Central banks bought $1.5T of assets in first 4 months of 2017

[devil21]

$1.5T in the first 4 months of this year. Where would economies be without this buying?

http://www.zerohedge.com/news/2017-0...on-assets-2017

The latest data means that contrary to previous calculations, central banks are now injecting a record $300 billion in liquidity per month, above the $200 billion which Deutsche Bank recently warned is a "red-line" indicator for risk assets.

[loveshiscountry]

$1.5T in the first 4 months of this year. Where would economies be without this buying?

http://www.zerohedge.com/news/2017-0...on-assets-2017
The latest data means that contrary to previous calculations, central banks are now injecting a record $300 billion in liquidity per month, above the $200 billion which Deutsche Bank recently warned is a "red-line" indicator for risk assets.

Deutsche Bank AG? Is that the same one who got the 350 billion dollar bailout?

[Brian4Liberty]

Is this a change in historical patterns? Don't the elite purchase everything after a crash, and not at a peak?

Are they purchasing government debt, or real assets?

[Dr.No.]

They're buying government bonds in order to push down interest rates and decrease borrowing costs. How did this massively shape the market over the last year or so?

[devil21]

They're buying government bonds in order to push down interest rates and decrease borrowing costs. How did this massively shape the market over the last year or so?

At a $1.5T figure for only 4 months, it seems to me it's unlikely it's only bonds they're buying. Officially, the Fed isn't buying bonds anymore (snort) and the ECB admits to 60B euro per month. Do the math. Not sure what the BOJ is doing but there's a huge gap of ~$1.25T there. The Swiss bank was caught buying stocks so I think it's safe to assume other central banks are as well, to prop up equities.

Is this a change in historical patterns? Don't the elite purchase everything after a crash, and not at a peak?

Are they purchasing government debt, or real assets?

Historically, yes, afterwards. I think we're seeing a very different scenario playing out this time though, where the central banks are basically taking back everything issued under the past system in exchange for soon-to-be-worthless digital money. The banks end up with all of the assets they issued (and always held ownership title to, btw...investors never owned anything, just held a "use" title) in the first place and the little people end up with the worthless money when the system resets.

[nikcers]

Deutsche Bank AG? Is that the same one who got the 350 billion dollar bailout?

[timosman]

Where would economies be without this buying?

In the dumpster. Now stop complaining.

[Brian4Liberty]

I'm pretty sure that Steve Mnuchin is the one who cuts off the chicken's head...

[Dr.No.]

At a $1.5T figure for only 4 months, it seems to me it's unlikely it's only bonds they're buying. Officially, the Fed isn't buying bonds anymore (snort) and the ECB admits to 60B euro per month. Do the math. Not sure what the BOJ is doing but there's a huge gap of ~$1.25T there. The Swiss bank was caught buying stocks so I think it's safe to assume other central banks are as well, to prop up equities.

The assets of the FR and the ECB are fully open. Where are the stocks on their balance sheet? The Fed has those MBS back from the original QE....

[devil21]

The assets of the FR and the ECB are fully open. Where are the stocks on their balance sheet? The Fed has those MBS back from the original QE....

Cuz' bankers don't use shell companies or anything like that . No proxy banks either.

If you'd like to explain the gap between the official QE numbers and the $1.5T, go for it.

[TheCount]

Cuz' bankers don't use shell companies or anything like that . No proxy banks either.

If you'd like to explain the gap between the official QE numbers and the $1.5T, go for it.

You can see in the OP which banks are buying.

[devil21]

You can see in the OP which banks are buying.

Perhaps I am misreading the chart but that chart shows less than $200B per month, which is less than half of $1.5T.

[TheCount]

Perhaps I am misreading the chart but that chart shows less than $200B per month, which is less than half of $1.5T.

I don't think they're stacked, I think that's $200b for ecb, $100b for boj, and whatever ~$25b or so for boe. The other chart includes one more bank, SNB, which I'm assuming from a quick google search is Swiss.

[timosman]

You can see in the OP which banks are buying.

I like the term liquidity.

