While You Were Sleeping, Central Banks Flooded The World In Liquidity

Tyler Durden's picture


There are those who have been waiting to buy undilutable precious metals in response to a headline announcement from the Fed that it is starting to buy up hundreds of billions of Treasurys or MBS.  This is understandable - after all that is precisely the trigger that the headline scanning robots which account for 90% of market action in the past year are programmed to do. And the worst thing that one can do is put on the right trade at the wrong time. Yet it may come as a surprise to some, that while the world was waiting, and waiting, and waiting, for Bernanke to hit the Print button, virtually every other central bank was quietly unleashing it own mini tsunami of liquidity. In fact, as Morgan Stanley puts it, "the Great Monetary Easing Part 2 is in full swing." But wait, there's more: in an Austrian world, where fundamentals don't matter and only how much additional nominal fiat is created is relevant, it is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every dollars is sub 1.00 relative to GDP creation. This means that by the time the Global Weimar is in full swing, we will see much, much more easing. Sure enough, MS anticipates an unprecedented additional round of easing in the months ahead. So for those waiting to buy gold et al at the same time as DE Shaw's correlation quants do, the time will be long gone. Because slowly everyone is realizing that it is not the Fed that is the marginal creator of fake money. It is everyone.

Behold, the Great Monetary Easing part 2:

MS Summary:

The Great Monetary Easing Part 2 is in full swing – and begets inflation risks. Global monetary policy interconnectedness, the impact of central bank easing on commodity prices, and the possibility of an improved outlook for the real economy could mean a return of the Global Inflation Merry-Go-Round:


1) Super-expansionary monetary policy in the major developed economies, particularly the US, a) contributes to commodity inflation and b) is imported by EM central banks through (US dollar) soft and hard pegs.


2) Price pressures rise in EM due to domestic overheating and higher commodity prices. Inflation is then re-exported to DM through more expensive goods exports.


3) More expensive imports from EM and dearer commodities raise inflation in DM. In turn, DM central banks initiate the next round by maintaining – or increasing – monetary accommodation.


2013 might yet look like 2011 on the inflation front.

...and Detail:

The Great Monetary Easing (Part 2), is in full swing … In response to a slowing global economy and further downside risks emanating from the possibility of an escalating Eurozone debt crisis, central banks all over the world – and across the DM-EM divide – have been deploying their arsenal for a while now, and should continue to do so. The result is aggressive monetary easing on a global scale – what we have dubbed the Great Monetary Easing, part 2 (GME 2 - see Sunday Start: What Next in the Global Economy, January 22, 2012); this follows on from GME1 in 2009-10. The GME2 is now in full swing. Last week, the Bank of England announced a further GBP 50bn of gilts purchases, to take place over the next 3 months. On Tuesday, the Bank of Japan upped the target of its Asset Purchase Program by 50%, from JPY 20trn to JPY 30trn, with the increment concentrated exclusively on JGB purchases. We think Sweden’s Riksbank will pick up the baton from the Bank of Japan on Thursday and cut the repo rate by 25 basis points.

Half the world's central banks have reqliuified in the past few months!

Out of a total of 33 central banks under our coverage, 16 have eased policy in various ways since 4Q11; 7 out of 10 DM central banks and 9 out of 23 EM central banks. Many of these central banks will ease further, on our forecasts, while the central banks of Poland, Korea, Malaysia and Mexico, which have not cut so far, will also join in (and the National Bank of Hungary will likely reverse its 100 basis points of hikes over the course of the year).

What is surprising, is that the primary beneficiary of these hundreds of billions in excess liquidity from around the world, has so far been the US, where courtesy of the biggest equity market, the reflexive flaw that the stock market is the economy has led to what some have noted is decoupling, when in reality it is merely outperformance of the US stock market, where the bulk of global liquidity has concentrated. And now, like in 2011, that luiqidity is starting to spill over again: gas just hit $3.52, and rising ever faster, which just happens to be the most direct, implicit tax on US consumera. And it is now detracting from growth. 

Finally, another way of visualizing the global central banks' balance sheets.

