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Top Three Central Banks Account For Up To 25% Of Developed World GDP

Tyler Durden's picture





 

For anyone who still hasn't grasped the magnitude of the central planning intervention over the past four years, the following two charts should explain it all rather effectively. As the bottom chart shows, currently the central banks of the top three developed world entities: the Eurozone, the US and Japan have balance sheets that amount to roughly $8 trillion. This is more than double the combined total notional in 2007. More importantly, these banks assets (and by implication liabilities, as virtually none of them have any notable capital or equity) combined represent a whopping 25% of their host GDP, which just so happen are virtually all the countries that form the Developed world (with the exception of the UK). Which allows us to conclude several things. First, the rapid expansion in balance sheets was conducted primarily to monetize various assets, in the process lifting stock markets, but just as importantly, to find a natural buyer of sovereign paper (in the case of the Fed) and/or guarantee and backstop the existence of banks which could then in turn purchase sovereign debt on their own balance sheet (monetization once removed coupled with outright sterilized asset purchases as is the case of the ECB). And in this day and age of failed economic experiments when a dollar of debt buys just less than a dollar of GDP (there is a reason why the 100% debt/GDP barrier is so informative), it also means that central banks now implicitly account for up to 25% of developed world GDP!

What does this mean? It means that nearly $8 trillion in world economic growth is artificial and exists only courtesy of central bank intervention - if one is looking for the reason why there is no mean reversion to a more stable period of time, there's your answer. It also means that central banks will never unwind their "assets", either actively, or passively, by letting them mature, as doing so would effectively mean an accelerated return to a non pro forma status quo, one in which global GDP suddenly finds itself $8 trillion less. It also means that in this age of ongoing consumer and corporate deleveraging, central banks will have no choice but to continue monetizing not to generate incremental growth, but to offset debt destruction elsewhere. And of course, in order to sustain global GDP growth of ~3%, they will have to print even more, in other words, accrue more liabilities (excess reserves) which of course would be funded by monetizing even more paper issuance (which Congress would be delighted to oblige with). Which is why we find the announcement by the Fed that it will notify in advance what the Fed Funds rate will be, to be beyond humorous: after all in an environment of active monetization, the only possible interest rate is zero (although the ECB tried a brief experiment otherwise, when it held higher rates than 1% to combat inflation even as it tried, unsuccessfully, to create a debt monetizing off balance sheet vehicle- the EFSF and the ESM).

Unfortunately, the worst news is that for everyone who feels that the global economy is fake - you are right: up to 25% of all economic growth is what in a different day and age would have been called "one-time and non-recurring" - unfortunately, since now this is the trump card on which the entire western model depends, "one-time and non-recurring" is better known as "constant and endless."

Our advice to anyone in the trading and investing business who has just had enough of central planning, and its ridiculous impact on capital markets which involves but is not limited to reacting to various disjointed headlines constantly, instead of trading based on a proactive, fundamentally-driven strategy is: find a new job. The new normal may be the "new paranormal", but more than anything it is the new centranormal. Because from now until the inevitable collapse of the financial system in its current form, nothing will change.

chart courtesy of John Lohman

 


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Thu, 01/05/2012 - 22:25 | Link to Comment lolmao500
lolmao500's picture

All bullish... according to Geithner.

Thu, 01/05/2012 - 22:26 | Link to Comment trav7777
trav7777's picture

I think he meant TRIllion, not billion

Thu, 01/05/2012 - 23:36 | Link to Comment Fukushima Sam
Fukushima Sam's picture

This is Winning the Future.TM

Fri, 01/06/2012 - 02:24 | Link to Comment Harlequin001
Harlequin001's picture

'Goldman Sachs rules the world' - you better believe it. If you weren't sat on the Board of Goldman with Lloyd and Vinier et al then there is no way you could know at what point Goldman would choose to collapse the US economy by refusing to bid for auction rate securities. If you weren't party as a board member to the discussion at which point Goldman would decide to start buying CDS then you would not know at what point the price would begin to spike.  Only Goldman knew when the market would crash because only they knew at what point they would stop bidding, and how much CDS they would accumulate before they did it.

If you weren't party to the same discussion at which it was decided to buy all their 'insurance' only from one counterparty AIG, then there is no way you could know how Goldman would entice or force the US govt to bail out its one and only counterparty and thereby save it from bankruptcy. The whole world knew that counter party risk would collapse the CDS market and so did Goldman. If you weren't on the Board there is no way you could know, which makes all these 'guest posts' about market trends etc nothing but pure bullshit and blind luck, or insider dealing.

Do yourself a favour, buy gold outside of the banking system. It doesn't matter what Goldman does then because you're always going to hold the same amount of gold, and the more they bail themselves out the more your assets are worth. It is the ultimate global short that becomes more valuable the longer these shenanigans perpetuate. The trick is to hang onto them...

'For anyone who still hasn't grasped the magnitude of the central planning intervention over the past four years...' This has been going on for a lot longer than a mere four years...

