Posted 5 февраля 2021,, 13:41

Published 5 февраля 2021,, 13:41

Modified 24 декабря 2022,, 22:37

Updated 24 декабря 2022,, 22:37

Monetary frenzy: there has never been such a situation in the financial markets in history

Monetary frenzy: there has never been such a situation in the financial markets in history

5 февраля 2021, 13:41
If earlier crazy financial bubbles and speculative insanity had little effect on the real economy, now their direct or indirect impact is already obvious.

Network analyst Pavel Spidel publishes an alarmist post on what is happening in the world's financial markets:

Impressive acceleration - $ 9.4 trillion in 11 months from March 1, 2020 from the top seven central banks of developed countries. They firmly and confidently stood on the path of self-destruction - conditions under which there is no turning back. Distortions in markets for financial assets of a wide range are so high, and the dependence of the budget system on debt monetization is so strong that they simply cannot stop. And this is not bad, very entertaining and unusual. An amazing experiment with a known end, but the very process of moving towards this "result" is unusual. Well, if only because there were no analogues in world history.

The current emission volumes are more than 4 times higher than at the peak of the 2009 crisis and in any of the periods of aggressive (at that time) pumping the system with liquidity from 2015 to 2017. On the histogram: FRS + ECB + Bank of Japan + Bank of England + CBN + Central Banks of Canada and Australia.

To understand what 10 trillion per year is ... For 100 years up to 2007 inclusive (this is not so long ago) the aggregate balance of the seven Central Banks managed to increase to less than 4 trillion dollars. Not bad, right? 100 years before the initiation of monetary frenzy, only 4 trillion, and here in 1 year already 10 trillion!

THE WHOLE monetary response to the 2009 crisis amounted to no more than $ 2.5 trillion up to 2011. But it should be understood that from the 4th quarter of 2008 to the 2nd quarter of 2009, most of the aggregate balance was made up of swap lines, forming a double account, and almost all the remaining differential was covered by credit lines to banks. Nobody knew about QE at that time, they began to deploy it only from the 2nd quarter of 2009. Therefore, 2.5 trillion in the 2009 crisis is mainly swap lines and loans to banks. From 2009 to 2011, these loans replaced just QE with a total volume of no more than $ 2.2 trillion across all central banks until 2011.

For the next 9 years, they increased their balances by almost 10 trillion by the end of 2017 and reduced by almost 1 trillion by 2020, respectively, over 10 years from 2011, 9 trillion came out. If we compare the entire era of new normalcy from 2008 to early 2020, then, taking into account the monetary response to the crisis of 2009, the balance sheets increased by 11.5-11.7 trillion. Therefore, the current $ 10 trillion per year is absolutely unprecedented even by the standards of episodic monetary frenzy from 2008 to 2019.

From March 1, 2020 to January 31, 2021, balances in national currency increased as follows: Fed - 3.3 trillion, ECB - 2.3 trillion, Bank of Japan - 125 trillion, Bank of England - 331 billion, SNB - 150 billion, Central Bank of Australia - 154 billion, Central Bank Canada - 440 billion, the Central Bank of Sweden - 424 billion, the Central Bank of New Zealand - 43 billion.

In dollars, it goes like this: FRS - 3.3 trillion, ECB - 3.4 trillion, Bank of Japan - 1.4 trillion, Bank of England - 500 billion, SNB - 265 billion, Central Bank of Australia - 140 billion, Central Bank of Canada - 350 billion, Central Bank of Sweden - 66 billion, Central Bank of New Zealand - 34 billion.

They are doing a tremendous and incredible job - to destroy in just 1 year what has been created for centuries? This is amazing! Total distortions and deformations in all classes and groups of assets, insane expansion of bad debts on the part of almost all institutional groups. The phenomenal rise of toxic waste such as SPAC, cryptocurrencies and similar dubious projects and surrogates.

Crazy bubbles and all-consuming speculative frenzy, as we recently witnessed with WSB. But if earlier all this did not penetrate into the real economy, it was isolated, but now it is already penetrating directly (through helicopter budget subsidies) or indirectly (through excess money supply). If earlier capital markets were conditionally dependent on monetary programs, now they are absolutely. There is very little left, the fun will begin soon! I hope they won't let go of the brakes. More madness, just a little more!