No Sign Yet of Central Banks Balance Sheets Declining

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Total assets held by major central banks are above $20tn. While Fed’s balance sheet has stabilized, the balance sheets of ECB, Bank of Japan and Bank of China have been increasing steadily.

Of course, the reduction in Fed’s balance sheet, expected to effectively start in 2018, will have a material impact on financial markets – the recent spike in volatility might be seen as a sort of recognition of that fact.

But global monetary base is still growing, which will in the end limit the potential for higher rates going forward and sustain high valuations in financial markets.

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Putting Recent Market Sell-off in Perspective

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Markets have been unnerved by rising interest rates in the US, with ripple effects around the world. The most staggering event has happened on the VIX market with a number of funds/ETNs making the headlines after having lost tons of money. What should investors take from these events ? A couple of reflections and interesting comments seen here and there. Continuer la lecture de « Putting Recent Market Sell-off in Perspective »

Real Rates Are the Real Problem – DBk

US 10 year yield is around 2.5% which is quite low. But if you take inflation into account, the situation is far worse. But real rates should be higher, based on the current fundamentals of the economy. This means that central banks should have ended QE some time ago already, but they can’t because they are prisoners of financial markets. They are just stuck in a mess they helped creating in the first place, because they never got the guts to stop banks around the world, and especially in the US, from doing stupid things.

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