 

Fri, 01/06/2012 - 02:34 | Link to Comment Chris Jusset
Chris Jusset's picture

Central banks now implicitly account for up to 25% of developed world GDP!

Since this arrangement has been so successful, I propose that we double the size of the central banks' balance sheets, such that they control 51% of global GDP.  This would make the unelected and unaccountable central bankers the de facto leaders of the free world. 

 

What could possibly go wrong?

Fri, 01/06/2012 - 06:12 | Link to Comment Ghordius
Ghordius's picture

a currency devaluation of 50% and it goes back to 12.5%, eh? Sustainable?

-----------------

"with the exception of the UK", always with the exception of the UK

how is it that the Bank of England and it's banking system is nearly never on any scrutiny? the rehypotecation "scandal" is already history

oh wonder, oh wonder...

Fri, 01/06/2012 - 10:10 | Link to Comment ATM
ATM's picture

Why mention the BOE? It's too small to worry about but not any different than the other thieves.

Fri, 01/06/2012 - 12:55 | Link to Comment eureka
eureka's picture

Ghordius - RE BOE, I believe it is because BOE - along with US FED - is THE largets contributor to the illusory productivity and growth claim called "GDP" - which really is naught but paper, smoke & mirrors - a.k.a. various asset purchases and stimuli moving from one empty pocket to another - BACKED BY A BIG GUN, of course.

If I say that my paper, which I call eureka-paper, is worth more than anyone elses paper regardless of what they may call it, everyone else will laugh - as they should - but, if I then pull out the biggest gun in the world - and repeat my assertion a lot of people will say "wow, look at the size of that thing, since eureka could afford that, maybe he's right - in any case, let's buy his paper even though it may be garbage, because after all, he does have the biggest gun in the world, and that's worth something, when the shite hits the fan."

People are fans of the biggest gun - and that - and not so much else -explains why GDP is such a beloved bunch of hocus pocus and MSM focus - elite manipulated icon'ery, constantly waved before the sheeple.

Now, in reality, REVENUE, is where the ruber meets the road. But even revenue is manipulated - i.e. forced and printed and leveraged by he who waves the biggest gun to protect his paper mill, central bank. And that's why the USUK central banks - i.e. US FED and BOE are soooo worshipped and protected and inflated.

US Military Empire backed US FED & BOE twart fundamentals and reality itself with biggest-gun enabled paper asset levitation. They just bamboozled Germany, via France, to give up on bond-holder-and bank haircuts - and then quickly proceeded to bamboozle EU, via France, to place a new embargo on Iranian oil AND freezing Iranian Central Bank overseas assets - which latter manouever is only possibly via the fact that Iran has not been allowed to have a big gun - unlike France and Israel and Pakistan and North Korea, all of whom US need to be more cautious and lenient with for obvious macro-strategic reasons - i.e. all these countries are used as regional wedges against their local-region neighbors and partners.

UK debt to GDP is 1,000% - the biggest gap in the entire world - and yet - globalization via financialization - i.e. paper puff bamboozlement - is run via this the older branch of THE USUK EMPIRE.

It is facinating - this levitation exercise- like all magic is, to the un-initiated eye. A new test of its continued applicability is being prepared in the Strait Of Hormuz this very moment.

Let of observe in peace and with complete detachment and dis-sociation, Gentlemen.

Fri, 01/06/2012 - 07:01 | Link to Comment Coke and Hookers
Coke and Hookers's picture

Good post sir.

Fri, 01/06/2012 - 10:03 | Link to Comment Downtoolong
Downtoolong's picture

Central Banks, Of The Banks, By The Banks, For The Banks, but, funded, guaranteed, and paid for by the People.

Fri, 01/06/2012 - 03:30 | Link to Comment vato poco
vato poco's picture

Yeah, this'll end well.

Thu, 01/05/2012 - 23:57 | Link to Comment iinthesky
iinthesky's picture

Why would Barry Obama advertise with ZH.. Do they really think anyone who reads ZH would ever vote for him? Curious. But hey.. if its funding this site, Go BARRY!

Fri, 01/06/2012 - 00:56 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Ze meeth of infeeeneet exspawnsion is meeting it's logical end. Eat eat and explode.

For those who might know Pat Farley but not know of his comeecs... please see and in-joy...

http://e-sheep.sansara.net.ua/www.e-sheep.com/rusheats/

First everthing gets swallowed. Scarfed.Then the swallower bursts.

ori

-life-in-pictures/

Fri, 01/06/2012 - 01:19 | Link to Comment markmotive
markmotive's picture

One look at the % of government expenditures that must be borrowed and you can see that the central banks will continue to buy.

 

This is why we could see hyperinflation and this is why I own gold.

http://seekingalpha.com/article/293312-hyperinflation-and-the-fiscal-cas...

Fri, 01/06/2012 - 01:24 | Link to Comment Vic Vinegar
Vic Vinegar's picture

These charts alone provide a compelling case for owning gold (GLD)

Nicely played mark.  You out-spammed the uber-spammer.

