Daily Management Review

Central banks attempting to save markets


06/15/2017


In the first five months of this year, central banks bought assets worth $ 1.5 trillion. Among these assets are stocks, bonds and real estate.



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pexels
Now the volume of assets owned by central banks has reached an incredible level. And banks are forced to acquire even more to achieve the same effect. Central banks in the first 4 months of 2017 bought assets worth $ 1 trillion, and total assets on the balance sheet reached $ 14.6 trillion.

In just 5 years, central banks purchased assets worth $ 7 trillion. This gives grounds to assume that in 2017 the total amount of assets acquired will reach $ 3.6 trillion, which will exceed half of the assets acquired over the past 5 years. All this led to a restriction of the price of gold, however, according to experts, for a short time.

If we talk only about the US, then the total amount of assets on the balance sheet of the central bank here is $ 15.1 trillion. For comparison, before the crisis of 2008 this amount was only $ 3.5 trillion. At the moment, the assets of the central bank make up almost 40% of the country's GDP. And analysts believe that if today the assets of central banks reach 40% of GDP, it means that the economy is in a difficult situation.

Central banks are investing a record $ 300 billion in liquidity per month, which is higher than $ 200 billion, which Deutsche Bank called a "red line" pointing to risky assets. That is, if Deutsche Bank earlier warned that $ 200 billion is the maximum limit for acquiring assets, why do banks exceed this figure?

Since central banks acquire assets on average $ 300 billion to stimulate markets, this amount significantly exceeds $ 10.7 billion per month for gold reserves. That is, the monthly expenditure of banks on the purchase of assets is 28 times greater than the cost of the world's gold reserves.

Global investments in gold reach about $ 3 trillion, including stocks of central banks and all large and small gold assets. Thus, for the amount of $ 1.5 trillion spent on acquiring assets in the first 5 months of the year, central banks could acquire half of global investment in gold.

Experts believe that if central banks ceased to buy, then the markets would simply collapse. At the same time, they repeatedly try to collapse, even despite the infusion of central banks. Without $ 12 trillion, which central banks invested in assets since 2008, gold prices would be much higher. Higher would be the price of silver as well.

This leads to a very sad conclusion: when central banks lose control over the situation, there will be a large-scale crisis, since there will be no one to take them out of this situation.

Thus, large-scale buying up of assets by central banks is the last desperate attempt to control the market and limit the growth of gold prices.

source: zerohedge.com






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