[devil21]

I don't think they're stacked, I think that's $200b for ecb, $100b for boj, and whatever ~$25b or so for boe. The other chart includes one more bank, SNB, which I'm assuming from a quick google search is Swiss.

That sounds reasonable and at least approaches the $1.5T figure. Crazy all the same.

[TheCount]

That sounds reasonable and at least approaches the $1.5T figure. Crazy all the same.

It's close but still not enough. One of them must have started purchasing more after January. But yes, it's an enormous amount of money.

[Zippyjuan]

The assets of the FR and the ECB are fully open. Where are the stocks on their balance sheet? The Fed has those MBS back from the original QE....

Central Banks don't own stocks though I think Switzerland did buy a few. (the $1.5 trillion is year to date- which is five months- not four. )

says that "central banks have bought a record $1.5 trillion in assets YTD."

That is $300 billion a month. Yet another chart on the same link says they are adding only $200 billion a month.

[oyarde]

It's close but still not enough. One of them must have started purchasing more after January. But yes, it's an enormous amount of money.

So , that would be about on pace for 3.3Trillion for the year ?

[r3volution 3.0]

They're buying government bonds in order to push down interest rates and decrease borrowing costs. How did this massively shape the market over the last year or so?

When they buy government bonds, the money doesn't have to stay in bonds; it can and does flow out to other markets.

Central Banks don't own stocks though I think Switzerland did buy a few.

The BOJ's been buying stocks for years, they hold well over $100 billion worth.

[Dr.No.]

When they buy government bonds, the money doesn't have to stay in bonds; it can and does flow out to other markets.

So what you are saying is that when the government buys bonds, the sellers of the bonds get money that they can put into other markets?

[r3volution 3.0]

So what you are saying is that when the government buys bonds, the sellers of the bonds get money that they can put into other markets?

That's right

[Dr.No.]

That's right

OK. But considering how leverage is used, I'm not sure it makes a big difference. Banks would be buying stocks using bonds to backup those assets. Now, they would be buying stocks using dollars to backup those assets. I'm not seeing this net loss of reserves from US banks that would be necessary (as at least some of it would go to the foreign sector). Can't say about the BOJ or ECB...

[r3volution 3.0]

OK. But considering how leverage is used, I'm not sure it makes a big difference. Banks would be buying stocks using bonds to backup those assets. Now, they would be buying stocks using dollars to backup those assets. I'm not seeing this net loss of reserves from US banks that would be necessary (as at least some of it would go to the foreign sector). Can't say about the BOJ or ECB...

Bank A sells $10B in bonds to Bank B, then buys $10B in stocks.

vs.

Bank A sells $10B in bonds to the Fed, then buys $10B in stocks.

What's the difference?

The difference is that Bank B has $10B less in the first scenario than in the second, so it is less able to buy stocks (or whatever).

[Dr.No.]

Bank A sells $10B in bonds to Bank B, then buys $10B in stocks.

vs.

Bank A sells $10B in bonds to the Fed, then buys $10B in stocks.

What's the difference?

The difference is that Bank B has $10B less in the first scenario than in the second, so it is less able to buy stocks (or whatever).

Yes, but in the second scenario, Bank A's balance sheet hasn't really changed. Instead of 10 billion in bonds, they have 10 billion in reserves. Those reserves don't leave the system. Moreover, their ability to purchase stock hasn't changed. Assuming that their desired capital ratios have stayed the same, their ability to buy assets hasn't gone up.

It's important to keep in mind that banks don't really use "real" money to buy assets. They acquire assets and create liabilities in the process (ie, if they want to buy stocks, they will buy the stocks as an asset and deposit the sellers' accounts with the proceeds as liabilities). As long as they think they are buying a quality asset, and their books look good (ie, their capital ratios/CAR are solid), they will buy whatever they want. Banks, as well as regulatory agencies, treat government bonds and reserves equivalently when it comes to assessing capital ratios, so a bank selling a bond to the Fed for reserves won't change its ability to leverage.

