Monday, June 26th, 2017 MST

Massive money creation underway

One of the reasons that gold and silver are safe investments is that today central bank printing of paper money is widely accepted.  Additionally, there are no limits on how much money central banks can create.

The graph shows the balance sheets of the European Central Bank, the Fed and the Bank of Japan.  Note that all three have assets right at the $4.5 trillion level. The People’s Bank of China also is a massive creator of money.

CMIGS-AOI15-6-6-2017

The thing to remember is that those assets were all paid for with money created “out of thin air.”  No work was done.  No taxes were collected. The money wasn’t even borrowed.

While the Fed Chair Janet Yellen hints about reducing the Fed’s balance sheet, that seems unlikely to any great extent insomuch as it would drain cash from the economy and perhaps induce a recession.

It is to be remembered that President Trump is an advocate of a  “weak dollar,” and any moves to reduce Fed assets would put Yellen and Trump at odds.

Mario Draghi, the ECB president, has said that the eurozone still needs “an extraordinary amount of money policy support” and is not expected to cut back on its monthly asset purchases until January 2018.

As for the BoJ, it is hell bent for leather, actually buying stocks to force money into Japan’s economy.

Although the graph shows massive asset purchases since 2008 by the three of the world’s most important central banks, there is no reason to believe that they will quit buying.  After all, there’s no limit on how much money they can print.

In time, the purchases between 2008 and today may be only blips on the graphs.  I suspect that still more massive money creation is on the horizon.  After all, no seen negative results have appeared from Ben Bernanke’s bank bailouts and his Quantitative Easing programs.  Actually, he is credited with having saved the world’s financial system — simply by printing money.

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