Fri, 01/06/2012 - 01:49 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Vic, pull your Dic out of the Vinegar, go see Rush Limbaugh eat everything and laugh.

And crunch some more NUMBers and stroke your gold.

I'm sure your sniping is equally if not more tiresome.

ori

Take this.... ;-)

http://www.youtube.com/watch?v=Xs2V5cRS5Bw

Fri, 01/06/2012 - 01:53 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Believe you me, Rush's 'See I Told You So' was some seminal reading for me during 10th grade English class.

Re your link: I clicked it, saw Osama bin Laden, got scared and closed the window quickly.  Fucking CIA didn't get him yet.  Damn government and their lies!

Fri, 01/06/2012 - 02:05 | Link to Comment Oh regional Indian
Oh regional Indian's picture

There ya go. I highly recommend the entire Electric Sheep Comix set. 

Osama? I wrote a song about him... sorry, is this too much spam for your tastes? Somehow apropos though...

Enjoy! ;-)

/aaaahhhve-bin-laden-see-i-ave/

ori

Fri, 01/06/2012 - 12:34 | Link to Comment MrBoompi
MrBoompi's picture

So please explain what Mitt Romney is going to do to get us out of this mess.  Will he buy the country, fire 20% of us, then resell?

 

 

Thu, 01/05/2012 - 23:22 | Link to Comment LiquidityandLunacy
LiquidityandLunacy's picture

How long before they cant deny it anymore

Thu, 01/05/2012 - 22:29 | Link to Comment Jim in MN
Jim in MN's picture

Just noticed something: Ron Paul polls better against Obama than ANY other Republican candidate except Romney.  As in, single digit gap.

Better than Perry.

Better than Gingrich.

Better than Santorium.

Check it out for yourself: http://www.realclearpolitics.com/epolls/2012/president/president_obama_vs_republican_candidates.html

Another lying sleazy MSM meme busted.

Thu, 01/05/2012 - 23:08 | Link to Comment Rob Jones
Rob Jones's picture

Romney is not a Republican.

Thu, 01/05/2012 - 23:55 | Link to Comment ISEEIT
ISEEIT's picture

Hate to say it bro', but Romney is the republican. Labels change but reality doesn't. Fact is we are all Libertarians. Problem is that FUCKING GOVERNMENT hates Libertarians ( that's us).

Proof is in the pudding (and the charts).

RON PAUL IS OUR PRESIDENT.

The other jokers want to be the governments president.

Fri, 01/06/2012 - 01:51 | Link to Comment Oh regional Indian
Oh regional Indian's picture

RepublocRAT. All of them actually. Flexible fellows, these pols.

ori

Fri, 01/06/2012 - 04:41 | Link to Comment Vic Vinegar
Vic Vinegar's picture

RepublocRAT.  Clever!

But enough with the sniping...I'm here to write a personal plea to Tyler:

I had two thoughts when I woke up this morning (no joke):

a) The first came after firing up Wall Street Bear and seeing the great Robot Trader say this:

I get knocked off all the time, then I'm able to post the next day. 

Something in their server thinks you are "spam" and eventually the spam filters figure out you are a regular person and you will be able to get on the next day. 

http://wallstreetbear.com/board/view.php?topic=92763&post=336055

Uhm, no.  You get knocked off b/c you are talking about Citi's stock price when Tyler is putting up articles about cats storming the White House.

b) I would probably choose being Sasha Grey's designated partner over working for ZH.  But I swear that's the only job I'd leave this one for.

Tyler - you need an ombudsman now more than ever.  There are plenty of cats more qualified than me, so pick them if you want.  But none of them wants it more than me.

http://www.youtube.com/watch?v=LEo8poVlQrM

Fri, 01/06/2012 - 00:49 | Link to Comment Urban Redneck
Urban Redneck's picture

Gordon Gekko is unelectable- which is why he is the most desireable opponent from the Democrats' perspective (which they won't admit until the Republicans have formed their circular firing squad- same cliche, same idiocay, different party, same as the other party)  

Fri, 01/06/2012 - 02:26 | Link to Comment macholatte
macholatte's picture

Romney is not a Republican

Barry is not a Democrat.

They're both Progressives wearing different lies.

Fri, 01/06/2012 - 12:43 | Link to Comment MrBoompi
MrBoompi's picture

So true.  These so-called leaders take their orders from people who are neither Democrats nor Republicans.  They are oligarchs, and only oligarchs.  And you either play their way or you get nowhere.  Fascism, totalitarianism, or corporatism are old school terms.  We need a new term to describe the submission of the "free" world's politicians to the financial elte.

 

 

Fri, 01/06/2012 - 02:37 | Link to Comment q99x2
q99x2's picture

As I've heard it Mitt Romney follows one leader that was so odious to the common folk, the townspeople, that they had to break into the jail he was being held/protected in just to kill him. I think that guys name was Joseph Smith. Another he is working with is ... well he is a good follower.

Fri, 01/06/2012 - 00:26 | Link to Comment Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

The funny thing is that the hi-jacked MSM tried to ignore Ron Paul, and had Santorum and Bachmann as actual contenders LOL! That's better than anything MDB can come up with.

