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Worlds Top Central Banks Have A Balance Sheet 40% Of Global Gdp?

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Last week we posted a chart from Deutsche Bank, showing that with a "global recovery" supposedly taking hold again, central banks are injecting a record amount of liquidity in the form of $2.5+ trillion in annual asset purchases by all central banks (more than $200 billion per month). And while this once again confirms that the "recovery" is once again on artificial foundations, built up entirely from the money created by central bankers, it has at least managed to push the US stock market back to all time highs.


Today, we show this global domination by central banks from the perspective of Citi, whose Hans Lorenzen has put together a fantastic, Matt King-inspired presentation, asking simply "Where is the utility in marginal QE." A broad criticism of monetary policy, the presentation carries an amusing footnote: "This presentation does not change any of Citi’s existing, published views on the actual future path of monetary policy. It is merely intended as a contribution to the ongoing debate about the efficacy of available policy tools." After all, the last thing the market wants is to get a sense that even banks no longer have faith in the central planners.

We will present some of the key highlights from the presentation in a subsequent post, but here is the punchline: as of this moment, the 6 big central banks have a balance sheet that is equivalent to nearly 40% of global GDP, a number which if extrapolated will hit 50% just after 2018.


Those wondering if this means that central banks are engaged in a
creeping, stealthy, indrect LBO of the world's assets on behalf of
third parties, the answer is perilously close to a resounding "yes."

And while everyone was delighted in the early days of Fed (and then global QE) when central banks were the buyer of first and last resort, helping push asset prices up, if doing little for the actual economy, the only real question asked in the dark, tinfoil-covered corners of the "smart money" universe is whether the cost of QE has now outweighed the benefits...


The top chart suggests the global economy was in serious trouble at the start of 2000's, no wonder Eddie went and created a consumer boom.... Still what could go wrong.

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What's the long term impact this would have on debtors?

Does this give central banks more control over inflation and interest rates?

I am currently cash rich and asset poor.

I am trying to determine - in the long game - whether it is better to be in debt or to have cash. This sounds ridiculous but what do they prefer people to be? In debt or with assets? I presume they prefer debtors, therefore, expect more punishment if you are prudent, you are the target. Stockholm syndrome, it makes me want to buy a house to limit my risk.

Edited by phantominvestor

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1) you can own assets without liabilities.

2) You can own assets but have liabilities.

3) You can have liabilities but no assets.

The first is the most preferential. In this world though, most people prefer to go for option 2. The problem is, they take excessive risk by being overly optimistic on the true value of their assets, and ignoring their liabilities because they think there'll be a bailout.

Like any decision, do what you are comfortable with. If that's buying a house with a mortgage, sign yourself up and go for it.

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Personally I'd rather have cash than debt. Basically it depends on your attitude to risk. I'd rather be able to sleep at night knowing I haven't taken on more debt than I can comfortably manage. :)

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