challenge to economic policy, he said.

Europe is particularly badly affected by the economic slowdown, but the latest monetary policy moves by the ECB may do more harm than good.

"Very few economists believe that cheaper money at this level will have any effect — something that our clients actually absolutely reinforce," Sewing said.

All of Deutsche Bank's small and medium-sized enterprise clients have said they would not invest more just because the loan would be 10 basis points cheaper, he said.

There are therefore not likely to be any positive effects of the looser ECB policy, but "plenty of negative ones like the distortion of asset prices, the continued redistribution of wealth in favor of the asset-owning affluent and the social implications these things aggregate," Sewing said.

What is really worrying, he said, is that central banks have already used their tools to a large extent already, "so there are no conventional measures left to effectively cushion a real crisis."