[solatic]

> - Many financial institutions are required to hold a certain percent of portfolio in safe assets.

In practice this is turning into unnatural demand guaranteed by the law, which goes against free markets and will eventually implode upon itself. If you force the market to buy a certain product regardless of quality, then the underlying quality of that product will erode (as there is no longer an incentive to provide quality and quality implies cost), and the market will evaporate as stakeholders disappear and move to other markets which do assure real quality. That there was natural demand for such products in the past, and indeed that natural demand may coincide with unnatural demand in the present, is not a guarantor for demand levels staying natural in the future.

In context, this creates underlying pressure for investors to divest from Euro holdings. It's likely that investors are currently sticking with the Euro because they have few other avenues for escape, but this is not likely to hold - whether due to Brexit/Euroskepticism or some other external crisis which changes the playing field.

[landivar2]

When you have a central bank that can control rates, no alternative money, and the bank can set rates negative, the equilibrium is for the government to own almost all assets. I'm not kidding. You will end up with communism, only via government regulation of rates, unless something breaks this up.

[kthejoker2]

If our capital markets are so unproductive that having the government own the assets is considered a net economic gain, we'll need all the communism we can get.

The central bank does not "control" rates, they respond to the market signaling where rates should be.