That's a direct challenge MDB...bring it!

 

Fri, 01/06/2012 - 08:26 | Link to Comment saints51
saints51's picture

who do they poll to get these results?

I have to ask because who in the hell would even vote for Obama. And don't say the blacks because I know a lot of them who regret their vote and are not even considering it. Got some black friends that tell me they are democrat in the day and republican at night....interesting.

Thu, 01/05/2012 - 22:31 | Link to Comment eddybaby
eddybaby's picture

Incredible, yet the good ship S&P still sails onwards.... 

Fri, 01/06/2012 - 00:32 | Link to Comment WonderDawg
WonderDawg's picture

Probably not for much longer. We've either hit an important high this week, or we'll have another little pop higher, and then the markets roll over. We're at a very significant point in the markets right now. I'll go out on a limb and say we've either already hit the high for the year, or we will within the next week. Yes, I said high for the year.

Thu, 01/05/2012 - 22:32 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

Exhibit A of why to own physical gold

Thu, 01/05/2012 - 22:59 | Link to Comment Boston
Boston's picture

In addition to making the rational/analytical case for gold, data like this should help with the emotional aspects of major price corrections in gold.

Data like this, when it fully sinks in, should help provide the confidence to 1) ride out the pullbacks when you're already long, and 2) buy more---a lot more---physical when the pullbacks become fierce.

Not that I'm predicting that gold will fall so low, but on the off chance that it does, I'm prepared---mentally---to buy down, in growing quantities, all the way to $1,000, and lower.  The more it falls, the happier I will be, despite any temporary and unrealized losses during the process.

Thu, 01/05/2012 - 22:36 | Link to Comment chump666
chump666's picture

Very good post. 

Thu, 01/05/2012 - 23:15 | Link to Comment earleflorida
earleflorida's picture

amen to that brother,... amen

Fri, 01/06/2012 - 01:46 | Link to Comment Irish66
Irish66's picture

I agree and its simple to understand but infuriating.

Thu, 01/05/2012 - 22:38 | Link to Comment Judge Arrow
Judge Arrow's picture

8 Trillion straight up and then the rocket runs out of the fuel sucked from the GDP tanks. We should feel the effects of a very unpleasant re-entry it would seem, in oh, about - a year?

Thu, 01/05/2012 - 22:46 | Link to Comment Jim in MN
Jim in MN's picture

Before the election, or after?

How many licks DOES it take to get to the center of a Tootsie Pop?

Fri, 01/06/2012 - 00:16 | Link to Comment fuu
fuu's picture

3.

Thu, 01/05/2012 - 23:17 | Link to Comment UP Forester
UP Forester's picture

Uh, I'm thinking more like Challenger than Columbia....

Thu, 01/05/2012 - 22:45 | Link to Comment knukles
knukles's picture

Print on, dude.

Thu, 01/05/2012 - 22:51 | Link to Comment Caviar Emptor
Caviar Emptor's picture

25% of everything you own belongs to The Fed. 25% of everything you eat, everything you ever learned, and 25% of your inner body parts since government pays for most of healthcare. 

Bernanke's new plan to hold regular public press conferences for "transparency" is just a transparent attempt to also control 25% of your mind. You will soon receive papers in the mail which you must sign and return, stating that you think you are being treated fairly by The Fed. 25% of your safety depends on it. 

Thu, 01/05/2012 - 23:01 | Link to Comment Teamtc321
Teamtc321's picture

This post game show will certainly have fire work's. 

Thu, 01/05/2012 - 22:51 | Link to Comment kito
kito's picture

That flat line at the end of the upward curve will continue to flatten because Ben ain't printing........

Thu, 01/05/2012 - 22:56 | Link to Comment Tyler Durden
Tyler Durden's picture

You seem to have completely missed the point of the article. It is not about the Fed or the ECB or the BOJ in isolation. These are essentially the same entity. They print in isolation, leading to a relative devaluation of currencies, or combined, leading to an absolute devaluation against hard currencies like gold. The point is one or all - they can't stop printing. Look at the first chart which shows the combined assets - it is exponential.

And incidentally, of course the Fed will print.

Thu, 01/05/2012 - 23:18 | Link to Comment kito
kito's picture

15 minute timeout for me...Tyler has intervened...... :).

Fri, 01/06/2012 - 01:30 | Link to Comment NotApplicable
NotApplicable's picture

ZIRP4EVA, kito. It's their only choice. They kill off the markets that they monetize, while trying to avoid the consequences personally.

Thu, 01/05/2012 - 23:29 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

They print in isolation, leading to a relative devaluation of currencies, or combined, leading to a absolutely devaluation against hard currencies like gold.

As I have been saying, it is no longer a competitive race to the bottom, but rather synchronized diving.


