authored by

John Kierans
December 2014

The chart below is quite complex, but is worth taking the time to think about it.  The chart demonstrates the magnitude and durability of central bank interventions since 2008.

All the information on the top half of the chart (above the zero line) relates to the amount of money required by capital markets.  It is the total value of new stock issuances, government borrowing and corporate borrowing.  The information on the lower half of the chart (below the zero line) is the measure of various government credit creation (money printing) schemes.

The most import part of the chart is the red line.  It shows that nearly all of the requests to borrow new funds by the corporate sector and the governments and all the calls for new capital in the stock markets are being matched by central bank interventions.

One takeaway from this chart is that central banks have become huge players in all markets and the level of activity shows very little sign of slowing down.

But perhaps the more interesting question that this chart raises relates to liquid wealth.  Why are central bankers so active?  Is there enough liquid wealth to support markets?  Can central bank credit do the same job as real money?  Where is the real / private money?

These questions may seem a little academic or arcane, but they are not.  All central bank money printing adds to the debt pile.  It does not add wealth.  

The chart below shows how volatility is steadily increasing as ever more central bank money sloshes around financial markets.  The chart counts the number of big moves in markets.  For example, we have 6 times as many big moves in sovereign debt markets in 2015 compared with 2009.

The number of large moves is increasing year by year.  Our starting point in this is 2009, hardly a calm year!

The number of assets around the world has not grown by as much as the amount of money chasing them. Central banks create phony money. This glut of extra money is causing increasing instability in markets as it sloshes in and out of assets with increasing rapidity and nervousness.

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