Now, when it comes to reserve requirements; yes, the selling of a bond will give a bank more reserves with which it can meet regulatory and in-house reserve requirements, but both requirements are so paltry that there is little effect. Especially in a post-recession environment where reserves are sky-high and central banks have to protect interest rates by turning to IOR policy.

[r3volution 3.0]

Yes, but in the second scenario, Bank A's balance sheet hasn't really changed. Instead of 10 billion in bonds, they have 10 billion in reserves. Those reserves don't leave the system. Moreover, their ability to purchase stock hasn't changed. Assuming that their desired capital ratios have stayed the same, their ability to buy assets hasn't gone up.

It's important to keep in mind that banks don't really use "real" money to buy assets. They acquire assets and create liabilities in the process (ie, if they want to buy stocks, they will buy the stocks as an asset and deposit the sellers' accounts with the proceeds as liabilities). As long as they think they are buying a quality asset, and their books look good (ie, their capital ratios/CAR are solid), they will buy whatever they want. Banks, as well as regulatory agencies, treat government bonds and reserves equivalently when it comes to assessing capital ratios, so a bank selling a bond to the Fed for reserves won't change its ability to leverage.

Now, when it comes to reserve requirements; yes, the selling of a bond will give a bank more reserves with which it can meet regulatory and in-house reserve requirements, but both requirements are so paltry that there is little effect. Especially in a post-recession environment where reserves are sky-high and central banks have to protect interest rates by turning to IOR policy.

I don't disagree with what you've said, but it also doesn't affect my point: i.e. that the Fed's buying can and does juice the stock market.

[Zippyjuan]

I don't disagree with what you've said, but it also doesn't affect my point: i.e. that the Fed's buying can and does juice the stock market.

The Fed quit being a net buyer in October 2014 (they are using money they get from maturing securities to buy replacement securities). But yeah, the Fed purchasing of securities frees up money in the system which would have gone into those notes and allows it to go other places including stocks.

[r3volution 3.0]

The Fed quit being a net buyer in October 2014 (they are using money they get from maturing securities to buy replacement securities).

I aware Zippy, just speaking in general.

The CBs currently doing the juicing are overseas.

[Zippyjuan]

I aware Zippy, just speaking in general.

The CBs currently doing the juicing are overseas.

Most are supposed to be cutting back on it this year. https://www.theguardian.com/business...caling-back-qe

ECB surprises markets by scaling back QE programme

The European Central Bank has vowed to continue with its programme of electronic money printing to shore up the eurozone recovery but surprised financial markets by reducing the amount of stimulus it expects to provide each month.

The single currency bloc’s central bank left interest rates unchanged and said it would continue its programme of quantitative easing (QE) to next December or beyond “if necessary”, marking an extension to its previous guidance that the scheme would run until the end of March.

However, the value of the bonds bought by the ECB per month under the QE programme will drop to €60bn (£51bn) from April next year, from €80bn currently. The ECB’s QE scheme involves creating electronic cash to buy sovereign and corporate debt to counter anaemic economic growth and low inflation.

ECB president Mario Draghi insisted the central bank would remain ready to beef up its support for the eurozone economy as needed and rebuffed suggestions the plans for more modest bond-buying from next spring represented “tapering”, a process by which QE is wound down.

[nikcers]

I don't disagree with what you've said, but it also doesn't affect my point: i.e. that the Fed's buying can and does juice the stock market.

Not only that buy I see another bubble in the housing market that is starting to build up. I keep seeing prices go up and people are buying them high. Normally people would stop buying in markets like these, at the least buying would slow down, there is no pressure to slow down buying at all from the banks because they are probably too pressured to pad their numbers, and they know the administration will just bail them out, Trump loved the bail outs.

[r3volution 3.0]

Most are supposed to be cutting back on it this year.

All the more reason to expect another recession in the near future.

Not only that buy I see another bubble in the housing market that is starting to build up. I keep seeing prices go up and people are buying them high. Normally people would stop buying in markets like these, at the least buying would slow down, there is no pressure to slow down buying at all from the banks because they are probably too pressured to pad their numbers, and they know the administration will just bail them out, Trump loved the bail outs.

Yup