Thu, 01/05/2012 - 23:35 | Link to Comment LiquidityandLunacy
LiquidityandLunacy's picture

But tyler, how can the fed print if the BOJ cannot seem to get that yen from exploding everytime the dollar goes down? Doesnt that incidentally mean that the fed CANNOT successfully print en masse again without causing japan to explode?

 

 

Thu, 01/05/2012 - 23:41 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

The BOJ will print even more. If the central bankers refuse, then their japanese housewives will be outed for insider trading.  See SNB.

Thu, 01/05/2012 - 23:41 | Link to Comment LiquidityandLunacy
LiquidityandLunacy's picture

Just do a search on this very website for articles posted by tyler about the laughable timeframe of the effectiveness of BOJ printing usefulness. He has documented himself that the BOJ is ineffective at devaluing its currency for more than 15 minutes.

 

So I say again, how can the FED print without blowing up Japan? Is that the plan all along?

Thu, 01/05/2012 - 23:57 | Link to Comment UP Forester
UP Forester's picture

Easier than fighting a Pacific Theater War v2.0.

And this time, they're already radioactive.

Fri, 01/06/2012 - 00:14 | Link to Comment blunderdog
blunderdog's picture

how can the FED print without blowing up Japan? Is that the plan all along?

Sure is an obvious possibility, eh?  The USA's got enough money to blow up the entire world, and after that's done, we just set up another monetary hegemony.

That's probably always been the plan.  That's why deficits don't matter...in the US.

Another possibility is that this is all just blind fumbling and flailing by a bunch of folks who address problems by creating new ones that are so much bigger that the earlier ones are forgotten.

Fri, 01/06/2012 - 00:25 | Link to Comment LiquidityandLunacy
LiquidityandLunacy's picture

I guess ive always had my questions as to why we are sucking the surrounding world dry of its resources while hoarding ours. Nevertheless, I dont want to get off point and I remain confident that printing will not occur  unless the intention is to cause Japan to implode.

Fri, 01/06/2012 - 09:34 | Link to Comment falak pema
falak pema's picture

Its the Schizophrenia that is the self fulfilling death wish of system. Can't have your cake and eat it. But the whole art of Imperial politics is to create a new front all the time; as the Oligarchical WE make the rules. Pax Americana on the line. Will democracy resist the upcoming manipulations all the way, as systemic risk catches the economies in its iron grip?

99% mayhem for 1%er glory. When thieves fall out all hell breaks loose as at Sarajevo. Don't be the last one without a chair, when the music stops; today Italy, tomorrow France, etc. etc. We are going thata way by the looks of it. 

World governance by central banks means market is a dead instrument. Thats the true real frontier for the Oligarchy. Getting to that point to avoid losing all their wealth. No markets, no accountability...Back room deals to decide how to spread the pain amongst people/sheeple. That's THEIR game plan.

Fri, 01/06/2012 - 12:53 | Link to Comment MrBoompi
MrBoompi's picture

Gold will not be a "hard currency" until they can't sell paper gold anymore.  25% of the world economy is fake, but 99% of the gold and silver market is fake.  They can't tell us the truth.  True free markets would lead to the largest depression the world has ever seen.  We either print and manipulate or....well, who the fuck knows?

 

 

Thu, 01/05/2012 - 22:51 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

The new normal is Abby.  Abby someone.

Thu, 01/05/2012 - 23:38 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture
What hump?
Fri, 01/06/2012 - 08:02 | Link to Comment StychoKiller
StychoKiller's picture

Act normal!  We've all got to act normal...

Thu, 01/05/2012 - 22:55 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

artificial economic growth?  L0L!!! really?

who could have known?  Artificial Flowers [bobbyDarin]

"Alone in the world was poor little Anne, As sweet a young child as you ..."

Thu, 01/05/2012 - 23:19 | Link to Comment Rynak
Rynak's picture

It's not even fake economic growth.

It's fake growth of..... erm, mostly fake things..... at the expense of reality.

Thu, 01/05/2012 - 23:50 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

(Paste):

"And in this day and age of failed economic experiments when a dollar of debt buys just less than a dollar of GDP (there is a reason why the 100% debt/GDP barrier is so informative), it also means that central banks now implicitly account for up to 25% of developed world GDP!"

yup.  a dollar of debt usta 'buy' (or correlate with/cause) way more than a dollar GDP.  now, the returns have lawfully dimished to the point that they are freaking negative [and have been for a while].  paper this;  paper that;  print;  fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt fund debt

any questions? L0L!!!

Fri, 01/06/2012 - 02:08 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

here is a situ where ~25% of developed world GDP = artificial = financial activity the euivalent of writing loans so people can pay on the money they have already borrowed and keep from defaulting

ponzinomics forever! 

Thu, 01/05/2012 - 23:15 | Link to Comment JR
JR's picture

Taxpayer money is going straight through to the bankers now. Those being rewarded are those who don’t produce. When the middle class is wiped out there won’t be enough money for infrastructure.  When the usefulness of the open border immigrants and the poor is over and the money runs out, they will be the first to be dumped by the rulers. Already, the central planners are starting to cut benefits for the handicapped. From there, they will move straight up the scale.

