Central Banks Now Own Stocks And Bonds Worth Trillions, by Michael Snyder.
Have you ever wondered why stocks just seem to keep going up no matter what happens? For years, financial markets have been behaving in ways that seem to defy any rational explanation, but once you understand the role that central banks have been playing everything begins to make sense.
In the aftermath of the great financial crisis of 2008, global central banks began to buy stocks, bonds and other financial assets in very large quantities and they haven’t stopped since. …
Global central banks are on pace to buy 3.6 trillion dollars worth of stocks and bonds this year alone. At this point, the Swiss National Bank owns more publicly-traded shares of Facebook than Mark Zuckerberg does, and the Bank of Japan is now a top-five owner in 81 different large Japanese firms.
These global central banks are shamelessly pumping up global stock markets, but because they now have such vast holdings they could also cause a devastating global stock market crash simply by starting to sell off their portfolios.
The $US1 trillion in bonds and stocks bought since the start of 2017 by central banks like the ECB, BOJ, Swiss National Bank puts purchases on pace for $US3.6 trillion in buying this year, the highest dating back to the start of the global financial crisis in 2007.
The balance sheet of a central bank consists of non-money stuff (usually bonds and stocks) that the central bank has bought with new money that it created out of thin air. This graph shows that the world’s central banks now own about $14 trillion of bonds and stocks. For comparison, the world’s stock markets have a combined market capitalization of about $55 trillion and US GDP is about $15 trillion.
What if they stop buying? What if they sell? A very great depression will follow. This is the logical endpoint of a paper currency system: those who manufacture the money end up buying all assets in order to stop the economy from crashing (i.e. to stop bad debts being called). Good for those with assets whose prices are boosted, and good for those who manufacture money, but everyone else loses.