March 29, 2024

How much damage has been done to the economy by the emission of the leading central banks?

Since the US Federal Reserve began its first quantitative easing program in...during the global financial crisis in 2008, the activities of central banks were turned upside down.

Finbold data show that sinceIn 2008, the world's leading central banks, including the US Federal Reserve, the Bank of Japan, the European Central Bank and the Bank of England, have invested more than $ 25 trillion in the global economy, of which more than $ 9 trillion is associated exclusively with COVID-19. This is data from the Atlantic Council think tank.

Now central banks are walking in extremelythin line - they need to reduce the purchase of assets and at the same time not jeopardize economic development. In response to the economic shock caused by COVID-19, the world's four leading central banks have expanded their quantitative easing programs by a total of $ 9.1 trillion to support their economies and international financial markets.

How much damage has been done to the economy by the emission of the leading central banks?

The graph shows that by buying more assets, these four central banks have increased their combined balance sheets by about 60% since the beginning of 2020.

Each time the central bank participates inquantitative easing, it purchases significant amounts of assets, such as government bonds, to lower interest rates on borrowings while increasing spending to spur economic development and, ultimately, inflation.

Back in 2014, former Federal Reserve Chairman Ben Bernanke said that “the problem with quantitative easing is that it works in practice, but it doesn’t work in theory.”

Central banks may abandon their newpolicy in case of continued growth of inflation, because the purpose of this step (quantitative easing) was to change the strategy and increase average inflationary expectations.

As reported this week, gold prices are steadily rising, reaching almost five-month highs due to the latest US inflation data.

Randy Smallwood, CEO of precious metals mining company Wheaton Precious Metals Corp., said inflation is becoming a threat, prompting more and more commodity purchases.

These are the foundational materials from which wewe build all our products. Accordingly, there is no doubt that inflation will pose an increasing risk over time. I will say that it plays into our hands, because already now commodity prices have risen significantly, said Smallwood.

As a result, many people turn to gold, stocks, cryptocurrencies, and other store of value and inflation defenses.

It is noteworthy that in October the indexconsumer prices in the United States amounted to 0.9%, up 6.2% over the same period last year, while expectations for growth from September to October were at 0.6%, and on an annualized basis - by 5.9%. As a result, the October values ​​of the consumer price index in the United States became the highest in more than 30 years.

On Tuesday November 9, the US PPI rose 8.6% year-on-year, while the energy component rose 30% year-over-year.

As several countries are on the vergefinancial collapse, public debt continues to be the subject of debate in the global economy. Even the most technologically advanced countries have suffered severe damage, and their sovereign debt is reaching historic highs.

According to data obtained by Finbold, the aggregatethe public debt of the United States, Japan and China in November 2021 amounted to $ 52.35 trillion. Thus, from $ 46.87 trillion in November 2020, the total debt increased by 11.6%. As a result, in just a year, public debt increased by $ 5.48 trillion.

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