The injustices and immorality of central planning, i.e., high-risk chance as played by the TBTFs and supported by free money from the Fed, encourages reward without labor and high-level corruption.

Says Melville Davisson Post’s Uncle Abner in The Mystery of Chance:

“Under the wisdom of God, labor alone can save the world. It is everywhere before all benefits that we would enjoy. Every man must till the earth before he can eat of its fruits. He must fell the forest and let in the sun before his grain will ripen. He must spin and weave. And in his trading he must labor to carry his surplus stuff to foreign people, and to bring back what he needs from their abundance. Labor is the great condition of reward. And your gentleman’s vice (chance) would annul it and overturn the world.”

Thu, 01/05/2012 - 23:22 | Link to Comment earleflorida
earleflorida's picture

nice :-))

Thu, 01/05/2012 - 23:26 | Link to Comment AUD
AUD's picture

What does this mean?

It means that the global financial system is an incomprehensively large & dangerous credit bubble. Maybe it's because the 'market participants' cannot comprehend how large it is they keep on playing, at least for as long as governments' across the globe are willing to throw your good money after their bad.

Thu, 01/05/2012 - 23:59 | Link to Comment UP Forester
UP Forester's picture

For some reason this reminds me of Flowers for Algernon....

Thu, 01/05/2012 - 23:31 | Link to Comment Big Ben
Big Ben's picture

We are all fixated on GDP. But there are different types of GDP, and some are better than others. Consider:

1. Investors construct a new $100M factory. This provides jobs for the people who provide the materials and build the factory. Then it provides jobs for people who work in the factory for years to come.

2. Investors build $100M of new homes. This provides jobs for people who provide the materials and build the homes. And it creates places for people to live for years to come.

3. The government builds a $100M bridge to nowhere. This provides employment for the people who build the bridge and nothing more.

Each of these adds $100M to the GDP. But I think most people would agree that option 1 is better than option 2 which is better than option 3.

Obama has focused on option 3 with his infrastructure spending which provides a only a temporary boost to GDP, while boosting debt which will detract from future GDP.

If we want to get out of this mess, we need to increase investment spending and not waste our money on make-work programs that pay people for doing unnecessary work.

Fri, 01/06/2012 - 00:26 | Link to Comment Cursive
Cursive's picture

@Big Ben

And what will this factory produce? More useless widgets? Do you not understand the concept of excess productive capacity? I almost vomited reading your paean to the benefits of a centrally planned economy. Stalin's ghost is laughing, though.

Fri, 01/06/2012 - 01:06 | Link to Comment Uchtdorf
Uchtdorf's picture

I gave you a big down arrow. You have misinterpreted his option 1 as government being the impetus to building the plant. I think he meant that a private individual or company decides to build a plant to meet demand for some widget. Stalin would be horified actually. 

Fri, 01/06/2012 - 05:20 | Link to Comment savagegoose
savagegoose's picture

yeah an individual  owner of the wealth and interestedin a return or at leas protection of his wealth, would never accept prop3. a bridge to no where.

only somewone wo doesn  own the money, and doesnt care for returns or infact any protection of the capital, would  agree to #3.

ie only gov.

Fri, 01/06/2012 - 10:30 | Link to Comment Cursive
Cursive's picture

@uchtdorf

Did/does Fannie Mae or Freddie Mac have investors? One should be careful how one uses the term "investor." Our government overlords are fond of talking about federal "investments." The problem with Big Ben's perspective (and, perhaps, yours) is that he succumbs to the central planner's wet dream of econometric data. That's the first plank in the road to serfdom.

Fri, 01/06/2012 - 01:45 | Link to Comment Hansel
Hansel's picture

Best example:  A person gets cancer.  They pay out the nose for doctors, nurses, chemo treatment, medicine, etc.  All of this adds to GDP.  Why then, GDP would go to the moon if we all just got cancer!  <-- why GDP is stupid and not a useful measure of anything.  GDP can never be "cashed in," redeemed for anything of value, etc., its just a masturbatory exercise for economists and politician asshats.

Fri, 01/06/2012 - 12:12 | Link to Comment andyupnorth
andyupnorth's picture

+1

A keeper.

Fri, 01/06/2012 - 13:04 | Link to Comment MrBoompi
MrBoompi's picture

"If we want to get out of this mess, we need to increase investment spending and not waste our money on make-work programs that pay people for doing unnecessary work."

So true, but our tax policies push money into areas where the return on the investment is very low, or actually dangerously counterproductive.  If we don't embark on a plan of increasing investments that reduce or eliminate the foreign trade deficits, increase domestic manufacturing, and spread the growth to someone besides the top 1%, we will never stop the slide into 3rd world country status.

The tax cuts should be given to people who create manufacturing jobs, and the tax rates on capital gains should be much higher than normal income.  We have it backwards.

Fri, 01/06/2012 - 13:20 | Link to Comment Urban Redneck
Urban Redneck's picture

If one taxes capital gains higher than income (whatever other kind) then one dis-incentivizes capital formation (IE INVESTMENT).

