Saturday, October 21st, 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.

One Response to “Massive money creation underway”

  1. Roger Armstrong

    Questioning the ramifications of printing $$$$$.

    When you print more $, you are devaluing the money, and it buys less.

    When I started teaching in 1957, I earned $ 3,200 per year. When I retired in 1977 I was earning $51,000.
    The Assoc of University Prof published an Earnings Value Chart that showed that the earning value of my
    living salary in 1977 salary was $2,900 (in 1957 dollars).

    The fear of the Fed of course is Deflation of Manufactured Goods, but it is OK to deflate the earning
    value of peoples earnings because it is easily absorbed into the broad economy. People wonder why
    they’re earning more, but can’t seem to get ahead and are able to buy less, unless they go into debt. This effects the buying power of the government, and the cycle continues until corrected by recessions.

    In anticipation of the debtor collapse, the main Chinese and Russian banks have started a joint
    movement toward a world currency based on gold. This will add to the further debasing of
    the U.S. dollar by our present governments irrational priorities.

    This doomed point in our not-so-far-future could be closer than we might think, when the U.S.
    and the world’s debtor house of cards will collapse.

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