Global Central Banks dispensed trillions of dollars QE credit market intervention and sovereign debt purchases, since 2008
They rolled out the liquidity cannons to rescue the world’s banking behemoths with massive, coordinated liquidity infusions for Wall Street’s financial sector – bailing out banks and insurance companies with trillions more in derivative payouts, toxic MBS purchases, stimulus programs and various other credit facility inventions.
Eight years later: public / private debt levels are perched up at all-time highs…. and global economic health is ‘anemic.’
And things appear likely to get much, much worse.
ZeroHedge 02/12/2016 – Excerpts:
Whether the recent tipping point was the Fed hike, negative rates in Europe & Japan, or simply the growing market dislocations and macro misallocation of resources and wealth, the deflationary theme of “Quantitative Failure” is stalking the financial markets. A multi-year period of major policy intervention & “financial repression” is ending with weak economic growth & investors rebelling against QE.
In short, monetary policies of…
- 637 rate cuts since Bear Stearns
- $12.3tn of asset purchases by global central banks in the past 8 years
- $8.3tn of global government debt currently yielding 0% or less
- 489 million people currently living in countries with official negative rates policies (i.e. Japan, Eurozone, Switzerland, Sweden, Denmark)
- -0.92%, the most negative yield in the world (2-year Swiss government bond)
…have in 2016 led to a macro environment symbolized by…
- BofAML’s Chief US Economist Ethan Harris cutting potential trend real GDP growth in the US to 1.75%
- inflation expectations in both the US & Europe dropping below 2008 levels & a global profits recession
- one of the most deflationary recoveries of all-time: in the past 26 quarters the nominal GDP of advanced economies has grown 11%
and a significant impact on Wall Street…
- a bear market in equities (median stock in ACWI is down 28% from its highs; 45% of global stocks (1123) are down >30% from highs)
- bear market in commodities (10-year rolling return from commodities is currently -5.1%, the worst since 1938) & credit markets
- $686bn of market cap loss for global banks since Dec 15th – the day before the Fed hiked – and worsening global liquidity conditions, which in-turn will likely cause bank lending standards to tighten further…..
Central Banks need to start over and ‘retarget’ their endeavors, granting direct liquidity access for citizens.
And the developed world WILL see, finally, massive debt reduction, powerful economic growth, and dynamic productivity gains:
“He who will not apply new remedies must expect new evils.” – Sir Francis Bacon
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