“An Extremely Dangerous Game” – Central Bankers ‘Extend & Pretend’ Has Increased Risk Of “Catastrophic Collapse”

“an-extremely-dangerous-game”-–-central-bankers-‘extend-&-pretend’-has-increased-risk-of-“catastrophic-collapse”

26-09-20 07:58:00,

In recent weeks, there has been a lot of talk about the role of the world’s central bankers going forward. With that in mind, now seems like a good time to recap the market bailout operations during the past few years… to get some insights into how this all ends (spoiler alert – not well)!

GnSEconomics.com’s Tumoas Maalinen has written a detailed (and ominous) twitter-thread on the ‘stealth socialization’ of the financial markets by the central bankers.

How we got here…

In late November 2008, the U.S. Federal Reserve announced it would start buying the debt of Government Sponsored Enterprises and mortgage-related securities in the secondary market.

In March 2009, the Fed extended the program to include US Treasuries. QE -program was born.

The Fed ran three sequential QE -programs.

The Bank of England started its QE program in March 2009, the Bank of Japan (BoJ) in October 2010, the European Central Bank (ECB) in March 2015 and the People’s Bank of China (PBoC) in July 2015.

In October 2010, the BoJ started to buy Exchange Traded Funds (ETFs) linked to the Japanese stock market.

It became customary that the BoJ to start buying whenever the Topix stock market index fell more than a 0.2 percentage points by midday.

In August 2012, the European Central bank enacted the Outright Monetary Transactions (OMT) program to halt the rise in sovereign yields in the Eurozone (to save it).

In 2015, the Swiss National Bank started to “invest” in foreign assets, including US equities.

2017 set the pre-corona record for central bank stimulus.

During that year, central banks across the globe pushed over $2 trillion worth of artificial central bank liquidity into the global markets mostly through their asset purchase programs.

In December 2018, the People’s Bank of China started to support the domestic banking sector by injecting hundreds of US billions worth of liquidity into the system.

In January 4, 2019, the Fed pivoted from its previous statements of several interest rate rises in 2019 and automated balance sheet run-off. This was to stop the market rout which threatened to topple the US credit markets.

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