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Thu, 02/16/2012 - 15:11 | 2166710 battle axe
battle axe's picture

Print and print some more until we run out of ink. Yeaaaa Haaaaa

Thu, 02/16/2012 - 15:12 | 2166721 LawsofPhysics
LawsofPhysics's picture

computers don't require ink, just energy.

Thu, 02/16/2012 - 15:22 | 2166760 Troll Magnet
Troll Magnet's picture

i should buy more silver then?

Thu, 02/16/2012 - 15:24 | 2166768 The Watchman
The Watchman's picture

I thought I felt a wet spot in the bed last night, but I didn't say nothing.

Thu, 02/16/2012 - 16:14 | 2166969 bobola
bobola's picture

When I was a kid we would play Monopoly with 2 banks, and everyone would get double the starting cash.

It took longer to go bust, but those who played smart and had good luck made wads of $$.

Same game, different circumstances.

Thu, 02/16/2012 - 16:22 | 2167009 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

We're all gonna be billionaires!

Thu, 02/16/2012 - 17:08 | 2167214 JPM Hater001
JPM Hater001's picture

Go debt go!

I know you can do it.

Thu, 02/16/2012 - 17:58 | 2167394 Sudden Debt
Sudden Debt's picture

They flooded the world with trillion... And all I got was.... Nothing....

Thu, 02/16/2012 - 18:36 | 2167504 Max Fischer
Max Fischer's picture



Are you aware that under the offical Monopoly rules, the bank can never run out of money?  If all the Monopoly money has been distributed, players are allowed to issue new pieces of paper with denominations written on them. 

If libertarians created Monopoly, the game would just end as soon as all the money was distributed because elastic currency is evil.  I always marvel at how libertarians can believe that the growth of an economy should be tethered to something totally arbitrary like the availability of a metal.  Throughout all of history, inelastic currencies have always been replace by elastic currencies which have the ability to conform to the needs of a growing economy. 

Max Fischer, Civis Mundi 


Thu, 02/16/2012 - 19:34 | 2167672 OutLookingIn
OutLookingIn's picture

until these elastic currencies are printed into oblivion.

There. Fixed it fer ya! 

Thu, 02/16/2012 - 20:58 | 2167871 francis_sawyer
francis_sawyer's picture

Yeah? Is that so Max Fischer, Civis Mundi? (champion of dickheaded reasoning)...

Last time I remember playing 'Monopoly', not only was it played with play money... But I didn't have to starve, or heat the house, or put gas in the token to travel around the board...

You are about the most self righteous (but 'dumbest') motherfucker on the p[lanet...


Thu, 02/16/2012 - 21:05 | 2167887 blunderdog
blunderdog's picture

I understand the concern. 

You know what comes right after the reinstatement of the non-fractional gold standard that every two-bit survivalist thinks is going to magically solve everything? 

Those  same fuckin' assholes who couldn't be bothered to understand the basis for an elastic money supply start calling for the slaughter of the Jews... because they hoard all the gold.

And so it goes...hope you're keeping dual-citizenship, Max.

Sun, 02/19/2012 - 04:11 | 2174475 stacking12321
stacking12321's picture

max, i am guessing you are trolling, you can't possibly believe that.

as money is a store of value, it should be tied to something, oh, i dunno, maybe actually *of value*.

it can be something arbitrary like gold or silver or something else, as long as it's real.

it absolutely must not be tied to something imagniary like a rainbow emanating from a unicorn's horn, that can be created with a wave of bernanke's magic wand, because if you do, then money becomes meaningless, and that's the realization we're coming to today.


Thu, 02/16/2012 - 15:49 | 2166842 J 457
J 457's picture

NG and coal and oil.  Materials will make a come back with all this money fresh money comes looking for hard assets to buy.

Thu, 02/16/2012 - 16:04 | 2166904 The Big Ching-aso
The Big Ching-aso's picture



No wonder my hands are covered in multi-colored ink after I fished through the wallet for a $20.

Thu, 02/16/2012 - 16:33 | 2167068 dontgoforit
dontgoforit's picture

Our Fusex acct is up a ton (mostly thanks to Exxon, Chevron & Apple).

Thu, 02/16/2012 - 16:39 | 2166946 Jumbotron
Jumbotron's picture

computers don't require ink, just energy.