The difficult task is targeting long term capital gains over short term capital gains, equity investment over debt investment, and production over consumption, and it is all the more difficult because the vested interests profit by the existing structuring and they shift the public debate to suit their ends, and in a worst case scenario- purchase gridlock from their pet congress critters. 

Thu, 01/05/2012 - 23:36 | Link to Comment chump666
chump666's picture

Of course all this printing hasn't rallied commodities with only the decoupling  of oil and gold.  That is a worry.  Equities are stuck in a range with the current rally overdone.  So Jim Rogers will have to admit that China is looking very sick.

Thu, 01/05/2012 - 23:52 | Link to Comment gookempucky
gookempucky's picture

Nothing matters anymore-- the banking system is about to be squezzzzzed clean of the festering puss that it is. This is what it will look like.

http://www.youtube.com/watch?v=kyCmGjkJ5-c&feature=related

end of story

hopefully this guy gets his teeth fixed

Fri, 01/06/2012 - 00:16 | Link to Comment Cursive
Cursive's picture

"Which allows us to conclude several things. First, the rapid expansion in balance sheets was conducted primarily to monetize various assets, in the process lifting stock markets, but just as importantly, to find a natural buyer of sovereign paper (in the case of the Fed) and/or guarantee and backstop the existence of banks which could then in turn purchase sovereign debt on their own balance sheet (monetization once removed coupled with outright sterilized asset purchases as is the case of the ECB)."

This explains the behavior of our "rational" markets for the last 3 years. God bless ZH.

Fri, 01/06/2012 - 00:46 | Link to Comment mailll
mailll's picture

But this is only what these banks are reporting on their books.  It may be much, much more than they are reporting that they have. But anyway, since the recession, most world economies crashed but the banks got richer.  So who caused this crash?  Where did the money go?  Now we know.  Who is behind the world banking system?  Conspiracy theories tries to answer this question. If you control the world monetary system, you do control the world.

Fri, 01/06/2012 - 00:52 | Link to Comment navy62802
navy62802's picture

World GDP ... denominated in monopoly money.

Fri, 01/06/2012 - 00:57 | Link to Comment Teamtc321
Teamtc321's picture

Here is an interesting and helpful new's letter imho I recieved tonight in defense of Mr. Ron Paul.

 

-----------------------------------------------------------

http://www.roadtoroota.com/public/791.cfm?awt_l=Kcs7A&awt_m=3mbq_FxZWxAZ85B

A Perfect Answer for Ron Paul

It is time that Ron Paul got some help from the rest of America. It is time for influential people such as politicians, scholars, actors, athletes and celebrities to come out and endorse the Ron Paul for President campaign. It is time for every single American to do anything they can to support Dr. Paul because he is truly the last hope for America.

So in this spirit I offer this rebuttal for Ron to combat those who attack what he has written or published over the years...

"I have stated before, although a few controversial statements were published in old newsletters I did not write them nor do I endorse them. For the past 35 years I have been battling "the system" to restore personal liberty and defend our Constitution and since the mainstream media has never been kind to me I have had to battle the system with my pen. I've written 9 books, published hundreds of newsletters and articles, sponsored or co-sponsored over 600 bills in Congress all in defense of personal liberty and our Constitution. That's hundreds of thousands of lines and millions of words. If you add up the writings from all my competitors combined it would not come close to the volume of work I have produced in my personal battle to restore Liberty to America. No writer or publisher has a perfect filter for everything they've produced in their lifetime. I know that "politics is politics" but it's time to focus our attention on the rest of what I've written because it is vital for the future or our country."

That's my suggestion to Ron and please pass it on to him and his staff.

Now ask yourself how you can get out there and help Ron...

He's been fighting this battle on his own for long enough.

May the road you choose be the Right Road.

Bix Weir

www.RoadtoRoota.com 

Fri, 01/06/2012 - 01:24 | Link to Comment chump666
chump666's picture

EUR 1.27 moving into 2010 lows.  Looks like a full blown banking crisis part whatever is happening again.  Centrals banks weave your voodoo, good for a mth or so...or less.

US equities payback looms.

Fri, 01/06/2012 - 01:26 | Link to Comment chump666
chump666's picture

ZH, this just in from FX wires:

  • news of two birds testing positive for bird flu in Hong Kong
Fri, 01/06/2012 - 01:35 | Link to Comment sasebo
sasebo's picture

Excuse me ---------- from where I'm sitting all central banks combined produce a total of zero, zilch gdp.

Fri, 01/06/2012 - 01:47 | Link to Comment Dr.Vannostrand
Dr.Vannostrand's picture

Zombie Earth

 

Fri, 01/06/2012 - 01:58 | Link to Comment insidious
insidious's picture

Tyler - how would Krugman spin this? Would he acknowledge or agree that the increase in central bank balance sheets is actually responsible for a quarter of the developed world's GDP?

Fri, 01/06/2012 - 02:07 | Link to Comment chump666
chump666's picture

what next?

