Monetary Madness Among the Central Bankers
Here is the combined balance sheet for the four most important central banks in the world: the Fed, the European Central Bank (ECB), the Bank of Japan (BOJ) and the People’s Bank of China (PBOC).
On the eve of the great financial crisis in 2007, their combined balance sheets stood at just $5 trillion. Today the figure is $31.5 trillion.
Need we say more?
The red line in the chart below shows the recent parabolic rise of the inflation rate in the eurozone. By contrast, the blue dotted line represents the ECB’s wisdom from just three months ago about where inflation was headed, while the solid blue line reflects its current wishful thinking. To wit, that inflation will be back in the sacred 2.00% box by next year.
We’d say, “Good luck with that!”
For want of doubt, here’s the recent inflation explosion in the sober Dutch economy. At 11.7% in the recent month, the Y/Y rate has just plain gone vertical. And that doesn’t yet include the full effect of NATO’s madcap Sanctions War against the world’s largest commodity producer, Russia.
Still, what did these cats expect after running the printing presses like there was no tomorrow for the better part of two decades?
As shown below, the ECB’s balance sheet first crossed the €1.0 trillion mark in October 2005 but now stands at €8.7 trillion.
That’s reflective of a 14.1% annualized growth rate year in and year out for 16.5 years running. Yet all the while, like their Fed kinsmen, they have been squawking about “lowflation.”
Never has an agency of the state been so drastically wrong as the leading central banks for the entirety of this century to date. They now have the world flooded with excess demand just as the artificial and unsustainable China-based supply chain, which temporarily facilitated the appearance of low inflation, has come totally unstuck.
For want of doubt, here is the nominal and real GDP in the eurozone for the same 16-year period. Rather than the ECB’s 8,700% gain from its starting level, nominal GDP is up by only 49% and real GDP is higher by a mere 17%. In annualized growth terms, that computes to some pretty tepid figures: 2.48% and 1.00%, respectively, for nominal and real GDP.
That’s right. A 14.1% growth rate of the ECB’s balance sheet resulted in nominal GDP growth that was less than one-fifth
Article from LewRockwell