They're going to need more voltage.

Thu, 02/16/2012 - 15:14 | 2166730 Future Tense
Future Tense's picture

Yes, keep the floodgates open.  It will only push up stocks higher, bringing higher sentiment into the stock market, creating the ultimate short opportunity.  The chart in this link has the most recent investor newsletter sentiment reading levels.  Can you say all in?


Thu, 02/16/2012 - 15:19 | 2166739 RichardP
RichardP's picture

It will only push up stocks higher ...

Dow = 14,000 in six to eight months.  Politics requires it.

Thu, 02/16/2012 - 15:23 | 2166763 SheepDog-One
SheepDog-One's picture

Six to eight months? Nonsense...we're only a few more trading days like today from new world record highs! Feb 28th DOW 14,500!

Thu, 02/16/2012 - 15:31 | 2166794 Spitzer
Spitzer's picture

Until the treasury bubble pops, the DOW will creep to a new high, the Cad and Aussy housing bubbles will continue to inflate and Japan will be on its way to 500% debt to GDP. Its all about treasuies, nothing else.

Thu, 02/16/2012 - 15:34 | 2166801 VanillAnalyst
VanillAnalyst's picture

All in on commodities maybe. But going short in the face of multiple tsunamis of liquidity in the coming years? balls out dude. Hope you can hang on long enough.

Thu, 02/16/2012 - 15:36 | 2166809 bob_dabolina
bob_dabolina's picture

The Treausury bubble doesn't have to pop as the Fed can print money to buy Treausuries ad infinitum if it wants. The natural consequence of this is obviously inflation. 

Thu, 02/16/2012 - 17:03 | 2167195 Eally Ucked
Eally Ucked's picture

It doesn't matter, DOW can go to 16k shortly but it's only the play for banks and hedge funds or few percentages of population. The rest is squeezed out so much paying for everything more and more by the day that suddenly all those earnings for american cos will evaporate in the nick of a time. Thanks to good propaganda job people are just spending their savings expecting return of good times any moment, but that moment is already delayed by 4 years and the savings are almost gone. And suddenly there is no more money for movies, cable, iphones, burgers, gas, nails, vacations and other things. Earnings from Asia won't help them for long time because those pesky Chinese will produce their own version of everything.  

Thu, 02/16/2012 - 15:23 | 2166764 economics1996
economics1996's picture

Fake wealth to quote Peter Shiff.

Thu, 02/16/2012 - 20:28 | 2167818 ConspiracyTheory
ConspiracyTheory's picture

Yes, absolutely all in. Sell your house, cars, and family and put all the money to short the freight train. The more short piling up, the faster the freight train melt-up continues.

Thu, 02/16/2012 - 15:21 | 2166757 taniquetil
taniquetil's picture

Then print more ink. Then print more printers.

Thu, 02/16/2012 - 16:14 | 2166964 Jumbotron
Jumbotron's picture

Print more printers......

Why not....with 3D printers you can.....





Thu, 02/16/2012 - 15:49 | 2166846 LongSoupLine
LongSoupLine's picture



"Drink the Kool-Aid...it's good!" - Jim Jones

Thu, 02/16/2012 - 15:12 | 2166718 LawsofPhysics
LawsofPhysics's picture

Precisely why I am long commodites and taking physical delivery whenever possible.  Natural gas is a buy, now to find a place for some big ass storage tanks.

Thu, 02/16/2012 - 15:26 | 2166778 slaughterer
slaughterer's picture

My husband does not mind me locating my natural gas storage tanks underneath the swimming pool.   Keeps them hidden from the mob when the time comes.  

Thu, 02/16/2012 - 16:03 | 2166897 Raisuli
Raisuli's picture

While it is difficult to find fault with keeping the natural gas storage underneath the pool. I suggest that you use the possesive pronoun with the gerund whenever. So, you would be more grammatically correct by saying: "My husband does not mind my locating my nat....

Just sayining...

Thu, 02/16/2012 - 21:41 | 2167971 Vlad Tepid
Vlad Tepid's picture

Really?  You're going to get that uptight that you're throwing out gerundal possessive coaxial widgets, yet you spell "saying" as "sayining?"

