This combined balance sheet has increased from the equivalent of $ trillion in early 2007 to almost $ trillion today, and a further substantial rise is in prospect. Once this further increase has occurred, the combined balance sheet will be equivalent to around 35 per cent of the relevant countries’ collective GDP, up from just 10 per cent prior to the crisis.
This increase has taken place primarily by the central banks creating money to purchase assets outright from the private sector. The next graph shows a long time-series of nominal 10-year government bond yields for a number of advanced economies (Graph 2). The striking thing is how low these rates are now.