QE Heading for $30 Trillion-Plus by End of 2016; Lending Ended
Aug. 25, 2016 (EIRNS)—According to calculations in a Bank of America research report released today, the international total of quantitative easing (stock/bond assets owned by central banks) has just reached $25 trillion—greater than the combined U.S. and Japanese GDP—and will be well over $30 trillion by the end of the year.
One obvious result of this "seven fat years" of money-printing, is that 20% of all sovereign debt worldwide now bears negative interest rates ($11 trillion), and one-third of the sovereign debt being issued during 2016 has borne a negative rate.
A much more serious effect is that capital investment by business is at or near record low levels across the trans-Atlantic nations. This is because the constantly and predictably declining interest rates (i.e., rising prices) on all this sovereign debt, has formed a perfect speculative market for banks and financial funds, entirely outside of those nations’ physical economies.
This fatal effect on the banking system has become clear since the 2008 crash. Big Wall Street- and City of London-centered banks have reduced their commercial lending into the economy, concentrated on investment-bank speculation in the bond and securities markets, and slipstreamed the central banks in the government bond markets to make reliable "profit"—which they then store as excess reserves at the same central banks. And their speculations in government debt securities have provided the collateral they’ve used and/or loaned for financial derivatives bets and the so-called third-party repurchase or "repo" markets. The big bank holding companies have all moved toward the model of Deutsche Bank, for which loans make up just 15% of its €1.6 trillion in "assets."