PS You forgot to end the quotation with a quotation mark, ass.  Welcome to ZH.

Thu, 02/16/2012 - 16:04 | 2166903 falak pema
falak pema's picture

I'm sure he likes to swim in dangerous places.

Thu, 02/16/2012 - 15:14 | 2166723 Ahmeexnal
Ahmeexnal's picture

Morgan Stanley comes up with a chart containing "Isreal".
If MS can't even spell, I'm sure their math and statistics is even worse.
Time to dump MS.

Thu, 02/16/2012 - 15:42 | 2166820 BlackSunshine
BlackSunshine's picture

I noticed that as well, but I was thinking that

1. They purposely misspelled it for their Taliban employee constituents.

2. It was done in jest, to say Isral = IS REAL.

I don't know which one, but it is a function of the employee demographics at MS.

Or maybe the stat guy is Al Qaeda, and he didn't want to spell it out correctly.

Thu, 02/16/2012 - 15:43 | 2166821 BlackSunshine
BlackSunshine's picture

I noticed that as well, but I was thinking that

1. They purposely misspelled it for their Taliban employee constituents.

2. It was done in jest, to say Israel = IS REAL.

I don't know which one, but it is a function of the employee demographics at MS.

Or maybe the stat guy is Al Qaeda, and he didn't want to spell it out correctly.

Thu, 02/16/2012 - 15:45 | 2166830 BlackSunshine
BlackSunshine's picture

In any case, what's your excuse for being an anti-semite?

-A. Foxman.

Thu, 02/16/2012 - 15:14 | 2166725 Theta_Burn
Theta_Burn's picture

Yet Miners and PM's are still fast asleep.....

Thu, 02/16/2012 - 15:23 | 2166765 flacon
flacon's picture

Maybe you are in the wrong miners?


Year To Date:

ATAC Resources: +19%

Avalon Rare Metals: +24%

Great Panther: +25%

Silver Standard: +15%

and my favourite TINKA: +85%


Not bad eh? 

Thu, 02/16/2012 - 15:32 | 2166797 Spitzer
Spitzer's picture

Yeah thats because anyone who got in before that got their head knocked off. All of those stocks where down 60% toward the end of the year

Thu, 02/16/2012 - 15:39 | 2166806 Theta_Burn
Theta_Burn's picture

Nice hits

Seems the gamble associated w/those names paid nicely for you.

Whats the story with HL (up 3.69% today) 1 of my favs awhile back, never seen a co. more fucked with.

Thu, 02/16/2012 - 15:42 | 2166819 hack3434
hack3434's picture

Misleading for the most part...ATAC is DOWN 65% from Aug of last year. 600MM of market cap "evaporated".

Thu, 02/16/2012 - 15:53 | 2166867 J 457
J 457's picture

AVL was close to $10.00 in May 2011 and now its $3.00.  Yea, those REE's are a sure thing, if you want to lose money.  But if the liquidity comes they may just start the upward climb.

Thu, 02/16/2012 - 15:39 | 2166814 LawsofPhysics
LawsofPhysics's picture

Paper promises...

Thu, 02/16/2012 - 15:13 | 2166726 Yen Cross
Yen Cross's picture

It was a SWAP.

Thu, 02/16/2012 - 15:14 | 2166728 I am more equal...
I am more equal than others's picture

Let the printing presses roll.  This will cause global warming because trees will be cut for the paper causing the building up of CO2. But the upside is lumberjacks will be busy for a while so that will cause employment growth.  And now for something really ridiculous...

I'm a lumberjack and I'm ok....


Thu, 02/16/2012 - 15:15 | 2166732 100pcDredge
100pcDredge's picture

Thank you Central Banks.

For these Lethal Injections.

Now I can go to sleep - finally.

Thu, 02/16/2012 - 15:20 | 2166754 Jonas Parker
Jonas Parker's picture

The "Jack Kevorkians" of the financial world...

Thu, 02/16/2012 - 15:17 | 2166736 falun bong
falun bong's picture

is this the regular everyday inflating/debasement...or do they know something we don't know? i wonder

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