Bill Gross: “The expansion of central bank balance sheets from perhaps $2 trillion in 2003 to a now gargantuan $12 trillion at the end of 2016 is remarkable. Not only did central banks buy $10 trillion of bonds, but they lowered policy rates to near 0% and in some cases, negative yields.
Withdrawal of stimulus, as has happened with the Fed in the past few years, seemingly must be replaced by an increased flow of asset purchases (bonds and stocks) from other central banks, as shown in Chart below. A client asked me recently when the Fed or other central banks would ever be able to sell their assets back into the market. My answer was “NEVER”. A $12 trillion global central bank balance sheet is PERMANENT – and growing at over $1 trillion a year, thanks to the ECB and the BOJ.
An investor must know that it is this money that now keeps the system functioning. Without it, even 0% policy rates are like methadone – cancelling the craving but not overcoming the addiction. The relevant point of all this for today’s financial markets? A 2.45%, 10-year U.S.Treasury rests at 2.45% because the ECB and BOJ are buying $150 billion a month of their own bonds and much of that money then flows from 10 basis points JGB’s and 45 basis point Bunds into 2.45% U.S. Treasuries. Read more »
В последнее время модно ругать американские и европейские власти за бесконтрольное печатание денег. Сравнение балансов Центробанков и их динамика показывает, что Китай впереди планеты всей.
Investors are getting nervous as there are no signs on behalf of either the FRS or the ECB regarding further infusions of money, such as QE, LTRO or a cure like Twist. The market picture is like a party running low on alcohol when there used to be plenty. If this is the case, the hangover won’t last long. The paradox of today’s financial markets is that the participants seek artificial illusory ideas (which, nevertheless, work!) weakly related to the real economy. At the same time, real disposable income per capita in the U.S. is decreasing gradually while it is the basis of final demand, constituting over 70% of the country’s economy.
Here is the Fed policy on the S&P500
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What does this graph and numbers mean? It means that the comparability of growth rates between the real economy and the balance sheets of the central banks are not being observed. However, if the balances increase and money is being printed why isn’t there runaway inflation? First, it takes 9 to 18 months from the infusion of money into the system until inflation occurs. Second, inflation only takes place when money is infused into the real economy. If the money stays in the financial markets there can be no inflation, but the bubble of financial assets… Read more »
February 29, 2012.
The European Central Bank (ECB) has provided a further 530bn euros ($713bn; £448bn) of low-interest loans to 800 banks across the European Union. It is the second time the ECB has offered such three-year loans and comes after 489bn euros was lent in December. The loans are aimed to help continue to ease the eurozone debt crisis, and help banks improve their liquidity. They have also helped countries such as Italy, as some banks have used the bonds to buy government bonds.
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