They're not just the biggest whales, but possibly the only whales that matter.
I mean, $9T is a lot. For comparison, the world's largest and most popular index fund, Vanguard's 500 Index Fund, with a gigantic number of investors, holds "only" $0.4T in investments.
Put another way, $9T works out to ~$1100 of liquidity injected into the financial system for every man, woman and child alive!
It's hard to reason about the impact of such incomprehensibly large injections of liquidity on the behavior of financial markets.
Peripheral banks are allowed an insane amount of leverage. all the peripheral banks basically blow out their accounts periodically, including most recently in 2020. central banks don’t really use anywhere as much leverage, because an account blowout for them looks like hyperinflation. And if they are in good terms with the us, the us central bank helps them out. we just had a forced deleveraging , which cost a one time 10-20% inflation.
I enjoyed this article, but I’m confused. The section raising the question about how this has affected other asset prices seems to just posit the question without establishing how the banks actions would have done so. Is there some obvious link between the FED buying mortgage backed securities and technology stocks going up? Or should it be inferred that by buying those securities they just put more money into the system that is creating the situation they describe? Thanks for any explanation.
Austrian economists have been warning about this [1] since cronies, socialists and statists from central banks have started "stimulating" back in 2007.
> The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Bloomberg has always supported activist central banks. Now they're telling us there's no way out. Gee, what a surprise!
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[ 3.2 ms ] story [ 21.6 ms ] threadI mean, $9T is a lot. For comparison, the world's largest and most popular index fund, Vanguard's 500 Index Fund, with a gigantic number of investors, holds "only" $0.4T in investments.
Put another way, $9T works out to ~$1100 of liquidity injected into the financial system for every man, woman and child alive!
It's hard to reason about the impact of such incomprehensibly large injections of liquidity on the behavior of financial markets.
> The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Bloomberg has always supported activist central banks. Now they're telling us there's no way out. Gee, what a surprise!
[1] https://mises.org/library/manipulating-interest-rate-recipe-...