0603 GMT [Dow Jones] The USD/KRW extends gains to 1,160.80 vs 1,152.70 late Thursday in Seoul. The pair briefly hit 1,163.00, the highest level in more than two weeks, amid unconfirmed market rumors there was an explosion at a North Korean nuclear facility, say traders and analysts in Seoul. Market participants dismiss the chatter, saying it's unclear where the rumour originated from and there's no official announcement from North Korean TV channel and its state-run Rodong news agency.

Fri, 01/06/2012 - 02:13 | Link to Comment Dr.Vannostrand
Dr.Vannostrand's picture

hahahahahahahaha

why not

Bullish!

Fri, 01/06/2012 - 02:31 | Link to Comment Tuffmug
Tuffmug's picture

All our currency should be redesigned with a picture of Bernie Madoff and the phrase "IN PONZI WE TRUST" on it.

Fri, 01/06/2012 - 03:06 | Link to Comment aswoboda
aswoboda's picture

the 25% statement is misleadindg: GDP is an annual (flow) number while debt on balance sheet is a one-time-number. If half of it has built up over the past 4 years, ~3% of GDP is driven by central bank balance sheets.

That's still huge, but the way you formulate the headline in a misleading way, dilutes the message at least for the ones who understand economics.

Fri, 01/06/2012 - 03:07 | Link to Comment hnaparst
hnaparst's picture

I would be interested to get an explanation for the statement that a dollar increase in a central bank balance sheet buys a little less than a dollar of GDP.

Fri, 01/06/2012 - 03:30 | Link to Comment IQ 101
IQ 101's picture

I met a guy tonight, he had dreadlocks and was hitchhiking past my abode

He said he had screwed up an ATM with a plastic card and  Super Glue on the card, he reckoend that if 1,000,000 people did it, it would bring down the whole Banksta system.

I think this is part of the occupy everything program,

They are going to shut down the ATM's

Get your cash out Now!

They are going to take out the whole ATM SYSTEM EXCEPT FOR SUPERMARKETS.STORES ETC. i THINK, FROM THIS ONE MEETING WITH A PERSON MUCH YOUNGER THAN ME They are up to something?

People will not be able to access their cash in a few weeks?

My opinion only. The Nuevo hippies have a plan?

Fri, 01/06/2012 - 06:34 | Link to Comment roy10
roy10's picture

You can't say central banks account DIRECTLY for 25% of GDP since central banks produce nothing - they merely lend (and these days they buy assets) - that does not produce GDP. Really - this is econ 101.

Fri, 01/06/2012 - 11:21 | Link to Comment onebir
onebir's picture

What the article is saying is the credit the CBs created credit accounted for 25% of the spending included in GDP. Which is probably right in a sense, since they were monetizing government spending (which does get counted in GDP).

But I think the basis for the comparison is misleading. GDP is a flow - it occurs in a particular period - while CB assets are a stock, & it sounds like Tyler's just divided one by the other.

To get an idea of the impact of CB balance sheets on GDP, we need to compare their quarterly changes with GDP. That's a ~10 percentage point change in 13 quarters. ie CB intervention has accounted for about 3 percentage points  of GDP growth each year since Q3 08 (ie more than all GDP growth in that period).

Fri, 01/06/2012 - 07:08 | Link to Comment chinaguy
chinaguy's picture

OT, but

ka-boom

German Nov Industrial orders -4.8%m/m (vs Reuters poll -1.7%)....

& ECB buying 5 year Italians this AM

Fri, 01/06/2012 - 11:20 | Link to Comment boogey_bank
boogey_bank's picture

This is an artist's concept of combined printing...

http://www.youtube.com/watch?v=3OOF0FpKiYk&feature=related

They are going to cross the streams...

Who is Draghi in that movie?

Tue, 01/31/2012 - 21:30 | Link to Comment Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Thank you, ZH, for really nailing the defining system parameters of the current state of the world financial system:

  • The rapid expansion in balance sheets was conducted primarily to monetize various assets, in the process lifting stock markets, but just as importantly, to find a natural buyer of sovereign paper (in the case of the Fed) and/or guarantee and backstop the existence of banks which could then in turn purchase sovereign debt on their own balance sheet (monetization once removed coupled with outright sterilized asset purchases as is the case of the ECB).
  • Central banks will never unwind their "assets", either actively, or passively, by letting them mature, as doing so would effectively mean an accelerated return to a non pro forma status quo, one in which global GDP suddenly finds itself $8 trillion less.
  • In this age of ongoing consumer and corporate deleveraging, central banks will have no choice but to continue monetizing not to generate incremental growth, but to offset debt destruction elsewhere.
  • Our advice to anyone in the trading and investing business who has just had enough of central planning, and its ridiculous impact on capital markets which involves but is not limited to reacting to various disjointed headlines constantly, instead of trading based on a proactive, fundamentally-driven strategy is: find a new job. The new normal may be the "new paranormal", but more than anything it is the new centranormal. Because from now until the inevitable collapse of the financial system in its current form, nothing will change.
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